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kastyz
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'Inside Job' - an eye opener. Financial crisis and it's start. Scarry to see that nothing is changing. Highly recomended - must see for everyone.
Indo: David McWilliams: Irish Deposits could be hit Argentinan Style
- Thread starter Lightning
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Do this mean that for evey $1000 you had in savings in a bank account, it suddenly became $300 ?
Or is it just a case that your (amount of) savings remained the same but you were just restricted as to when you could or could not withdraw it ?
What happened, and in some cases is still ongoing, is that anybody that owned Argentine bonds, which were almost entirely denominated in US$, got $300 per $1000 invested.
Depositors lost out in a different way. They still had all their pesos, but they were suddenly no longer redeemable in US$. Therefore the pesos bought an awful lot less when the central bank devalued the peso. The other problem that people faced was that they were only allowed access to a certain amount of their deposits per month.
I was in Argentina about 5years after the crash and people were still very very angry. All banks were heavily fortified and behind steel shutters. Presumably people kept breaking all the glass. The front of the banks were still being sprayed with graffiti each week to the effect that the bank were thieves and much worse. It was eye-opening stuff
I would think that if we were to leave the euro, the Govt would first have to freeze all Irish bank accounts to prevent a massive flight of capital
I would think that if we were to leave the euro, the Govt would first have to freeze all Irish bank accounts to prevent a massive flight of capital
I also wonder about these institutions.
What happens to deposits with the above, if Ireland has to opt out of the euro?
Would those places maintain their deposits in euro or what they have to change over to the punt?
Can we remain in the Euro and default?
I don't think we can.
One reason why is moral hazard. If we can ineptly manage our finances and get away with it, then where's the incentive for any Euro-zone country to be fiscally responsible?
One solution is perhaps the German idea of constitutionally limited budgets.
But in the end, full fiscal union is the only solution. That is probably not in our best interests.
We are between a rock and a hard place.
If our lenders allow us to default, there will be a price to be paid. As long as the responsible pay for the irresponsible, who is going to be responsible?
I think we are certain to default, it's the circumstances surrounding that default that I'm not sure of.
I don't think we can.
One reason why is moral hazard. If we can ineptly manage our finances and get away with it, then where's the incentive for any Euro-zone country to be fiscally responsible?
One solution is perhaps the German idea of constitutionally limited budgets.
But in the end, full fiscal union is the only solution. That is probably not in our best interests.
We are between a rock and a hard place.
If our lenders allow us to default, there will be a price to be paid. As long as the responsible pay for the irresponsible, who is going to be responsible?
I think we are certain to default, it's the circumstances surrounding that default that I'm not sure of.
I agree with you, and the longer government keeps it's head in the sand chasing the delusional solution of a lower interest rate the bigger the problem will be.
As for will Ireland be allowed to default? I don't think there is anything the EU can do to stop it. It is certainly a big moral hazard, but it only became a moral hazard when governments collectively decided to bail out countries in the first place.
While I admire D Mc W I think he is now beating the doomsday drum too much. Nobody really knows what is going to happen. It could be far worse than he says. The Japan situation may be a new tipping point in relation to world economy. It could go any way. But a stopped watch is correct twice every 24 hours and if Mc W keeps saying it he will be right some of the time but i dont think his current column is helpful.
dockingtrade
Registered User
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Argentinas central bank is I assume the Argentinian central bank and Argentina was broke. Our Central bank (I think) is the ECB, wouldnt the whole of the ecb banking sector have to be in trouble before anyone takes a hit i.e. if deposits are in trouble in ireland and our central bank (ecb) has cash they plug the whole?
I dont think our situation can be compared with any other country as we are part of the Euro. All the comparisions are with stand alone situations.
Anywho if depositors in one part of the eu take a hit it will destroy the euro and the EU they will be hysteria in the PIIGS + belgium and the big boys will lose an awful lot of money.
China and the US biggest single market is the EU. No one wants a eurozone country losing deposits
I dont think our situation can be compared with any other country as we are part of the Euro. All the comparisions are with stand alone situations.
Anywho if depositors in one part of the eu take a hit it will destroy the euro and the EU they will be hysteria in the PIIGS + belgium and the big boys will lose an awful lot of money.
China and the US biggest single market is the EU. No one wants a eurozone country losing deposits
I agree, but despite the rational part of my brain is agreeing on this I admit it the emotional part took charge on this since the Black Thursday and I moved my savings back to my homecountry and to Germany as well...
I remember when Northern Rock Ireland was in crisis and people were queuing outside to withdraw their money in Harcourt Street, at the end people who resisted were awarded with an extra in interest rate as an award to their loyalty... Would the same happen to the brave savers keeping their savings here? I guess not...
And of course in exchange for (apparent?) security I'm getting much less interest rate than in Ireland sixshooter
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Godfather,
I don't think anyone could doubt your logic in moving your deposits to Germany, but moving them from Ireland to Italy...? Talk about out of the frying pan into the fire! While Northern Italy is still a strong economic performer, the country's debt is colossal and growth practically non existent for 20 years. If there's one country to which the Argentian example is prescient, it's Italy.
So if we're talking about desperate government measures just before a bankrupt state entirely runs out of money, I'd have more faith in Enda & co than I would with Berlusconi...
I don't think anyone could doubt your logic in moving your deposits to Germany, but moving them from Ireland to Italy...? Talk about out of the frying pan into the fire! While Northern Italy is still a strong economic performer, the country's debt is colossal and growth practically non existent for 20 years. If there's one country to which the Argentian example is prescient, it's Italy.
So if we're talking about desperate government measures just before a bankrupt state entirely runs out of money, I'd have more faith in Enda & co than I would with Berlusconi...
I quite agree, but Italy contributes quite a bit to the IMF ( http://en.wikipedia.org/wiki/International_Monetary_Fund ) and I think in the balance of power (like Spain) due to its dimension it's a bit more visible than here. Furthermore, as I'm planning to retire there I decided to follow the destiny of the old italian Lira at the moment...
One more update after posting this: actually now I'm thinking of moving more money to DKB as soon as my short term italian bonds expire
I think it is helpful. The comment could be reminiscent of the boom years when McWilliams stated the property bubble would send this country into a economic recession. Everyone thought this guy was crazy to even state it. Now we should look at all possibilities and the odds are looking much more towards a default.
However I think he was wrong to say people lost ALL of their money. Deposits were devalued by nearly 50%. Your money was worth less outside of Argentina but a freeze was in place to prevent a run on the banks. $250 was the maximum allowed to withdraw per week. The country suffered hyperinflation.
I think our situation would get alot worse if Ireland were to delault on the debt. We rely on imports so hyperinflation would happen and foreign companys will leave the country. It would send us into a worse crisis than we are now in. I am too intested on how accounts with Nationwide UK, Rabo & Northern Rock would be effected if we were to default. Can the government impose a freeze on accounts in those banks? Would this explain it(taken from the crisis in Argentina):
Currently default is inevitable as debt increases and growth is suppressed to be much lower than the interest rate on increasing debt. There is no other vista currently.
Why would we experience hyperinflation during a period of financial deflation and austerity ? It's the creation of money via ''magic wand'' as debt which is one of the factors that creates inflation. Defaulting means the destruction of debt and the disappearance of money so how would this cause inflation ?
And why would foreign companys leave the country ? We cannot be forced to leave the Euro or the EU and its free trade area even if we default on bank debt which was never morally our problem. A way has to be found to separate bank debt from sovereign debt. Without the burden of bank debt , bond yields would fall back to normal and we would be able to borrow on the financial markets.
I reside in the UK and have Anglo Irish bank saving accounts a very small amount os savings in UK and not a very big amount that I had in my saving account in Euros with them in Dublin. Got letters recently telling saying that my accounts have been moved to AIB Group (UK) plc. and one in Ireland not much in both. Have not been able to contact the AIB UK group to find out about this or look at the contents of their letters in great detail but will do next week.
Will this mean however that my irish depost in Euros will be in the same currancy in in AIB Group UK.
Will this mean however that my irish depost in Euros will be in the same currancy in in AIB Group UK.
Another great piece by David McWilliams in The Sunday Business Post. The article is not yet online.
He compares the attack on depositor's to the attack on a castle but one where the depositor's can flee. He believes that depositor's are at risk if the Irish banks fail.
He compares the attack on depositor's to the attack on a castle but one where the depositor's can flee. He believes that depositor's are at risk if the Irish banks fail.
G
Guest105
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A few weeks ago Enda Kenny called the banking system a national emergency.
The more I read the above, the more I feel that something just awful is going to happen. I hope I am wrong
The more I read the above, the more I feel that something just awful is going to happen. I hope I am wrong
I'm sorry for sounding a bit... insensitive... But I'd like to launch a little survey please: who's already moving away their remaining savings with Rabo/NR Ireland/Nationwide UK Ireland/NIB? I'm not moving them yet, but I'd like to know if I'm the only one...