Is this a sensible strategy: deposits with EBS, PTSB, KBC & UB?

[celebtastic]

Quote from post above-'then your deposit will get converted into a new currency and most likely suffer devaluation'
Can anybody give any idea roughly how much this devaluation would be?
Would it be extreme that €100 would end up being €5 or is this totally extreme?Thanks

There was an article in the Sunday Times last week predicting a devaluation in excess of 50%.

The most recent precedent is when Argentina was forced to break its link to the US Dollar, which resulted in a 75% depreciation in the currency:
http://en.wikipedia.org/wiki/Argentine_peso#Peso_convertible.2C_from_1992

These are the reasons why you need to get your life savings out of Ireland as soon as possible.

As it is stated up above, if a run on the banks start it will be too late to get your money out then.

 

[ardmacha]

There was an article in the Sunday Times last week predicting a devaluation in excess of 50%.

I didn't read that article and doubt if it said that, exactly.
Some Euro currencies could decline by that amount, Greece certainly and possibly Portugal. Ireland has a large balance of trade surplus and broadly balanced balance of payments, why should we devalue hugely? Nomura suggest a 25% devaluation but Bank of America suggest a 9% revaluation! A modest devaluation seems most likely, say 10%.

I don't see why we should leave the Euro, unless it breaks up. Our problem is debt and devaluation makes debt even harder to repay. We could devalue and repudiate the debt, but it would be easier to just repudiate the debt and stay in the Euro!

 

[Jim2007]

Ireland has a large balance of trade surplus and broadly balanced balance of payments, why should we devalue hugely? Nomura suggest a 25% devaluation but Bank of America suggest a 9% revaluation! A modest devaluation seems most likely, say 10%.

Yes, I've read a few reports along these lines and I tend to agree with them. There might be an initial devaluation, but it would tend to appreciate provided we maintain the net surplus.....

And of course it goes without saying that people who have stuffing money into Germany would stand to loose!

 

[celebtastic]

I didn't read that article and doubt if it said that, exactly.

Oh but it did

UK edition 20th May - page 13. I would provide a link, but its behind a paywall.

The lead banner on the front of the London edition this week was "Euro meltdown", which pretty much says it all.

Some Euro currencies could decline by that amount, Greece certainly and possibly Portugal. Ireland has a large balance of trade surplus and broadly balanced balance of payments, why should we devalue hugely? Ireland has a large balance of trade surplus and broadly balanced balance of payments, why should we devalue hugely?

Once the euro starts to unravel, as has already begun with Greece, the situation will quickly spin out of Ireland's control.

Ireland still has a huge cost base structural problem, down to issues like an overgenerous welfare state and high public sector pay rates coupled with archaic working practices.

Have you been shopping to Northern Ireland recently? Have you ever wondered why the weekly shop is so much cheaper up there.

We inflated Ireland's cost base massively from 1997 - 2007, and that needs to be unwound, either through puy cuts and tax hikes for decades or through a rapid devaluation.

Ireland's currency probably needs to devalue 20 - 30% from its main trading partners in the UK, Germany, and the US but, like we have seen in the property market, once this correction gets underway the end state is probably more likely to be 50% down.

Nomura suggest a 25% devaluation but Bank of America suggest a 9% revaluation! A modest devaluation seems most likely, say 10%.

Link to these reports? The range of their variation should suggest that they are of limited value.

Even at your "best case" scenario of a 10% reduction in the value of your savings - why risk it?

I don't see why we should leave the Euro, unless it breaks up.

Ireland will soon not have the luxury of making that decision for ourselves. Once Portugal and Greece are ejected, Ireland will be out the door shortly thereafter.

Our problem is debt and devaluation makes debt even harder to repay. We could devalue and repudiate the debt, but it would be easier to just repudiate the debt and stay in the Euro!

As the Greeks have found, it's not an either / or choice.

Greece (and Portugal, Spain and Ireland) cannot repay their debt as interest rates rise to unsustainable levels, and so will be forcibly ejected.

If you are wise, you will get your cash out of Ireland while there is still time.

 

[celebtastic]

Yes, I've read a few reports along these lines and I tend to agree with them.

Which reports? A specific reference or two would be useful

There might be an initial devaluation, but it would tend to appreciate provided we maintain the net surplus.....

Please point to another instance where this happened, after a forced break of a currency link. I fear there is no precedence for this.

Even Ireland's tightly managed break of the link with sterling was supposed to see the Punt appreciate dramatically.

Within no time, it had lost 20% of its value against sterling.

And of course it goes without saying that people who have stuffing money into Germany would stand to loose!

The German banking system is being bolstered by currency inflows from other eurozone countries. Look at how its cost of government debt has fallen through the floor.

The eurozone crisis strengthens the German banking system rather than weakens it.

 

[Chris]

People are fooling themselves if they think that moving their Euros to Germany will protect them... it will not. The amount of foreign deposits with German banks is at such a level that it would cause serious economic problems in German if they were to convert them to the Neu Mark on the break up of the Euro and I can't imagine the Germans going along with that!

What are you basing this on? A massive inflow of cash means that there is a huge amount of capital available for investment. It strengthens the currency which reduces costs of imports, especially oil and gas which Germany has none of.
The idea that a strong currency is harmful to an economy is a total fallacy and was proven wrong in Germany after WWII. Foreign governments and opposition leaders predicted that Germany would be a basket case if it didn't devalue, but Ludwig Erhardt did the exact opposite, resulting in the biggest economic boom the country ever saw. Jim, I believe you live in Switzerland and if you speak German I would suggest getting a copy of "Wohlstand für Alle", it outlines Erhardt's battle and success to roll out a strong currency and free market policy.

I didn't read that article and doubt if it said that, exactly.
Some Euro currencies could decline by that amount, Greece certainly and possibly Portugal. Ireland has a large balance of trade surplus and broadly balanced balance of payments, why should we devalue hugely? Nomura suggest a 25% devaluation but Bank of America suggest a 9% revaluation! A modest devaluation seems most likely, say 10%.

I don't see why we should leave the Euro, unless it breaks up. Our problem is debt and devaluation makes debt even harder to repay. We could devalue and repudiate the debt, but it would be easier to just repudiate the debt and stay in the Euro!

The ECB published a paper a year or two ago stating that there was no legal basis to force a country out of the Euro. If a country leaves it will be because that country foolishly believes that by leaving, debt problems can be handled through their own currency and devaluing it. Contrary to your statement devaluation would result in the debt burden being reduced, but this would come at the expense of the creditors and savers.

There is not a single country in the world that is actually pursuing policies that would strengthen their currency, which gives me no reason to believe that the Irish government would leave the Euro in pursuit of a stronger currency.

Bottom line is though that Marc made a good point about why you would have any significant amount of money in cash in the first place. If you're afraid of a Euro breakup then you should look at putting your money in physical things like equities and commodities, which is what I have done. The small amount of cash in my investments is not in Ireland though, because of the reasons I mention above.

 

[PolkaDot]

Bottom line is though that Marc made a good point about why you would have any significant amount of money in cash in the first place. If you're afraid of a Euro breakup then you should look at putting your money in physical things like equities and commodities, which is what I have done. The small amount of cash in my investments is not in Ireland though, because of the reasons I mention above.

Is this not also risky? The value of equities and commodities can be quite volatile.

Most people with cash savings have chosen that option in the first place because they want a low risk saving option.

 

[Palerider]

It really depends on where you are in your life cycle, I've worked almost 30 years in the financial sector and right now I'm all cash and staying that way, I don't propose a long reply as each to their own although in general I always agreed with diversification, an old client of mine sitting on millions disagreed strongly and apart from purchasing a pad in London ( that did really well by the way ) they stayed in cash, many people tried to tempt them away with claims of inflation risk, diversification is good and so on but the do nothing approach worked and that's working for me now, I'm diversified across several Irish and foreign owned Banks and mindful of the applicable Govt guarantees, yes I considered a day return flight to Germany but quickly discounted it, If a person where to believe or rely on much commentary on this site then the poor Euro would be dead and gone a long time back, 4% annual deposit rates...Yes please I'll have that all day thank you very much !

 

[The Ghoul]

It really depends on where you are in your life cycle, I've worked almost 30 years in the financial sector and right now I'm all cash and staying that way, I don't propose a long reply as each to their own although in general I always agreed with diversification, an old client of mine sitting on millions disagreed strongly and apart from purchasing a pad in London ( that did really well by the way ) they stayed in cash, many people tried to tempt them away with claims of inflation risk, diversification is good and so on but the do nothing approach worked and that's working for me now, I'm diversified across several Irish and foreign owned Banks and mindful of the applicable Govt guarantees, yes I considered a day return flight to Germany but quickly discounted it, If a person where to believe or rely on much commentary on this site then the poor Euro would be dead and gone a long time back, 4% annual deposit rates...Yes please I'll have that all day thank you very much !

+1, my thoughts exactly. I own one property with no debt and everything else is in cash. Most of it is in various Irish State Savings now thanks to good interest rates and favourable tax.

There are plenty of people out there like you, me and your multi millionaire former client. They tend to stay fairly quiet and generally don't post on internet forums though.

I'm keeping a close eye on inflation and am pleased with how things are working out. Inflation is my main concern, not "eurogeddon". Far too much hysteria about the latter and it is quite amusing to see people using the Sunday Times (one of Murdoch's europhobe rags, abysmal paper) as sources for their views.

FWIW if the eurogeddon that is being described here does happen (which it won't) all bets are off, there are absolutely no guarantees that having a German bank account, gold, shares etc. will protect a person's wealth in the way they hope.

I really think that people have skewed ideas when it comes to assessing risk and making subsequent investment decisions. There was a comment in this thread or another eurogeddon thread about how people should take all their money out of Irish banks even if the chance of euro collapse is 0.01%. This post will be deleted if not edited immediately wept.

 

[kdoc]

Ghoul, that's my position too: one property and no debt. My money is in a mix of State Savings, Irish banks & Irish branches of foreign banks. So far the sky hasn't fallen down, despite the doomsday pedlars.

 

[ardmacha]

Have you been shopping to Northern Ireland recently?

Yes. (Hint the clue is in my username)

In early 2009 the Euro was 95p, since then UK inflation has been 10%, and the Euro is now 80P. That is a change of one quarter in Irish competitiveness and prices in NI are no longer the incredible value they once were. The Euro too has declined against the dollar, improving Irish competitiveness somewhat there too.

Contrary to your statement devaluation would result in the debt burden being reduced, but this would come at the expense of the creditors and savers.

It depends on whose debt you are talking about. Mortgage debt internally would become Punts and would be mitigated by the higher inflation caused by any devaluation, at the expense of savers However, the government and the Irish banks owe a lot of money to the IMF, ECB etc and this cannot be re-denominated in Punt without being a default.

 

[callybags]

+1, my thoughts exactly. I own one property with no debt and everything else is in cash. Most of it is in various Irish State Savings now thanks to good interest rates and favourable tax.

There are plenty of people out there like you, me and your multi millionaire former client. They tend to stay fairly quiet and generally don't post on internet forums though.

I'm keeping a close eye on inflation and am pleased with how things are working out. Inflation is my main concern, not "eurogeddon". Far too much hysteria about the latter and it is quite amusing to see people using the Sunday Times (one of Murdoch's europhobe rags, abysmal paper) as sources for their views.

FWIW if the eurogeddon that is being described here does happen (which it won't) all bets are off, there are absolutely no guarantees that having a German bank account, gold, shares etc. will protect a person's wealth in the way they hope.

I really think that people have skewed ideas when it comes to assessing risk and making subsequent investment decisions. There was a comment in this thread or another eurogeddon thread about how people should take all their money out of Irish banks even if the chance of euro collapse is 0.01%. This post will be deleted if not edited immediately wept.

Ghoul, that's my position too: one property and no debt. My money is in a mix of State Savings, Irish banks & Irish branches of foreign banks. So far the sky hasn't fallen down, despite the doomsday pedlars.

Two of the most sensible posts amid a mass of hysteria.

 

[celebtastic]

In early 2009... since then UK inflation has been 10%.

Complete and utter hogwash

[broken link removed]

 

[celebtastic]

Two of the most sensible posts amid a mass of hysteria.

So do you think Brendan's post on how to protect yourself against a eurozone break up is hysterical?

I found it very sensible and far more reasoned than most of the "head in the sand" posts in from some in this thread.

It makes timely reading, as the end game with Greece approaches:

Key Post Protecting your savings against a euro breakup

 

[yenom]

I moved 25% of my savings to Sterling in Northern Ireland last year.
So far my Sterling is worth more in Euro’s now than when I moved it.
On these forums people keep saying you’ll lose so much switching between currencies. As far as I am concerned there are two currencies
on this island. I can make any large purchases in Northern Ireland if things favour Sterling so there’s no switching back and forth..
If there was Eurogeddon no one knows how it would affect Sterling. But I do know I would like the options of two currencies if things go bad.

 

[ardmacha]

Complete and utter hogwash
[broken link removed]

Do you ever read what you post? You describe my contention that prices had risen by 10% as "hogwash" and then post a chart showing UK inflation as 3-4% per annum!! An ability to add is a help in a forum such as this.

Check out the UK CPI and see that the from April 2009 to April 2012 the index has risen by 11.6%.
[broken link removed]

 

[kdoc]

So do you think Brendan's post on how to protect yourself against a eurozone break up is hysterical?

I found it very sensible and far more reasoned than most of the "head in the sand" posts in from some in this thread.

It makes timely reading, as the end game with Greece approaches:
http://www.askaboutmoney.com/showthread.php?t=163133

celeb, I'd love to know exactly - or even roughly - how many AAMers have actually got on a plane and opened accounts in Germany. According to some posts, it's not all plain sailing opening such an account over the phone. One poster, when he identified himself as Irish was almost told to hump-off.

 

[celebtastic]

celeb, I'd love to know exactly - or even roughly - how many AAMers have actually got on a plane and opened accounts in Germany.

I have no idea of the numbers - neither do you

According to some posts, it's not all plain sailing opening such an account over the phone. One poster, when he identified himself as Irish was almost told to hump-off.

Don't know about Germany, but I do know that it is very easy to open an account in Jersey or the Isle of Man.

My own family are using the UK Nationwide in the Isle of Man, using a combination of euro and other currencies:
[broken link removed]

Best buy list of offshore euro accounts here:
http://moneyfacts.co.uk/compare/offshore/euro/

I'd be minded to keep some cash out of euros. The euro is likely to stay low while the whole problems with Greece (and now Spain) are sorted out.

 

[kdoc]

I have no idea of the numbers - neither do you

That's why I was asking - in the hope that that someone could furnish the numbers. I suspect it's quite small. There's a well known psychological phenomenon that 'what people say is often at variance with what they do'.

 

[celebtastic]

I suspect it's quite small.

What do you base that estimate on?

Do you really think that Irish people should keep their life savings in Irish banks risking them being wiped out if the eurozone unravels, or move them to a more secure offshore environment?