Little British charity in Irish loan

We are still providing the loan at a lower rate than the EU so the Irish will benefit. They will still not put up their corporation tax rate and at almost half the UK corporation tax rate they are our competitors so I think we can afford to make a small profit out of the loan.

Can anyone really approve of this?

There is risk involved but there is risk either way, whether we get the money back or not. Would we not do it if there wasn't a profit imotive involved?

Some cultures and religions don't believe in usury. My gut feeling about this is that I don't but its the way of the world. Is there no turning back from this kind of transaction? Is this what the future is going to be like with regards to every interaction between individuals, states and organisations?

Its sad to think that everything we do is coming down to this. I think it is theft of a kind. It seems the human race is being built upon this kind of transaction between people in every scenario. Its nightmarish.

Osborne & Cameron - "We must help our friends across the Irish Sea."

I think you've just done more damage to them than Cromwell did.

Lending money to a near bankrupt would be classed as a risky loan and would attract a higher interest rate as a result. So I don't see what's wrong with this. In fact I think it is rather good news for Britain. We are not a charity.

Nice to see the nations working together to solve the global financial mess.
Looks like starving animals picking on a carcass.

If they default on the loan what happens? Can we give it Northern Ireland and give the entire island independence?

This comment was removed because the moderators found it broke the house rules. Explain.

I wonder how governments, which set interest rates at 0.5% for retail depositors (i.e. taxpayers providing money) can justify rates at this level to other governments (i.e. taxpayers borrowing money?) Or am I naive? I think this is called 'usuary' somewhere.

We are not a charity. But we don't have to make a profit out of it either - we just need to recoup our costs. But they are icelandic and we are British so its okay to profit out of their misfortune. Simply everyones a banker nowadays. Sad.

i is concerned about the intrinsic sadness of capitalism - it does involve competition and advantage and usury and shows us the worst of humanity's capacity for greed and sublimated violence but, as we appear to have invented nothing better, we are stuck with it. The most depressing thing is that, although economists are supposed to take note of trends in human activity, there's no discernible way in which the capitalist process can be seen to promote an outcome that is pro human; we are all grist to its constant grind. Is this economic process for people or are we for it? Who is really in charge out there? Hello....???

IF we get our money back!!! That's not looking too likely at the moment given the way the Eurozone is going. Greece must default soon and I can't imagine that Ireland will be too far behind.

...oh and I forgot to mention Robert - a man of your intelligence should know....

If inflation dances at an average of about 3-4% over the next 10 years then I think you'll find we will infact be taking back money which has lost it's purchasing power (i.e. it wil be worth less)

...but why concern your readers with ALL THE FACTS - better treat them like mushrooms eh?

It's truly becoming pathetic how the BBC are now simply feeding us the news the Government want us to hear rather than actually analysing it.

I can't see Osborne wanting to sting the Irish state too much. He is after all heir to whatever is left of the baroncy of Ballintaylor and Ballylemon in the County of Wexford. I guess he knows the loan won't get repaid because the Irish economy has been steered into the death spiral and is just trying to help out some of his peasants for a bit.

4. At 16:19pm on 15th Dec 2010, Julian wrote:

"Lending money to a near bankrupt would be classed as a risky loan and would attract a higher interest rate as a result. So I don't see what's wrong with this. In fact I think it is rather good news for Britain. We are not a charity."

Yeah - way to go Britain - of course when the Irish officially default (they have actually defaulted - it's just called 'bailout' these days) - that high interest rate will make all the difference as we see our £3.35 billion sailing away....

....still lets not panic, it's only £3.35 Billion, compared to what we're going to lose to the banks - it really is chickenfeed!

"George Osborne today estimated that profit at £440m in fees and interest over the 10 years until we get all our money back."

10 YEARS? I've heard of blind optimism before but..........

Ireland has got 10 months - tops.

#4. At 16:19pm on 15th Dec 2010, Julian wrote:
"Lending money to a near bankrupt would be classed as a risky loan and would attract a higher interest rate as a result. So I don't see what's wrong with this. In fact I think it is rather good news for Britain. We are not a charity."

Lending money to a bankrupt would be classed as moronic, not to mention illegal. Only in the world of sovereign debt and banking can you get away with crap like this.

Smell that parchment roast!!

definition - 'spiv'

"flashy, slick operator who makes a living more from speculation or profiteering than from actual work. The kind of guy who wears a shiny medallion, goes bankrupt from a dodgy swampland development scheme, but still has a big house in his wife's name.
This real estate boom is a spiv's paradise."

Did we somehow force the Irish government to borrow this money? Ireland's banks and government got that country into the mess it's in and I don't think the British government has done anything to be ashamed of.

"Which means that a profit is more or less guaranteed for Britain. "

What a load of rubbish Robert. If you lend to people at interest rates they cannot afford and they are already in trouble you run the risk of it not being repaid.

10. At 16:46pm on 15th Dec 2010, ZincPlater wrote:

I agree - It is sublimated violence and its out of control. Bizarre to see us wage wars in the name of democracy whilst engaging in activities which not only lead to wars but also glorify organisations which are counter-democratic. It would appear that we have no option to conduct ourselves in this way because we are not intelligent enough to surpass it. There is so much lip-service paid to the idea that war is a last resort yet we engage in wars all day long, every single day. Its no wonder half of the UK and US are on anti-depressants!

Not an unreasonable rate of interest considering the credit rating and risk factors. Ireland will of course not be able to pay it back, it will simply be rolled over for many decades to come. If you think it's expensive try borrowing from any commercial source in the market and see what rate you can get if you are already bankrupt!

A lesson to be learned for all profligate spenders.

As someone said sad but it's really sad that regulators, governments and others allowed this to happen and that includes all those riding on the property boom. Like all bubbles they tend to burst eventually.

18. At 17:03pm on 15th Dec 2010, Pte_Sector wrote:

"Ireland's banks and government got that country into the mess"

The U.S, Japan, UK, Ireland, Iceland, Italy, Spain, Greece...the list goes on. All in a mess caused by lending.

Mr Peston thinks we are all stupid and do not understand economics.
He needs to work harder on his posts. There are some things you just can't get away with Roberto! Get a grip man.

Is the high risk interest mark up sufficient for this sub - prime loan when the Irish are about to have an election to decide who will turn off the last light in their country?

This comment was removed because the moderators found it broke the house rules. Explain.

This comment was removed because the moderators found it broke the house rules. Explain.

Well said Mohammed but this isn't an economics blog it's meant to be about business!

Mr Peston seems to continually confuse the two subjects. Come on Robert lets have some proper business commentary!

[[[22. At 17:24pm on 15th Dec 2010, i wrote: .........caused by lending]]]

Sorry i "caused by borrowing".

Yet again the moderation on this blog is taking far too long which means the flow of the blog is disturbed and real interaction is impossible. Hopeless so please BBC can you improve it please?

Between charging penalative rates of interest on loans to banks and Ireland and stealing shareholders equity to sell on at a later date, the government are making a pretty penny out of the liquidity crisis.

Unfortunately this is short sighted as if the govt is taking more money then private individuals in their role as the ultimate end user have less money.

If private individuals have less money then they pay less tax or leave the country and pay no tax at all.

This is why govts have learned through history and experience to tax the bottom line and not the top line. A lesson that the government could do with being reminded of just now.

Ireland would have been able to borrow from the markets if Angela Merkel hadn't spooked the markets by suggesting they should take a hair cut.

[[[31. At 17:48pm on 15th Dec 2010, Firey Shandy wrote: ]]]

Not so sure Ireland would have been able to borrow from the markets at least not at anything like the rates provided.

I see you make reference to this as a liquidty crisis which is one description; but its also a debt crisis, deficit crisis and confidence crisis all caused by too much borrowing on the back of a huge and ultimately damaging property bubble.

Borrowers (Ordinary Irish people I suspect, as well as those evil property speculators from all over the world) and lenders are now caught up in a debt spiral which can only be resolved over a long period of time by cutting back spending (private and public) and I suspect a little inflation.

Yes you are right many Irish people will migrate to more prosperous regions and some may even come to the UK for work. A few may end up partially reliant on our welfare state in which case the so called £440m profit over the next 7 years may just cover those costs.

I wish Ireland and the Irish well as ultimately it is only they who can solve their own problems. I am glad the UK is at least helping a little and I don't recall hearing the Irish government refusing that help?

So bank industry is going to create money from nothing and lend it to us @ 3.61% And we’re going to lend it to Ireland @ 5.9%
To help Ireland repay money they’ve borrowed to bail out the bank industry in the first place.

Is it any real wonder why people are starting to question this whole business of all money being created as debt.

And for anybody who doesn’t understand the above, the positive money lot have an explanation of how all money is created as debt.
https://www.positivemoney.org.uk/

In any event if I were Irish, I’d vote for default, as opposed to the slow torture of debt slavery.

You certainly know how to rattle some cages Mr P. The ‘I’m anti anything and everything brigade’ are out in force.

In a week or so try posing the opposite, e.g. Giving money to Spain at zero interest rate; my bet is some of today’s anti posters will ask if we are a charity case!

Personally I see it as good business but I can understand the worry of no return and I would be interested in, who has priority payback, IMF, CEB, or UK?

Perhaps to a lesser extent but isn’t this what the Americans did with US!

I'm wondering what back room deal Boy George got. Was he promised a stallion from one of those fantastic stables and will he find all he gets is a Poor Man's Mercedes, otherwise known as a donkey?

Julian! Julian! Got any Irish bank docs yet? Irish bailout docs? When can we see them? Postal Order in the post. To Iceland.

Hello moderators 12 mins gone must be on your tea break?

Do you have a servcie level agreement with BBC management if so what should the average Mod' time be?

Hello moderator can you give me a hint what is wrong with Blog 32 please?

Oh it just appeared. Thank you.

[[[33. At 18:18pm on 15th Dec 2010, Dempster wrote: ]]]

Come of it Demster its not just the banks creating debt!

First the property speculators borrowed the money off the Banks and those speculators probably included individuals, small and large builders as well as bigger property developers. The simple fact is the property bubble burst and the underlying asset values crashed. It was not just the fault of the banks and bankers; borrowers, lenders, risk assesors, property valuers, regulators, government etc were all to blame.

ref 39 Didn't mean balme they were all implicated.

39. At 18:40pm on 15th Dec 2010, ObserverinMonmouth wrote:
Come of it Dempster it’s not just the banks creating debt!
‘First the property speculators borrowed the money off the Banks and those speculators probably included individuals, small and large builders as well as bigger property developers. The simple fact is the property bubble burst and the underlying asset values crashed. It was not just the fault of the banks and bankers; borrowers, lenders, risk assesors, property valuers, regulators, government etc were all to blame’


Well that’s a fair point O.M.

However creating money against a ‘promise to pay’ works providing that the creator suffers the loss if the promise to pay defaults.

However we’ve gone past this point. We’ve allowed banks to create money against unsound promises to pay, and then ‘the people’ have been forced to take the debtors place when the promise to pay failed.

And we’re now borrowing money (created from nothing by banks) to bail out banks, that were the route cause of the problem in the first place.

I worry that ordinary Irish working people are carrying the can for this-Reducing the minimum wage? Is that for real? How does that do anything? The horrible corrupt crony based state that fuels the jobs for the boys mentality. Fintan O'tooles book "Ship of fools" really hits home on how this almost village based mentality has corrupted the whole of the Irish elites political system.
Bankers and their property based Ponzi propertyschemes are being allowed once again to get away with it.
However, I wonder if the shoe were on the other foot woud the Irish people be comfortable about lending money to the British? Wouldn't many be happy to see us hang? -Given the high risks associated with a bankrupt state?

Ireland faces the same problem as all nations from whom a scale of deflation is demanded which outruns their ability to grow their way out of recession.Frau Merkel and the EU has demanded two bouts of severe cuts in public spending with their effects on employment and investment.There are also the allegedly stabilizing loans but at rates of interest which will cripple employment and investment still further.

The aim of the cuts and loan is to reduce the deficit,but tax revenue is falling faster than deficit reduction leading to a deadly downward spiral.Deficitis has gripped the EU as it has grippled Mr.Osborne who knows no better. As Mervyn King observed,(wikileaks),Messrs Cameron and Osborne are more concerned with politics than economics.

3. At 16:13pm on 15th Dec 2010, NorthSeaHalibut wrote:
Osborne & Cameron - "We must help our friends across the Irish Sea."

I think you've just done more damage to them than Cromwell did.
===================

but less than the EU is doing, and what is the US doing?

As soon as Ireland has all of Osbourne's cash they should default and give him the middle finger. British banks stand to lose a lot more money than Osbourne 'loaned' to Ireland.

6. At 16:37pm on 15th Dec 2010, Wee-Scamp wrote:
If they default on the loan what happens? Can we give it Northern Ireland and give the entire island independence?

======================

Personally, as I believe we own large chunks of the Republic due to the Bank loans, I think we should sell all those bits of land along with the North to the Chinese, and quickly before China buys Portugal, that way we could be rid of the whole of the Island and get a load of cash, and China could have her 'offshore' aircrafter carrier in the Atlantic. If we were really lucky we could end up with a bidding war between China and the US.

18. At 17:03pm on 15th Dec 2010, Pte_Sector wrote:
"Did we somehow force the Irish government to borrow this money? Ireland's banks and government got that country into the mess it's in and I don't think the British government has done anything to be ashamed of."

To be ashamed of?,no.But with government`s we are not interested in praise or blame but efficacy.Ireland is the tip of an iceberg of debt that reaches around Europe.Mr.Osborne has not ruled out further loans to Portugal or Spain if needed.For a chancellor so critical of government measures here to stabilize the economy, it is contradictory to spread his largesse elsewhere.What is his fall back in the event of sovereign default? Germany is on the edge as far as further bail-outs are concerned,it may soon be impossible politically for Frau Merkel to do it!
Then there are his Eurosceptics here? What will their attitude be as unemployment climbs and social unrest grow here? As Ronnie Reagen used to say,"You ain`t seen nothin` yet"

[[[42. At 19:09pm on 15th Dec 2010, jimmymk wrote: ]]]]

Hi Jimmymk. Ok I agree its a very sad situation (mind you your min wage is unsuppoprtable, look at China and India which is who YOU have to compete with) BUT you are a domocracy and you all have the vote SO USE IT! If people are complacent then frankly they will get what they deserve.

Having read this blog I was going to point out the absurdity of Robert's justification but most of the posters have done a sterling job.

Nevertheless have you considered the opportunity costs of lending to Ireland as opposed to servicing our own debt? What is the interest on our debt Robert?

Finally you are supposed to be business editor and this is really Ms Flanders brief.

How about commenting on the denial of a loan to Sheffield Forge Masters which has cost the UK dearly in vital engineering growth. What was the interest rate that was agreed with Sheffield Forgemasters on their relatively paultry £80M loan?

https://www.guardian.co.uk/environment/2010/jun/18/sheffield-forgemasters-loan-new-nuclear

If the BBC wishes to be the Ministery of Good News for the Coalition perhaps its time to cut out the middle man, privatise your organisation and let Mr Murdoch run it! hmm?

I'm just waiting for the bonus bonanza or inflated basic salary to be justified as a good result for the taxpayer.

[[[43. At 19:14pm on 15th Dec 2010, bryhers wrote: ]]]

So what do you propose, bryhers?
Foget Frau Merkel and monetary solution the reality is that game is over and the only solution is that you have to compete in the real world. You cannot borrow your way out of the problem in the vain hope that somehow this magical 'GROWTH' will solve the problem.

The real world in this context is; India, China and other rapidly developing economies and once climate chnange is happening then Russia.

So think about how you can compete with them and GET ON WITH IT!

This comment was removed because the moderators found it broke the house rules. Explain.

They are only doing well if the loan is ever repaid. I doubt it will be.

"Sub prime lending" anyone..?

[[[41. At 19:00pm on 15th Dec 2010, Dempster wrote: ]]]
Thanks for the affirmative comment but you are still trying to blame the banks!
I agree the problem in Ireland has gone beyond what could be called normal risk (managed or otherwise) and has become systemic. The banks (and therefore the borrowers and lenders) problems have become so great that they have drowned the governments ability to provide support.
BUT bear in mind supporting the banks also means supporting the borrowers and lenders. Many of the borrowers are likely to have been small property speculators not just major property developers creating Dublins equivalent on Londons docklands! So supporting the banks meant support everyone else but what alternative was there?
I suppose they could have burned all the savings accounts but that wouldn't have been very popular would it. So yes lets just blame the banks because there the only ones who deal in debt, yes?

[[[47. At 19:26pm on 15th Dec 2010, bryhers wrote: ]]
Ok so what do you suggest?
It's terribly easy to make comments but what about some realistic solutions?
Let me start the ball rolling;
We (europe) have to compete with emerging economies so that means either being more productive (more efficient) or cheaper (lower labour costs) whilst having to support the infrastructure of a developed enconomy e.g MEPs, MPs, Health and Safety et al. We also have to compete for natural resources as ours are rapidly deminishing or exhausted.
Given this how on earth can we survive? Please discuss and you have 20 mins!

Irish people are completely entitled to feel extremely angry about the legacy they face as a result of badly run, badly regulated banks and a property bubble which has allowed some developers and speculators to accumulate more wealth than their labours deserve.

But the underlying questions here are remarkably simple.

First, should the UK help Ireland with financial support?

If the answer is yes, then should the terms be commercial or should they be softer? To me it looks as if the terms are relatively soft by normal commercial standards.

To my fellow blogger ObserverinMonmouth:

If we put aside the blame issue for a moment, my take on it is this:

Under normal circumstances the threat of people defaulting was enough to limit the extension of credit to those very likely to repay it.

However between 1997 and 2007 lending money to people who were unlikely to repay it became common practice.

As previously mentioned:
Creating money against a ‘promise to pay’ works well providing that the creator suffers the loss if the promise to pay is no good, as this naturally limits the amount of money that can be created.

Unfortunately banks went past this point. And as a consequence were insolvent.

Faced with the likes of RBS & HBOS collapsing, which in turn would have likely taken down many others, bailing them out was the only sensible course of action.

If the banks had collapsed then all the money held on deposit to pay peoples wages etc. would have gone with them.

And if people weren’t paid their wages, they wouldn’t have gone to work, and the country would’ve collapsed into anarchy.

But bailing the banks out is inherently flawed.
Because you have to bail them out with money.
And all money is created as debt.
Therefore more debt has to be created to bail the banks out.
And the excessive creation of debt caused the collapse in the first place.

So the BOE decided to print some money and give it the Government (who had bailed out the banks), in essence to prevent the Government falling into a compound debt trap.

But Mr King hadn’t fully appreciated the gravity of the problem.
The £200bn he’d printed isn’t anywhere near enough.
Which leaves him with a rather interesting dilemma.

Either he watches as the country collapses under the weight of its debt, which is still far too high, or prints a lot more money.

Eroding the value of the currency by printing more of it, would seem at first thought to be the other dilemma, but I don’t reckon it is.

The value of a currency used to be backed by a measured amount of gold or silver for which it could be exchanged. Not so any more.

The value of a currency is based on the common sense and fiscal discipline of its issuing government. Remove that and you could well remove its value.

And in my view that’s the risk Mr King is about to run……… again.

Which as previously posted I refer anyone interested to:
https://www.positivemoney.org.uk/

Who have a far better explanation of it all than I could ever give.

50. At 19:51pm on 15th Dec 2010, ObserverinMonmouth wrote:
[[[43. At 19:14pm on 15th Dec 2010, bryhers wrote: ]]]

So what do you propose, bryhers?
Foget Frau Merkel and monetary solution the reality is that game is over and the only solution is that you have to compete in the real world. You cannot borrow your way out of the problem in the vain hope that somehow this magical 'GROWTH' will solve the problem.
The real world in this context is; India, China and other rapidly developing economies and once climate chnange is happening then Russia.
So think about how you can compete with them and GET ON WITH IT!"

To compete you need a high investment economy.You give China as an example,I`ll go with that,but this is a centrally managed economy whete state investment in core technology and infrastructure is enormous and the private sector exists because markets are efficient at some things but not others.

The huge question facing capitalist economies is resolving the contradiction between a liberal ecomnomic model for a small state and large private sector,and institutional and social pressures for a growing state sector.

There are arguments on both sides,state enterprise, insulated from the discipline of the market tend to be inefficient,but the argument for a growing state sector is not ideological but institutional.Across the industrialized world including the USA,the economic functions of the state have grown as a result of three factors:-economic crisis,war or war preparation and the demand for improved public services.All of these factors are "Built in stabilizers" for capitaslist economies which are inherently unstable.It is indicative that these institutional imperatives have grown and developed despite ideologies which carry a contrary message.

I am amazed that in the first half of the 21st century,men like Mr.Osborne still hark back to the classical economics of Gladstone and Marshall.Their small scale and medium firms competing against each other have been transformed by the multinational corporation and the enhanced economic role of the state,but clearly not the thinking that went with it.

Evening free thinkers - sorry had to log off for a few hours whilst dealing with a work issue. Seems me and WOTW upset a Capitalist on one of the other blogs who has trouble adding -that is most of them actually.

35. At 18:25pm on 15th Dec 2010, copperDolomite wrote:
I'm wondering what back room deal Boy George got. Was he promised a stallion from one of those fantastic stables and will he find all he gets is a Poor Man's Mercedes, otherwise known as a donkey?

===========================================================

30 pieces of silver was the old deal. I do hope he enjoys Ireland after all 3 years ago he cited their economic miracle- a man of foresight.

Someone suggests sell ingN.I. to China. A long term strategic investment for China. We don't want it anymore now the ColdWar is over - not that anyone has told the MOD - and Republic can't afford/don't want it either. We wipe off our debts to China and they get some very nice scenery instead. Creative thinking I like it even though may not agree with it in toto.

[[[55. At 20:35pm on 15th Dec 2010, Slessac wrote: ]]]
Quite right Slessac. Great pseudonym by the way.
The terms for all commercial loans should reflect the risk reward ratio and as somone said earlier there has to be a genuine risk of default which needs to be assesed.
No risk equals no reward OK?

"If inflation dances at an average of about 3-4% over the next 10 years then I think you'll find we will infact be taking back money which has lost it's purchasing power (i.e. it wil be worth less)"
============

That is a good point, but I would guess that the interest rate we are charging will be "x%" above the rate of inflation to take this into account. It would be nice to have this clarified.

NorthSeaHalibut, you are wonderful. I love this comment:

'I think you've just done more damage to (the Irish) than Cromwell did.'

So, Ireland ask us for financial support, we say 'oh alright then' and provide it on soft, uncommercial terms that might make us a small profit, or might be eroded through inflation so that we make a loss, and you compare the UK government's support with the malicious and callous subordination of the Irish by Cromwell.

Not sure which part of your anatomy you are talking through but I'm really not sure it's your mouth.

[[[56. At 20:46pm on 15th Dec 2010, Dempster wrote:]]]
Hi Dempster
Yes I agree with most of your critque but you have yet to post an alternative strategy. I would love to know what your personal ideas are? I have made the fundamental case for increased productivity and reduced labour costs, for without BOTH of these we Europeans have little hope in a competitive world.

I like the ideas expoused on the positivemoney web site and have sent several emails to the powers that be BUT it's still teoretical with little in the way of real solutions to the problems being faced by governments.

54. At 20:29pm on 15th Dec 2010, ObserverinMonmouth wrote:
[[[47. At 19:26pm on 15th Dec 2010, bryhers wrote: ]]
Ok so what do you suggest?
It's terribly easy to make comments but what about some realistic solutions?
Let me start the ball rolling;
We (europe) have to compete with emerging economies so that means either being more productive (more efficient) or cheaper (lower labour costs) whilst having to support the infrastructure of a developed enconomy e.g MEPs, MPs, Health and Safety et al. We also have to compete for natural resources as ours are rapidly deminishing or exhausted.
Given this how on earth can we survive? Please discuss and you have 20 mins!"

Twenty minutes!All of that!

My first suggestion would be a realistic economic model rather than a nostalgic one.Why do none of our tame economists discuss the changing economic role of the state compared with twenty,fifty or a hundred years ago? Why no debate on its present transformation and how this can best be used in the national interest?

The chinese miracle has partly been achieved by low labour costs as you you rightly say,but also huge government investment in plant and infrastructure,but not health,education or welfare which constitute social costs on capital.The textiles,auto`s and consumer electronics which have poured out of China into the west has decimated medium level industry here and the USA.

But Germany competes successfully,why? First the excellence of their technical and technological education going back to Bismarck,then the high tech products which result from it,thirdly,late industrialization which enabled German plant and machinery to be more modern than its competitors.

We need a highly educated workforce adapted to science and technology and huge state investment in up to date plant and machinery in alliance with the private sector.But Sheffield forgemasters is a dissastrous harbinger of the blindness of our elites,as is EMA and the supertax on higher education.

In a nutshell.

A shocking post. Robert, your British bank obsession has deserted you here because, in reality, this money is being used indirectly to prop up RBS and HBoS - again!

Remind me, what was Napoléon saying? A nation of shopkeepers?

For UK government read UK bank.

For Ireland read Joe Average mortgage borrower.

In terms of financial position these analogies are probably pretty good too.

62. At 21:07pm on 15th Dec 2010, ObserverinMonmouth wrote:
‘Yes I agree with most of your critque but you have yet to post an alternative strategy. I would love to know what your personal ideas are?’

My personal view is this:
The creation of money in private corporate hands = Debt slavery for the majority.

The plain truth is, if the state (which is us) does not control the creation of money, then the state (which is us) can only ever be at the mercy of those who do.

Two video links which are interesting to watch are:
A short animated film by Paul Grignon, ‘Money as Debt’ (link below).
https://video.google.com/videoplay?docid=-2550156453790090544

The documentary Secrets of OZ (link below)
https://www.youtube.com/watch?v=U71-KsDArFM&feature=related

I do hope that the money is being borrowed in the same currency as we are lending it to Ireland in i.e. borrow in Euro if we are lending in Euro otherwise there is an exchange rate risk.

[[[63. At 21:12pm on 15th Dec 2010, bryhers wrote: ]]]
Sorry but that just isn't going to happen. Germany has a major advantage in capital goods and related technology and industrial infrastructure that will sustain it (Germany) in the medium term BUT every machine tool they export to India and China et al will be copied and improved as was the case with our exports to Japan in the 50's and early 60's.
So accepting that 'they' have cheaper labour and a lot of cheap intellect what the hell are we to do? I have to admit I don't know the answer and I am really scared for my kids because they don't have a clue what is coming!!

Ok moderator 27 minutes since the last blog got past you SO what is the problem?

Sorry 37 minutes???????????????????

@2. At 16:11pm on 15th Dec 2010, i wrote:
"Its sad to think that everything we do is coming down to this. I think it is theft of a kind. It seems the human race is being built upon this kind of transaction between people in every scenario. Its nightmarish."
What's a decent hourly rate we can start to charge people who need our assistance? I mean, say a flat fee of £10 for helping the elderly or infirm across the road. Demand charities pay at least a minimum wage for volunteers, work to rule etc etc. It would make a great satirical sketch but now it seems to have slowly become real life (albeit in a somewhat less obvious way) it isn't funny at all.
Still, next series of the X-Factor should be out soon, I'm sure the major soaps have a riveting set of storylines coming up, and in a couple of years we'll all be back to normal, except chanting the mantra "four legs good, two legs better".

@14. At 16:50pm on 15th Dec 2010, writingsonthewall wrote:
"....still lets not panic, it's only £3.35 Billion, compared to what we're going to lose to the banks - it really is chickenfeed!"
To put that figure into context perhaps you could suggest ways that that figure could be more usefully spent so it's more comprehensible to the non-financier (like me).

. At 21:45pm on 15th Dec 2010, ObserverinMonmouth wrote:
[[[63. At 21:12pm on 15th Dec 2010, bryhers wrote: ]]]
"Sorry but that just isn't going to happen. Germany has a major advantage in capital goods and related technology and industrial infrastructure that will sustain it (Germany) in the medium term BUT every machine tool they export to India and China et al will be copied and improved as was the case with our exports to Japan in the 50's and early 60's."

It will happen if we make it happen by exploiting our comparative advantage in the skills and technologies we do best which is not capital goods but pharmaceuticals,
financial services,overseas investment,defence products,private and higher education,oil and gas servicing and technology,fashion,some nuclear technologies,theatre and the arts,tourism,as an entropot for car manufacture and so on.

We have considerable skill and huge potential providing it is not ruined by political vandalism.Education,training,public and private investment is the key to modernity.Those who fail to embrace it decline as shown by the current stagnation in the USA and elsewhere.

72. At 21:49pm on 15th Dec 2010, Stuart Wilson wrote:

“Still, next series of the X-Factor should be out soon, I'm sure the major soaps have a riveting set of storylines coming up, and in a couple of years we'll all be back to normal, except chanting the mantra "four legs good, two legs better".”

Or a line from The Planet of the apes:
Ape to man: You had your chance and you messed it up!

£10 flat fee….urm……make it £14 and we have a deal

If there is a need for charity should not the gesture come primarily from Eurozone? I suspect that as things progress there will scope for adjustment. It is in no-one's interest to see Ireland struggle.

hi Im Offert Provident... if is charity



www.daisyshome.webedin.co.uk

a lot of you are missing the point - that 3.35bn is gone and not coming back.

Its' gone indirectly to the Irish subsidiaries of UK banks RBS and HBOS, (along with the other billions already sent to keep the capital ratios of these banks at the minimum levels). along with the billions and billions the Irish govt has poured into the Irish banks, which is also not coming back.

and its actually €7+bn UK is contributing to the EU bail out mechanism.same as the €800m (?) it gave to the greek bail out fund.

Have a look at the latest Bank of International Settlements figures out on Tuesday (see ftalphaville.co.uk) -

as of Q2 this year UK banks have $187.5 bn exposure to Ireland of which just over $31bn to banks and $97 bn (ninety seven billion!) "non bank private" ...which would be what? property developments, mortgages etc...

Think about it, Ireland too big to fail for the UK.

This is the greatest - " Re-finance All Your Loans into One Easy-to-Manage Monthly Repayment" swindle I've seen.

But then, since time began money lenders have been making money out of people with no money ....

The more I consider this post the lazier it seems. Any student of accountancy will tell you it is unwise to count your profits from something which has not yet taken place. For example we have not received any interest yet but already the profits have been calculated.

Not dealing properly with profit and loss accounts and balance sheets was one of the reasons we got into the current mess Robert but this post seems to have forgotten that.

I have writingsonthewall's blog profile bookmarked! I think it is far more informative than Robert Peston's blog articles - I often just skip to WOTW's comments...

For every debtor there must be a creditor, and it is these creditors who lose their money if debtors default. So it is the creditors who are being bailed out using taxpayers money.

It is the nature of creditors to be rich, and it is only the very rich who can lend money on the scale required to make up the billions of debt involved. It is also only the very rich who can afford to make individual donations of 100s of thousands of pounds to political parties.

Very few students and young people make substantial donations to political parties, so it is not surprising that they do not benefit from the government's generosity with taxpayers' money.

Message 80 from Richard35
Accounting been used deliberately in an improper manner for centuries according to the excellent R4 series "A brief history of Double Entry Book-keeping."

https://www.bbc.co.uk/programmes/b00r402b

Now, watch this business drive...

https://www.youtube.com/watch?v=TTsSz_eEqG8

58. At 20:56pm on 15th Dec 2010, M_T_Wallet wrote:

And just what does a bank loan to the government in Dublin have to do with NI?

Truly extraordinary!

[[[74. At 22:24pm on 15th Dec 2010, bryhers wrote: ]]]
I agree with all of that but that isn't going to solve the mass unemployment problem. What do you suggest?

[[[82. At 00:19am on 16th Dec 2010, stanblogger wrote: ]]]
And for every creditor there are debtors. So you don't think near zero interest rates are helping the creditors then particularly those with tracker mortgages?

[[[58. At 20:56pm on 15th Dec 2010, M_T_Wallet wrote: ]]]
I any event why would the Chinese buy it now? They will wait for it to go bankrupt and pick it up for a song.

'55. At 20:35pm on 15th Dec 2010, Slessac wrote:
Irish people are completely entitled to feel extremely angry about the legacy they face as a result of badly run, badly regulated banks and a property bubble which has allowed some developers and speculators to accumulate more wealth than their labours deserve.

But the underlying questions here are remarkably simple.

First, should the UK help Ireland with financial support?'

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In order to be helpful, we need to first understand what the issue is. It is far better to treat the cause, though the symptoms may also require addressing.

The cause was not addressed when the symptoms first appeared. The situation is now dire.

Merely lending money is like giving a patient paracetamol when the patient has septicemia. The asuterity measures are no better than applying a horde of leeches.

IV antibiotics are required now that septicemia has been allowed to develop, when all that was needed at an early stage was a simple, standard prescription to knock the spivvy bugs on the head in the first place.

[[[88. At 06:37am on 16th Dec 2010, copperDolomite wrote: ]]]
Not sure that simply knocking a few spivvy bugs on the head was ever going to solve the massive property crash experienced in Ireland (and elsewhere).
Too many individuals as well as larger property developers supported by banks and other lenders drunk on low interest rates and with very poor reguation was the problem. Thats an awful lot of spivs!
Unfortunately only long term inflation and austerity measurers together with some encouragement for inward investment (hence their low CT rates will) eventually address the problems. But its going to take a long time and be very stressful for the Irish I am afraid.

[[[82. At 00:19am on 16th Dec 2010, stanblogger wrote: ........................
It is the nature of creditors to be rich, and it is only the very rich who can lend money on the scale required to make up the billions of debt involved. It is also only the very rich who can afford to make individual donations of 100s of thousands of pounds to political parties.]]]
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Not sure all creditors are rich although a very few maybe. The vast majority will be companies and their staff responsible for other peoples money in the form of savings, pensions, investments et al. I suspect very few of these companies and their staff make political donations to any party.

[[[82. At 00:19am on 16th Dec 2010, stanblogger wrote: ..........................
Very few students and young people make substantial donations to political parties, so it is not surprising that they do not benefit from the government's generosity with taxpayers' money.]]]
-------------------------------------------------------
So free education to 18 isnt a benefit provided by the taxpayer then? And even with the so called £9000 costs (most will pay £6000 or less but only when they start earning more than £21k) the state is still subsidising the Universities with £billions in support. I thought that was tax payers money? In general students should not be contrbuting significant sums to political parties they should be focussed on maximising on their own educational opportunity.

89. At 07:09am on 16th Dec 2010, ObserverinMonmouth wrote:

Wasn't thinking there would be a few.
Just like drunk drivers, drunk bankers need to be taken to court, jailed and barred from future banking!

Just because the nutters tell you we all need a good dose of austerity, doesn't make it true - that's like believing leeches will cure you of the flu, cancer or depression. There is no morality, no justice in driving the public into poverty as a means of sorting out the mess created by those spivs.

Start by taxing the spivs at 95%, that'll pay off the bills in a jiffy.
Then tax all their activities at 95% too. If you want to be a spiv, you pay 95% tax on all banking, trading, business, all the way right down to how much they pay for a TV license.
These people need to realise they are social lepers, and we'd like them better if they spent their time chasing house flies around.

[[[91. At 07:45am on 16th Dec 2010, copperDolomite wrote: ]]]
Sticking with the Irish problem for a moment you cannot place all the blame on the providers of credit. I think you are refering to all of them as bankers but correct me if I am wrong. Lenders are usually approached by people wanting loans and respond with a yes or no depending on a whole variety of parameters; borrowers credit profile, valuation of asset if something is being purchased, perception of the market, etc etc.
So in the case of the Irish property boom borrowers were just as responsible for the debt mountain as were the lenders and they were supported by excessively optimistic valuations and regulators who were asleep on the job.
To simply blame bankers is frankly rediculous.
Every housing loan has a happy and optimistic borrower at the start. But they were in a property bubble and bubbles always burst eventually!
So lets be a bit more even handed with the blame please.

[[[91. At 07:45am on 16th Dec 2010, copperDolomite wrote: ]]]
So to continue I am not sure how you identify the spivs? If you cant then how can you tax them unless you simply tax everyone who earns a high salary or income. Is that your proposal?

If you introduce a 95% tax rate you will simply create a massive incentive for people to pay forutnes for tax avoidance schemes or they will work less because it is not rewarding or they will move to a lower tax regime. High tax rates do not solve any real problems and at 50% the UK is already amongst the highest tax regimes in the world.
Still staying with the Irish problem; most people who work in banks and particularly those managing mortgage applications are modestly paid administrators, hardlyy spivs!
Ok a few may be highly paid wheeler dealers but if they are paying 50% tax or whatever the rate is in Ireland they are at least contributing to society.

[[[91. At 07:45am on 16th Dec 2010, copperDolomite wrote: ........................
Just because the nutters tell you we all need a good dose of austerity, doesn't make it true - that's like believing leeches will cure you of the flu, cancer or depression. There is no morality, no justice in driving the public into poverty as a means of sorting out the mess created by those spivs.]]]
---------------------------------------------------------------------
I think you will find it was the Irish government who went looking for extra money to bolster there bombed out economy. They had a massive property boom and we have already established that was caused by excessive borrowing, lending and poor regulation not just by greedy banker spivs.

They got it from the EU, IMF, UK and Sweden and maybe a few other sources who quite reasonably wanted a few conditions attached so that Ireland attempted to stop spending more money than it had. Result austerity yes but what was the alternative?
Taxing the banker spivs at 95% or even 900% would not solve the problem and defaulting on the debt would simply close the doors for any future finace for the Irish. Result, bankrupcy. So where would Ireland go then for cash?

"Which means that a profit is more or less guaranteed for Britain."

The whole point of them needing bailout money from the UK and the EU is that the Irish are a very long way from being able to guarantee paying back any of the loans, which is why the interest rate they are able to borrow is shooting up.

They are a loan, not a charitable donation. Charity begins at home. Semi punitive interest rates will at the very least discourage moral hazard in the future and help to ensure stronger oversight of their economy.

#48

BUT you are a domocracy and you all have the vote SO USE IT! If people are complacent then frankly they will get what they deserve.

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You could say the same about us here in the U.K.

[[[95. At 08:22am on 16th Dec 2010, Dr_Doom wrote:
"Which means that a profit is more or less guaranteed for Britain."]]]
Assuming that we dont end up paying money in welfare to a large number of Irish immigrants which must a least be a possibility in view of the state of the Irish economy?

Only fair for UK to make a profit when Ireland poaches many companies and their tax revenue with the ultra low cooperation tax at 12.5%. The UK must also watch out for increased competition from Ireland, Greece etc when their labour costs have dropped by 15% or more. UK Unions also need to take note of this, if UK is not to lose many jobs to these new competitive countries.

[[[96. At 08:28am on 16th Dec 2010, creditunionhero wrote: ]]]
I agree.

[[[98. At 08:50am on 16th Dec 2010, lixxie wrote: ]]]
Very good points but we will also have to watch out as large numbers come over here looking for work. ho hum.