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Well yes. Collateralised by the worthless assets of the irish banks.
The good assets, those that there are, are being repo'd at the ECB's discount window. Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
collateralised debt Well yes. Collateralised by the worthless assets of the irish banks.
That is not the Irish public's problem. Any creditor who accepts crap collateral accepts the risk of a haircut. That's the whole point of the term "due diligence" when applied to collateral. The haircut can go all the way to 100 % if the collateral turns out to be worthless. That is not a problem. That is a perfectly normal bankruptcy, such as which happens every day somewhere in the OECD.
- Jake Friends come and go. Enemies accumulate.
And anyway, this isn't about the Irish banks anymore. It's about the Irish government debt. Why is this so hard to understand?
Incidentally, if the ECB were doing its job as a central bank and fixing the price of government bonds, then we wouldn't be having this discussion in the first place.
What exactly are you propagating here? Austrian economics?
The ECB should resolve those banks which are insolvent. That means reimbursing their depositors, up to the limit of the deposit guarantee (say, 20.000), and then attempting to recover whatever value can be recovered from their assets. Any value that can be recovered from their assets beyond what is needed to cover depositors is then paid out to their creditors, in order of seniority. The remaining creditors get to fuck off and die.
The ECB should lend at the discount window to those banks which are solvent. That does not involve taking on crap collateral. If the bank is not able to post collateral that is not crap, then it isn't solvent and should be resolved.
The Irish state should spend money in order to support demand and restore full employment. The ECB should support this policy by purchasing all newly issued Irish bonds at the ECB's policy rate of 1 %.
The Irish state should attempt to claw back the money that was unjustly paid out to the creditors of insolvent banks. To the extent that money was ever actually paid, this is going to be hard. But I'm betting that most of that money was never actually paid, in the sense of being moved from one reserve account at the ECB to another. I'm betting that most of the money "paid out" in the Irish bank bailout was actually just the Irish government buying the debts of Irish banks using newly issued Irish government bonds. In which case it is a matter of supreme simplicity to declare those bonds void. Bonds are numbered and notarised, after all.
The Irish state should not, under any circumstance, engage in austerity. Not now, not ever.
But what is actually happening is that the ECB is telling the Irish government that the ECB will not support a sane Irish recovery policy, because the ECB is concerned about the Irish national debt. Instead, the ECB will only refinance Ireland's existing national debt, and only if Ireland engages in certifiably insane macroeconomic policies.
The logical response to that - indeed the only sane response - is to say "well then, fuck the national debt." If there is no national debt, then there is no need to refinance, and then the ECB cannot impose its austerity insanity.
That is the duty -please don't laugh - of the Irish bank regulators.
In other word of the people who allowed this whole problem to happen.
But instead of laying the problem at the foot of the Irish authorities, you like to blame others.
In fact, it does not even excuse the ECB from the first paragraph. Because the ECB has been lobbying for the banks to not be resolved since the first day of this crisis. The ECB decided to be a part of the problem, where it could have been a part of the solution.
So its public debt now and all public debt hold by "foreigners" - that is fellow europeans - is per se odious debt.
I was tempted to down-rate your remark for willful mis-characterization, but I'll simply make this comment instead. The thread proves that you are incorrect. paul spencer
There are indications that there's no more private liquidity to be drawn. Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
This is most definitely not what a Central Bank should be doing. The ECB is acting literally as an enemy of the people. Of all countries. The road of excess leads to the palace of wisdom - William Blake
Look, I am hardly a expert on Irish politics. But as far as I know every Irish government and party since twenty years has happily pursued a neoliberal agenda: Fianna Fail and the Greens, Fianna Fail and the Progressive Democrats, Fine Gael and Labour, Fianna Fail and Labour.
And now you want blame "Europe"? Mighty convenient.
If one thinks that ECB/IMF austerity should be rejected on principle in this case, then I don't see how else Ireland can help this cause other than by doing something like what Jake is saying. The road of excess leads to the palace of wisdom - William Blake
It's not so much about "Europe", but about European elements in international banking sector joining in with the collective financial nervous breakdown, and demanding that Europe's real economies should pay to clean up the vomit and replace the carpets and the furniture.
The only possible mature and democratic response to this is "no."
Why, Merkel's so-called "competitiveness pact". Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
But killing the Irish economy in order to make a point about the consequences of electing crooks and liars to high office is overkill and collective punishment. What about the Irish citizens who were shouting bloody murder about their corrupt and in-bred politicians? They'll be punished too if the economy goes into the crapper.
No, it does not. Bondholders should be given haircuts in order of their importance for the productive economy, and in a manner that is distributionally reasonable. Widows and orphans should be protected. Bankers should lose their shirts.
True. But you cuold say the same about Labour in Ireland.
After sabotaging the SPD/Linke coalition in NRW for absolutely no gain?
After preferring a Grand Coalition over an SPD/Linke coalition at the federal level?
No, not really.
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