I was on the Dart into Dublin the other morning, surrounded by students getting ready to sit the dreaded Leaving Cert this week.
They were in good form, talking about big bits of the course they hadn’t a clue about. This is the sort of bravado or giddiness that precedes panic. I remember it well. Their lives are ahead of them and there is nothing they can’t do, given a chance. But are we giving them a chance?
My heart sank when I heard, earlier that morning, that the state was going to waste yet more of our money on Anglo. No one needs Anglo and, if we closed it down tomorrow, we’d miss it less than Hector Grey’s. More to the point, the financial markets would reward, not punish, us.
Our government has indicated that it will have to put up to €20 billion into Anglo so that it can give this money to institutions that lent to Anglo. Just let’s think about how much money this is.
Very few are able to comprehend the impact of nine zeros. Instead of euro, let us imagine seconds. One million (1,000,000) seconds is 1.65 weeks or about 11 days. One billion (1,000,000,000) seconds is 31 years, eight months and 15 days. Twenty billion is more than 636 years!
That’s how much Anglo will cost us, before interest on the money we will borrow to give back to the investors. This is plainly ludicrous. Our government is putting a plan to the EU which plots what happens next to this piece of financial rubbish.
Alan Dukes, chairman of Anglo, who is an honourable man, said he had a plan: he will split Anglo into two banks – a good and a bad bank. The good bank will be a business bank and the bad bank is our problem – our 636-year problem.
But it’s not my problem and it’s not your problem: it is the Anglo investors’ problem and, because they took a punt on Anglo, they should have to sort it out themselves.
In America, the standard way of sorting this out was that the bank management looked at the two different types of creditors. There are bondholders and there are shareholders. Bondholders are a special type of creditor who lend the bank money, expect to be paid back in full and get a small interest premium. They are the most secure creditors.
The shareholders, on the other hand, are pure speculators. When the bank’s doing well the share price goes through the roof and they profit; when the bank is doing badly, the share prices collapse and they lose. Normally when a bank is in a crisis, like Anglo the bond holders swap shares in the new bank.
They are forced by the management to back the plan with their money, not just platitudes. They are forced to exchange their old bonds that the bank can’t pay for new shares, which will be worth quite a lot of money if the bank recovers. This is common practice.
But the bondholders in Anglo haven’t even been asked to do this. I suspect, if they were, they’d say thanks, but no thanks. We would prefer taxpayers’ hard cash rather than Dukes’ shares. Frankly, I don’t blame them. But they shouldn’t be given this option.
The second ‘‘normal’’ way of dealing with Anglo is, if the bank can recover as Dukes said it can, then let’s put that to the test. Simply, let’s do what they have done now with Quinn Insurance – call in an administrator and let the administrator find a new buyer. If it has value, somebody will buy the thing. Why don’t they do that in Anglo?
Because the Anglo management is bluffing. They will never find a buyer. So they have told us it has value, but they’re afraid to put that to the test. Nobody in their right mind believes them.
So the ‘‘insiders’’ who financed Anglo and were great capitalists four years ago, today don’t trust the normal rules of capitalism to solve their problem. They have miraculously turned into Marxists.
They used to be red in tooth and claw; now they’re just red.
So, close it down. The financial markets will reward us, because that is one less debt that the Irish taxpayer will have to pay in the future.
The reason the markets will support closing down Anglo is that markets have no interest in an Ireland that turns itself into a debt-servicing machine to pay for the mistakes of yesterday. There is always new money and, if someone has to lose on Anglo, well, so be it – that’s the game. Move on.
The financial markets are investors who want growth, who want to invest in the real wealth of Ireland and the real wealth of this country, which is the teenagers on the way to their exams.
They are the creativity of the future, but if they are lumbered with a huge tax bill to pay for stuff like Anglo, investors will see that their creativity is choked by debt and they will stay away from Ireland and invest in the young workers of Poland, South Korea or Brazil. These are the simple facts of globalisation.
This government has talked about the ‘‘smart economy’’. There is nothing smart about keeping Anglo open.
No investor minds a government spending €20 billion on education and infrastructure because it means the balance sheet will have an asset opposite the debt. But on our national balance sheet opposite the €20 billion is Anglo, with its treasure chest of worthless land and sites.
This simple accounting identity scares people.
Close it down. In the past 12months,141 banks were closed down in America and no one noticed.
Close it and move on.
David McWilliams performs Outsiders at the Peacock from Wednesday to July 3; www.abbeytheatre.ie
David.
One of your best opening two para’s for an article I think.
David.
I saw a movie last night entitled, ‘The International’, with Clive Owen.
It hit’s the nail on the head with the back drop story in which we are all debating these issues.
Everyone i urge everyone to rent it and watch it a.s.a.p
David.
I think it’s becoming clear the ‘insiders’ and ANGLO bondholders who are also it now appears, the power brokers in the engine room running Ireland have made a decision, for some time now, that, they are saving their own bacon and if it means a ‘funeral pyre’ so be it.
….slave traders , deceptors ….just pure liars .
…yes lenny bacon &co …..real mob leaders who are rotten inside.
David
how do we make the politicians close it down?How do we make it happen. Are we powerless as the 2 Brians stumble on towards the abyss.
Great article on the money. Coincidentally, over the weekend I was remembering the great loss to us of Alan Ruddock recently. I looked through some old newspapers incredulous at his passing. I was a fan of his as I am of D’s great efforts to restore some financial sense to our isle of political/financial/incompetence/corruption. Looking through some old newspapers, I found alan’s article, Sunday Independent, ‘Anglo The Rape Of A Nation/ Awestruck Despair over €90bn cost to fix banks’, written by him on 4th April. Direct, fearless witness of the truth was his hallmark. http://bit.ly/df0Q48 Quantum Research for the Indo… Read more »
David: I have sometimes tried to convey the reality of large numbers to others. Your analogy (One million (1,000,000) seconds is 1.65 weeks or about 11 days. One billion (1,000,000,000) seconds is 31 years, eight months and 15 days. Twenty billion is more than 636 years!) doesn’t cut it, because time is another abstract concept. I prefer to use a comparison most people with access to a ruler can visualise. Rulers are calibrated in millimetres. Think of a piece of graph paper one metre wide and one metre long covered with millimetre squares. There will be a million squares on… Read more »
Malcolm McClure – my concept of Time as we should read it is best shown as :
the code of before time and after time
aka : da wu yu code
imagining the dun aengus original circle and its distruction 10,000 years ago.
Whatever you and I think it is so big that we both are irelevant anymore.
On the news today 100,000 more young people will emmigrate within a year .
Are we really Cuckoos ?
John ALLEN: Last week you mentioned cuckoos and taxis just before the taxi driver Bird murders. Today its cuckoos and emigration. Whazz up?
I heard an interview on Newstalk this morning with a ‘cuckoo’ American who claimed to be a Breatharian. He lives on fresh air and 2 McDonalds hamburgers washed down with diet coke taken once every 30 days. He too is expecting the millenium on 20/12/ 2012.
How does that square with your philosophy Horatio?
Malcolm McClure – there is one hell of a whole month of absolute chaos starting from 19th June for four weeks and nothing will prepare you what is yet to happen.It will embrace the physical , emotional and the intellectual breakdown we have never seen before.The advice to all is Slow Down to Stop.
Malcolm McClure – the concept of cuckoo means are we as a nation building a nation to become a better nation and remain together building our culture as most countries do or are we just wanting to fuck and send away our chicks to a foreign land under deception and rob them of their identity?
Leaving Cert is the certification of youth to get out and make way for the princelings and princesslings of the corrupted elite ruling the center of gravity of the country.
Alan Dukes as Minister of Finance in the mid 80s raised the VAT rate to 35%. At the same time the UK VAT rate in N. Ireland was 15%. The exodus of shoppers North economically crippled the border areas. He would be not my choice for Chairman of Anglo — I would seek somebody with some financial savvy.
Strange- his successor as Minister of Finance Brian Lenihan pulled the same trick some 25 years later with much the same consequences. I fear the young people of Ireland do not have a great future ahead of them.
On a more mundane note,I heard a story today about a local community/ resident group in Dublin 7, who have stopped paying the bin taxes.
When one of their people are brought to court they are supported by a fund which is financed by contributions from their neighbors.
How wonderful to see that grass roots groups are organizing to confront the Mafia who govern this country.
I will investigate this phenomenon and keep you informed as I acquire more information.
Ladies and Gentlemen: THE HONOURABLE ALAN DUKES…. Right! Sure, but of course David, they are all honourable, Cowen, the Ahern’s, the O’Keefe’s, and all the numerous other siblings that are acting in Irish politics, Lenihan, Dukes, the whole bunch are nothing but honourable men David, what else. In the Democratic Republic of the Congo, the prefix Honorable is used for members of both chambers of the Parliament of the Democratic Republic of the Congo. May be we should start that here as well, and request all members of the political class in ireland to be adressed as such. Informally, senators… Read more »
It is highly unlikely that any of the mandarins in merrion square will have disclosed any part of my professional banking report to the ‘national crime forum made in 1998 ‘, to dept of finance when making public their findings today.
Their game is ‘shove it up your arse’ ‘its none of your fcking business’.
Don’t know if putting Irish taxpayers on the tab against their will has any parallels with the seizure of white landowners land in Uganda, but the story of Mike Campbell is an excellent documentary. It does echo the eviction predicament fears of many at the present time as they lose hope in a Nama for the people. As the will of Irish taxpayers is being denied by Government, bankocracy replacing democracy, banks taking over homes, is this where were goin? Enjoy.
http://bit.ly/byuSgg
cbweb – I remember some years ago I had an appointment in Hotel George V in Paris( posh place) with a client of mine from Geneve .On the day Mugabe was at an International Conference there.As I was entering the hotel alone there were lots of police and protesters .Somehow like the cartoon Mr Magoo I walked through the cordon effortlessly unknowningly what really the signifance of the protest was. After entering the place was full of black people dressed in armanis and the women were wearing gold all over themselves.It was amazing just to watch it .I sat myself… Read more »
1.00 EUR = 1.19096 USD
Euro beginning to head to the bottom and IBEC
http://bit.ly/aaV7IH
“However, it warns that the emerging recovery here and elsewhere could be choked off if financial market stress over Europe’s sovereign debt crisis continues for a number of months.”
You know IBEC, KOWN gang will still be telling us we’re forging ahead when our currency has changed from the euro to ‘the turnip’ or ‘the cabbage’.
What stocks are those two items used for?.lol.
Cbweb, not sure what your concern is about the Euro falling back to its proper weighting is about. Based on the ECB link below the Euro should trade in a band from parity to 1.10USD. It should also trade between 70 and 75 pence Sterling. Look at the all time or 10year range for both curriencies. The rise in the Euro from about 2002 onwards was more a symptom of rising credit availability than any underlying strength based on sustainability. The Euro versus the yuan maybe of more interest to the Germans than the Irish. As for the fool from… Read more »
stage act – I think David will have difficulty mincing his words on stage during his play .If he was reading this blog how can not do so .Imagine him saying : klown instead of cowen or lenny instead of lenihan or drink cabinet instead of the government cabinet or slave trader instead of market trader and lots more.Its like doing the french orals
[…] Anglo to save Ireland (http://www.davidmcwilliams.ie/2010/06/07/kill-anglo-to-save-ireland) all independent minded people should take the time to […]
@Tull, Re your link. Dropping euro on the surface good for euro re exports, but i know this is freaking Bernanke. Currency volatility is not liked by the US especially with the nervous US auto industry. http://bit.ly/9GEt89 Under the surface there is a Dr Doom question to do with the euro diving below the dollar and what this effect would have on the dollar and global meltdown. From the url above Bernanke said a trillion dollars was the war chest available provided by the eurozone to prop up ailing parts of the eurozone. I heard this am it was €440bn… Read more »
http://www.irishtimes.com-looks as if a lot of the insiders were aware of seanie’s arrangement with ILP.End of the line for the cronies?.
@Tull Mcdoo,
You posted @21
‘Just as a thought , do you think that by the way things are being prioritised at the moment, that the “insiders” are more concerned about their Financial market participation, than any return of the Real Economy to Real growth like the original Celtic Tiger.???’
It baffles me that most people process and assimilate ANGLO and NAMA through the lens of it been in context with free market capitalism.
NAMA and ANGLO are projects devised by power elites to preserve power OVER free market capitalism.
http://www.irishtimes.com/newspaper/breaking/2010/0608breaking27.html
Hi All, I got this of the Irishtimes.com it has since been taken down but not before I posted it on the blog here http://www.thepressnet.com This is shocking confirmation that the Irish Government was aware and indeed encouraged this attempt to falsely bolster Anglo Irish Banks financial health in the run-up to its collapse. This opens the way for a class action law suit, against the instigators of the country’s biggest fraud .The Irish financial regulator, the Department of Finance and the Irish Government are now exposed for what they are and no international financial agency can cover this up… Read more »
PS
SLICKMICK 24
Your link is also down
Someone does not want people to know something and information is getting out that shouldn’t
next time cut and paste
The “green Jersy ” brigade was another version of the Plunge Protection Team (PPT)
LOL.
http://www.youtube.com/watch?v=H3RIWNRpisI&feature=player_embedded
Surely not?
http://bit.ly/9Orthk
What, now, if true?
indymedia.org.uk should be forcibly closed down.
Bethan Kilfoil is a responsible journalist over 10yrs for RTE, a few days ago was reporting from Chad, Africa.
http://bit.ly/cwrRWR
Report refers 6pm, news uploaded to website 6.15pm this evening.
Journalist John Downing, Bethan’s husband, is Green Party Deputy Government Press Secretary!
http://bit.ly/bX40tg
Looks like a very weird, nasty hoax!
If this sort of drivel is allowed a public audience without moderation, we deserve to be shut down.
This can’t happen again, at all. It’s completely dispicable.
@Furrylugs, I reported it to the indymedia.org website, not heard back. Also reported it to RTE and got a decent thank you, information as I requested, to be passed on to Bethan. I replied to RTE with the following: “No worries, if you do have any follow up information following an investigation, please let me know. I as a contributor to http://www.davidmcwilliams.ie/2010/06/07/kill-anglo-to-save-Ireland found the information posted innocently by a member who found the information elsewhere. Members like myself would not like to in any way be associated with such nasty false information based on dirty tricks of the lowest form.”… Read more »
Re Banking inquiry due for publication today. The word is Cowen
is criticised and given a large chunk of blame. Happy days are gone when he could blame Lehman’s on it all. Given his even worse record post meltdown with support of Anglo and crazy giveaway/takeaway Nama, may I humbly ask for his immediate resignation and a general election. How can the Amish stand idly by, surely their conscience still not lost?
Hi David, I’m a bit late coming to you on this article. I agree with you that Anglo shouldn’t have been supported by the state. But by an equal measure the so-called ‘systemic banks’ of BOI and AIB should have not had equivalent support either. Any bank that excessively leveraged itself and lent in the credit frenzy should not have been rewarded with support. There should have been branch and root reform and we should have come out with utility banking only. > But on our national balance sheet opposite the €20 billion is Anglo, with its treasure chest of… Read more »
Saw David’s one man show last night ( “Outsiders” ) Not much new there, to what his fans have read in his many articles-however an entertaining summary of his writings/philosophy re Anglo Irish Bank and the property bubble debacle for those who have not been tracking his journalism. Besides the story always comes across better when presented in person! It was one hour and three quarters -without an intermission when I checked my watch, but he held our attention so well that, it was only during the last 15 minutes that I grew a little restless for an interval.. Well… Read more »
News Lenny the hen cuckolded by bankers and Trichet et al for his doomed support for Anglo and the doomed NAMA travesty, now recovering from pancreatic cancer, is to mount a challenge to Clowen for the leadership of this ship of fools…..wonders never cease…..meanwhile Bruton to mount a similar heave against Kenny, what a dreadful lack lustre support Kenny has got from his front benchers including that from silent Bruton whose position on the banking crisis often has to be prised out of him…..politics Ireland sorely needs reform, folks. Only consistent effort to stop the rot from the bankers has… Read more »
unfortunately Gilmore could not persuade Labour to break the link with the big (public service) unions and “go it alone” as an independent Party. One reason not to vote for them. Labour are a bunch of opportunists,-political “prostitutes” who will sell out to Fianna Fail again if the nations well paid secure jobbed public servants are protected from the coming storm. There is no political life in Ireland.Just a liquorice allsorts bag of assorted self serving opportunistic people waiting to join the” Mercedes set” with their fairy lifestyle of massive salaries;obscene expenses; secure pensions;and foreign junkets lifestyle. Meanwhile screw the… Read more »
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