TODAY we pay €700,623,555 to unsecured Anglo bondholders. This is a travesty because the Irish people do not have to pay this money under any circumstances. It is not covered in the EU/IMF deal.
The so-called investors have taken a punt and can’t quite believe their luck that they are being paid. Anglo is not a bank. It has no deposits. It does not do any new business. It would not make any difference whether we pay or not. Events have overtaken us.
Before we talk about how the world has changed in the past day or two, let us just focus on the nonsense that is being peddled by certain people, the Government included, about paying the Anglo bondholders. Certain people suggest that if we did not pay this money to people who cannot be named, that there would be negative ramifications. What ramifications? We are paying back “professional” investors who gambled. What part of ‘risk’ do they not understand?
Do they seriously believe that the ECB, which is under enormous pressure right now to keep the entire euro project from imploding, would seriously cut off money to Ireland because of non-payment of unsecured bondholders? Give me a break. That is not how central banks work. Anyone with any knowledge of this field would know that.
So if it is not the central bank we should worry about, is there something in the way corporations are wound up that would oblige us to pay this money back?
Regarding the status of unsecured creditors in a bankruptcy, the clue is in the description “unsecured”. An unsecured creditor is exactly that, he is unsecured. When things are going well, he is paid slightly more interest than anyone else because if things go wrong, he is “unsecured” and therefore only gets what he gets after everyone else has been paid. In the case of Anglo, he gets nothing. That’s the meaning of “unsecured”. When you are “unsecured” you are not secure. It could not be clearer.
Yet our Government is paying the money anyway. Worse still, the Government is borrowing to pay this and thereby breaking the golden rule of finance, which is that the way to improve an indebted balance sheet is with less debt, not more debt.
The only reason it can be choosing to do this is to remain the good boys in the class. But have they not seen that the classroom is burning down, the teacher has lost control and the rules are about to change so much so that anything agreed, even as recently as last week, is now conditional. As this column argued a few weeks ago, the Troika is dead. It is over and its mission has failed.
Remember, the Troika’s job was to ring-fence Ireland, Greece and Portugal and thus ensure that Italy and Spain didn’t come under any pressure. Well Greece has spun off into orbit and Italy’s bond market is tanking — despite last week’s deal. So it is clear that the game is up for the Troika. The strategy that underpinned the Troika is in tatters and the plan must be reworked. With this new thinking will come new deals and possibly the break-up of the euro entirely, particularly as the Greeks’ referendum decision may lead directly to the new drachma.
The world has been turned upside down in the past few days. Of all the financial changes, the following three are the most critical and will have enormous ramifications for our future.
First, yesterday US broker MF Global — run by the former head of Goldman Sachs — filed for Chapter 11. This is the eighth largest corporate bankruptcy in US history. It lost money due to its huge bets on the EU being able to get its act together. MF Global’s $6bn in European debt was a gamble that the bond markets of Italy, Spain, Portugal and Ireland would rally. MF Global was one of the big buyers of Irish government bonds in the summer. Now this trade will unravel. In the US, it was the concern that this debt could be downgraded to “junk” status which led to its big bet going wrong. This proves that contagion from Europe is a very real threat to global stability.
If its creditors cut off funding to it because they thought its $40bn balance sheet was ruined by exposure to Europe’s debt markets, which other financial institution might be suffering right now, trying to hide its exposure to European debt markets? Of course a sell-off of peripheral bonds will unravel the rally in Irish bonds and will rip away one of the central pillars of the Irish Government’s spin that things are getting better.
The second event is obviously related to the first, and it came in an open letter to Italian PM Silvio Berlusconi by Ferrari chairman Luca Cordero di Montezemolo. In the letter, the man form Ferrari, one of “brand Italy’s” industrial and design jewels, stated that Italy had reached a “point of no return”. He demanded that Berlusconi leave now because he senses what many others do, which is that Italy can’t be dragged back from the brink under Berlusconi’s increasingly dysfunctional regime.
The yield on Italian 10-year debt yesterday moved above 6pc, while the interest rate on German bonds fell. Obviously investors are worried that if or when the euro falls apart, it would be better to own the government bonds of Germany rather than Italy because the new deutschemark will be worth much more than any new lira.
LAST night, the difference between Italian and German bonds was over 4.5pc as German yields fell and Italian yields rose. This is the largest gap between the two since the advent of the euro.
Remember that all the EU’s efforts have centred on protecting Italy from contagion. This looks as if it has failed. When Ireland’s bond yields hit 6pc, they quickly went to 7pc and 8pc and then it was over. Something similar happened in Portugal.
All this came against a dramatically changed background as George Papandreou surprised everyone by deciding to hold a referendum on the second bailout for Greece.
As we know here from the Lisbon Treaty referendum, the EU doesn’t like real democracy. At its core, the EU ‘rescue’ packages are designed to bail out professional risk takers at the expense of taxpayers. That is the deal. And it is the dirty little secret our politicians don’t want you to figure out so they shroud everything in complex language. But that is what is going on.
This isn’t the kind of thing that goes down well with ordinary people. Polls show that 60pc of the population is opposed to the terms of the new bailout. So it is game over for this particular phase of the EU’s efforts to save the euro, and with it go all the previous agreements.
Everything is up for grabs and we should not pay any more until there is clarity about what happens next.
After all, when there is no clarity, it is we who are the unsecured creditor, risking good capital on a hunch. Hardly the most prudent way to run a country.
–
‘Certain people suggest that if we did not pay this money to people who cannot be named, that there would be negative ramifications. What ramifications?’ ……………. I’m horrified at what our government are doing ……. I’m mildly curious about who is receiving the payment???
The Germans and French want complete control and Fina Gael want no control whatsoever.
The US must be seriously considering a high profile military campaign right now to take the heat of the economic situation.
This meeting of the G20 is a busted flush and the Eurogamblers have lost their shirts. “Adieu. Chiao, Hasta Luego. Auf wiedersen” when Obama said ‘See ya’.
Good luck with the John Mauldin session this evening which deserves a full house and will be a highlight of Kilkenomics. I’d like to be there but logistics etc. preclude.
I look forward to seeing highlights in his newsletter.
Most of these bondholders are probably not the original owners who lent to Anglo as it used to be known. These bonds were sold on and on again at discounts to god knows whom. Today they make a killing at our peril and they must think the Irish are the least adaptable in this crisis. Survival of the fittest? No, just the demise of the complacent (us).
Erste disclosed some major losses on its €5.2 billion CDS portfolio, consisting of “EUR 2.4 billion related to financial institution exposures, and EUR 2.8 billion related sovereign exposures…. As a reminder the EBA stress test data showed Erste to have zero sovereign CDS exposure within its sovereign mix
http://www.zerohedge.com/news/back-european-sov-exposure-moodys-will-downgrade-austrias-erste-over-attempt-hide-billions-sove
Noonan pay attention!
http://www.businessweek.com/news/2011-11-02/iceland-court-backs-emergency-bill-blocking-bond-claims.html
David, The fact the *unsecured bondholders* are been paid off seems to me to prove that the authorities here in Ireland are following instruction from other s. And, the *Anglo bondholder* pay off is connected in with another narrative out of sight. A hidden narrative dynamic at play. What though. It can only be but the plumbing machinations going on on the pipelines around the CDS multi trillion dollar ticking time-bomb. So, the Anglo unsecured bondholders pay must be happening because its due to pipeline flows of credit been irrigated through banking deep pipelines to HOLD the CDS ponzi pyramid… Read more »
MG Global are the first part of the chain reaction of things starting to fall apart. It should not have happened. Euro leaders were told to do what was necessary to keep the pretence that all is ok. Could it be that all bets no matter how secure are all set to go really bad? Dont ya love the magnifying effects of CDS. All we are witnessing are tactics to allow more time to allow another ponzi scheme take over from where the other left off. Poor old MG got nailed before it could get cash out. Its all happening… Read more »
David, please will you share with us what you think our options are — us, the people of the country who you point out are being complacent about our complacent government. If we march the streets, to what end? If the government wAs to go, who’d we replace it with? I’m deadly serious here — if people like you and your network understand that there are choices (not to have paid the 700M, to have negotiated a write- down when Greece did) then will you represent us in renegotiating our debt with Europe? There is no point in knowing all… Read more »
“Obama made a promise yesterday at G20 to do all he can to assist Europe to get out of debt crisis” Does he forget that the U.S is 14.4 trillion dollars overdrawn…and growing by million dollars every week and they have no solution to their own problems ? Find the movie “wag the dog” with Dustin Hoffman.political fiction yet very curious…. I am trying not to write anything to “heavy”as I am wondering what is the point,not giving up or anything,just wondering. It is simple leaving cert debits & credits,I Do not care how they try and dress it up.… Read more »
G-20: DOHA TALKS CANCELLED
DDA (DOHA talks) declared dead!
In addition and as a matter of course, the IMF to increase it’s powers and global footprint. – Coup d’état! – However, the IMF finance will remain under US control as the largest share holder of this banking Mafia. A global Bankster Tax is off the table, thanks to Obama.
The dismantling of democracies and the global heist continues.
AMAZING!
http://www.youtube.com/watch?v=1oHRdiklTlU&feature=player_embedded
War against citizens! The waffle that floods official channels is increasingly propagandistic. Noonan’s timing of presenting the budgetary strategy to the public is no coincidence, two days after Anglo Bondholder were paid! People need to make up their minds, and time is of the essence. You continue to accept the total control of this country by foreign private interests, or you demand your country back. Politicians are the puppets of the Bankster Mafia, IMF-ECB-EU, they continue to lie at you while stealing the bread from the plate of your children. They gave enough evidence in the past three years. You… Read more »
subscribe.
So George, what should we do??? Concrete suggested actions please??
list of anglo bondholders:
http://order-order.com/2010/10/15/anglo-irish-bondholders-should-take-the-lossesis-the-ecb-forcing-ireland-to-protect-german-investments/
@Paul,Fiona and Georg. Yo Paul, It’s the other Paul here a mere child in comparison to yourself. But seriously; Every syllable of everything you say above – I am with you on it! Your anger is palpable as is mine and many others. Last November I travelled to Dublin from Limerick and joined 50-100,000 others (and if I remember so did you?) What did it achieve? Ultimately for me it represented a box ticking exercise for the unions. It didn’t save a single job and only slightly irritated the regime at that time. Of course in January FF/Greens disintegrated (without… Read more »
I wAtched the video Georg, thanks. What is the objective of the occupy movement- are they going to take over like a coup? I will go and research it now. If that is their objective, it brings other problems – an unelected ruling class?! Paul, thanks for the first concrete suggestion :-) Pauldiv, as for your supposition that people like David McWilliams aren’t going to do it for us, well let’s at least let him answer that. David, are you going to answer my question about what you see the concrete actions the people of Ireland could take? Are you… Read more »
Sorry Georg, you obv posted that while I was writing previous.
Thanks for this.
I believe there is a more important issue at hand than the debt Ireland is facing.
That is a vote on the ESM by EU governments. This is a show stopper for democracy and freedom.
http://www.youtube.com/watch?v=5CZr17HLH5U&feature=player_embedded
http://www.businessweek.com/news/2011-11-02/iceland-court-backs-emergency-bill-blocking-bond-claims.html This article was posted after the previous article but worth posting again for anyone that did not get the chance to read it. The perfect retort to anyone defending Irelands course of action with bond holders. Lenihan was right Ireland certainly is not Iceland. “Iceland’s banks defaulted on $85 billion in debt when they failed at the end of 2008, as the government ring-fenced its financial industry in an effort to avert an economic collapse…..Iceland, which completed a 33-month International Monetary Fund program in August, will see its $12 billion economy grow at more than double the pace of… Read more »
Great to see some real action-oriented ideas being put on the table rather than just academic debate!!
Yes but we’re still missing a leader/figurehead and a means of mass communication? And one is of little use without the other. In the following historical article replace English with Politicians and Indian with ordinary European citizens; Mahatma Gandhi sought advice and direction from Leo Tolstoy, who wrote to Gandhi pointing out the absurdity of the situation in India where 30,000 British officials and soldiers enslaved 200 million Indians. “Do not the figures alone make it clear that not the English, but the Hindus themselves are the cause of their slavery?” After proclaiming the Declaration of Independence of India on… Read more »
A little bit of a reality check While preparing some food, I stumbled across a TV series, and I have never seen anything like it before. My reaction was utter disgust and aggression. A bunch of whorish people, bickering and bitching, stabbing the other in the back, running their mouth, parroting, jabbering a whole lot of useless stuff, self promoting, and brown in the face from crawling up the host’s rear. Of course, there is a price. There is always aprice! in a society that promotes such sick and undignified behavior. I did not catch the whole show, but it… Read more »
Georg, I find your last long post bitter, negative and unhelpful. If you feel you have the right to share all those sentiments with us, then I feel I have the right to tell you how it comes across. In my opinion.
Ghandi
Ghandi was successful because his idea as explained above happened at the end of the age of Pisces ( water element ) had he been alive now something else would be required because today we are at the very beginning of the age of Aquarius ( Air Element ).Thus the medium of connecting together is totally different and Leadership must embrace that .
An age period lasts 2,180 years approximately.
There is a long long journey ahead for many many generations yet in this new capsule of life we now find ourselves in.
Astro – Art is the only compass we have to light up the long dark tunnel we have facing us .
Logic as we have known it is absolutely Dead.
At this juncture I think this is the most appropriate song to play:
http://www.youtube.com/watch?v=NS3m0-4bM9s&feature=fvst
For most of us most of the time happiness is a reliable income. This is the root cause of all our problems. This article and indeed all of Davids articles are about the disruption of this income by 3rd parties. Now if u could figure out a way of not having a need of such income, you’d be sorted. Let’s face it income=rat race=more income=life fulfilment=happiness and so on. More insidiously, it also equals independance and the removal of the need to trust others. The ability to control is the comfort blanket we seek not realising that it also divides… Read more »
TTG ITs been interesting reading commentators views and reading David’s articles over the past year or two, but the articles are becoming more and more insubstantial as time goes on. They no longer reflect the deep shit the country is in. For me they no longer provide an adequate response. I thank him and commentators for the ‘good articles’ and ‘good comments’ made by contributors especially re breaking news and information related to what we are all interested in. Sadly, DmcW is no Alexander The Great http://en.wikipedia.org/wiki/The_Battle_of_Alexander_at_Issus His critique of government response to the banking sector, namely, that we should… Read more »
Evening All David is a messenger and by and large a good one.The most important thing today is keeping things simple.Looking after each other and realizing through circumstance our luck,what is really important.There are small things we can do every day to make our own contributions to ourselves and our society.Only you can decide what they are…… We are back to basic’s.perhaps for the better in terms of living life on life’s term’s.Shelter.food,warmth.and taking care of those around us. In the world today,Fear is our peoples greatest enemy,our own fear.Fear is not a fact it is a feeling,which leads to… Read more »
Shelter.food,warmth.and taking care of those around us.
….
Fear is our peoples greatest enemy
….
Really RR6, couldn’t have said it any better!
Terminal One
Four days remaining to Full Moon ……..Please drive slowly .
http://www.zerohedge.com/news/wikileaks-exposes-german-preparations-eurozone-chapter-11>
whereby Mayer’s 1) is not a question of if, but when, and the latter is pretty evident, and no later than Q1/2013.
Evening.
UN Atomic watchdog agency to release report on Iran on the 8 November.
Israeli President, Shimon Perez,
claims”attack on Iran more likely than ever”
41% of Israeli’s favour attack,39% against.20% against.
United States and Israeli Defense Forces launch LARGEST ever military war games excerise.
Reuters 11/6/11
“with TWO U.S carrier groups operating in the mid east,this must be the biggest “war games”ever.Even during the “cold war” I don’t remember two carrier groups being used,that is a MASSIVE amount of hardware,never mind what else their using.
“I am sure it’s all innocent enough though”…..NOT
Like so many others I love reading this blog here from down under. I read regularly and I’m always overcome with enthusiasm, laughter, but most of the time despair! So now the government want to keep flushing down more money into the crap bank loos. Why oh why is this still happening? I read that this is not a requirement of us by the EU. Why are the politicians allowed to get away with telling bare faced lies on national television telling us that it is! I spent the month of September back home in Ireland. I hadn’t been home… Read more »
http://www.youtube.com/watch?v=m1jy0_UiIbQ
More on scripted realities… Our abilities to sense what is right and what is wrong vary, but this is not an exclusive matter of personal skills. In a world that is flooded with soundbites and headlines that have a halftime of approximately 20 minutes at the most, and a public with the attention span of a Goldfish, it is increasingly difficult to separate the useful information from intellectual junk. If you are watching six-one news, and see pictures from your car that burned out completely, and a scene with firefighters securing the site, well I bet you are out of… Read more »
[…] to leave complex Mortgage crisis hits home at Ulster bank Boost for homeowners with rate cut What bit of ?unsecured? do you not understand? Investment firms face new Central Bank rules ?3.8bn in cuts and tax increases in budget Central […]
I see SBP put David’s Sunday article behind a paywall yesterday. I hope they allow him to escape with it later in the week.
As a matter of interest, does anyone know who owns the Business Post empire?
Have they decided that stale quality news is only for those with sufficient disposable income, but not for the needy unemployed?
Perhaps some enterprising person will establish an SBP soup kitchen providing a nourishing diet of leftovers.
i see your 700 million euro clusterf*#k and raise you a 3.6 billion euro “double-count” (http://www.irishtimes.com/newspaper/breaking/2011/1102/breaking11.html)
fox likes to blame a servant single hen because all the other hens know that hens can make mistakes. fox wouldn’t like the hens to know that the foxes knew of this “error” all along. I wonder what other “errors” will be found in the coming months…
The Beginnings of class warfare.. too few have have too much….. And too many have not enough This is the beginnings of the first Great War of the 21st Century. Academia is irrelevant,what is important now is consolidating your own security and your families. What you need to do is to take care of your own families and suggest to others any ideas that can assist in this,and you do not need any Governments permission to do this,to them you are a burden and just a asset to be manipulated. Man up and realize their is nothing to be afraid… Read more »
Did anyone from this Forum meet up in Kilkenny and how did it go ?
I know how the central banks function – and so do you David. You know that it is the greatest scam in history. Yet, you write article after article, telling us how the Central bank is the lender of last resort… blah blah blah. Well you were one of the boys anyway, so I guess it’s no surprise. You should know the Keynesian Economics is the economics of elite fraudsters. Unfortunately the government and people like me listened to you 3 years ago with your bank guarantee scam. What an idiot I was. As far as I can tell, joining… Read more »
The Forum is quiet currently maybe its because of the late pop up of the next article from the SBB . Anyway something for serious Rugby Followers . Munster has lost all their matches against Leinster on the 7 day eve of the Full Moon .It has always happened like this even the recent one too . There is a reason . It will happen again and again and again . Its not the fault of the players . there is another reason . And the Full Moon plays a part to this and always sides with Leinster . The… Read more »
Irish Evictions by Irish Banks
Under French Law nobody and no family can be evicted from their Home in France between 1st November and 17th March ( St. Patricks Day ) each year .
Under Irish Law the Court Process increases the Enforcement of Eviction and Personal Bankruptcy and the Maximum Impact happens on Christmas Week every year .
Hello Suds, http://www.thedailyeconomist.com/2011/11/did-john-corzine-use-mf-global-as.html http://www.businessweek.com/news/2011-10-26/goldman-may-get-windfall-if-it-buys-mf-global-bove-says.html O dearie me suds G-Sucks up to its goolies in doo doo again. G-Sucking across the universe, On the starship G-Sucks under captain jerk, G-Sucking across the Universe, Things aren’t getting better, Things are getting worse! Hello David, Troika G-Sucks style. 1) The penny drops with the sociopaths in G-Sucks that Eurpoean Debt is worthless shit. (They must find a buyer at all costs.) 2) Send in a double agent to control a cash rich company with the instruction to buy up all the worthless bonds from european countries from guess who and whoever. When the… Read more »
Hi folks. Been away for a few days but I’ve looked through the past week’s comments. Good to see you are finally beginning to see the light. I’d like to dedicate the following excerpt to Georg and his acolytes. Take it away, JKT… [From Myrna Minsky’s letter to Ignacius Reilly] “At last it seems I am finding a platform for my philopsophy, etc. It all happened in a strange way. A few weeks ago I was at a party that some friend were giving for this very REAL boy who had just returned from Israel. He was unbelievable. I mean… Read more »
Morning from dreary, drizzly Belfast. Apologies for not having the usual service of articles up yet on the site. I will try to get to it today but as the SBPosy have changed the website I have to get a password first!
Thanks,
David
Devaluation Train has Arrived
http://www.rte.ie/news/2011/1108/crh-business.html
Cement Roadstone have moved their main Primary Listing to London and in Sterling .
How many more will follow?