Financial Crisis

[geysir]

No, its the creation of a fund that is available to be called on as required.

A better question is, where did the £50bn actually come from?

I've only read one commentator so far twig that the "E400bn" Irish package is nothing of the sort, if it ever gets halfway near that amount the state will be bankrupt and will be unable to pay.

Fair enough.

I have a question. If we had a separate currency
and the State needs €100m to pay salaries, hospital treatment, all gov funded services
but there is no cash in the account.
The State decides to print the money just to pay the salaries and services
The currency value then inflates by that proportion of the money printed.

Another alternative is the State borrows €100m on the foreign market to pay all those services.
Then the national debt increases - does the currency inflate in the same way to reflect the new value of our total debt

[OneRedArmy]

Slightly disappointed by the lack of Bellicose attitudes in this thread, !

I'm slightly disappointed you continue to post when you patently don't understand whats going on.

I was apoplectic when I heard that these 6 bankers were paid a combined 13 million euro last year which included fat bonuses...!

1) The shareholders approved it. 2) Its a drop in the pond compared to the earnings and wealth of the property developers who spend 7 figures on a party for their kids. Why aren't you complaining about them? Two wrongs don't make a right but I don't understand your obsession.

If you are not annoyed you should be!

Thanks for your advice but I think I've demonstrated in this thread that I'm more able to to take an informed view than you.

[OneRedArmy]

does the currency inflate in the same way to reflect the new value of our total debt

whats the effect on the interest rate?

[Reality Bites]

I'm slightly disappointed you continue to post when you patently don't understand whats going on. 1) The shareholders approved it. 2) Its a drop in the pond compared to the earnings and wealth of the property developers who spend 7 figures on a party for their kids. Why aren't you complaining about them? Two wrongs don't make a right but I don't understand your obsession.


Thanks for your advice but I think I've demonstrated in this thread that I'm more able to to take an informed view than you.

Terribly Obnoxious and Superior stuff. We all understand whats going on!

Three words!

Bad Lending Practice.

Dress it up what ever way you want but its quiet simple really and don't take such a patrionsing view with me again!

[OneRedArmy]

Terribly Obnoxious and Superior stuff. We all understand whats going on!

You made a clearly ridiculous point on secured property assets on the last page and refused to quote your source into the bargain, which iirc is against the rules here.

Three words!

Bad Lending Practice.

And? Banks are well capitalised to sustain large losses in property. Most banks in most economies survive most recessions. FACT.

Dress it up what ever way you want but its quiet simple really and don't take such a patrionsing view with me again!

Get off your soapbox.

The complete shut down in global liquidity wasn't forseen by the vast, vast majority of bankers, investors and legislators around the globe. Its always been held that money was available at a price, and only the price varied. It is now not available at ANY PRICE. Did you forsee that?!?

If you ever finish pontificating you know where to come to discuss the detail.

[Billsthoughts]

And? Banks are well capitalised to sustain large losses in property. Most banks in most economies survive most recessions. FACT.

Kaupthing Singer & Friedlander gone bust today.

[Reality Bites]

You made a clearly ridiculous point on secured property assets on the last page and refused to quote your source into the bargain, which iirc is against the rules here.

And? Banks are well capitalised to sustain large losses in property. Most banks in most economies survive most recessions. FACT.



Get off your soapbox.

The complete shut down in global liquidity wasn't forseen by the vast, vast majority of bankers, investors and legislators around the globe. Its always been held that money was available at a price, and only the price varied. It is now not available at ANY PRICE. Did you forsee that?!?

If you ever finish pontificating you know where to come to discuss the detail.

Boulderdash -waste of time arguing with you.

[John83]

Kaupthing Singer & Friedlander gone bust today.

Really? Ouch. The investment banks are dropping like flies.

To be fair, we were discussing the likes of AIB and BoI, which are a different sort of beastie altogether.

[pete]

The State decides to print the money just to pay the salaries and services. The currency value then inflates by that proportion of the money printed.

Because are part of the Euro we could not do that ourselves. In the old punt days nothing stopping from printing new cash. I have heard suggestions that the US been printing new money for years so purchasing power of the dollar has plummeted.

Another alternative is the State borrows €100m on the foreign market to pay all those services. Then the national debt increases - does the currency inflate in the same way to reflect the new value of our total debt

Been a lot time since studied economics but I believe the value of our currency would decrease. I believe US dollar would be an example of this. I would guess value of each unit of currency is National worth divided by number of units in circulation?

Anglo Irish only has market capitalisation of 1.7billion. Maybe the state should have taken control (like Examinership) & sell it off bit by bit?

[OneRedArmy]

Kaupthing Singer & Friedlander gone bust today.

Due to liquidity issues. Not credit losses AFAIK.

[pineapple stu]

They're in administration, not liquidation, yeah? Big difference (difference between, well, being bust and being in serious problems but not being bust).

[geysir]

Because are part of the Euro we could not do that ourselves. In the old punt days nothing stopping from printing new cash. I have heard suggestions that the US been printing new money for years so purchasing power of the dollar has plummeted.



Been a lot time since studied economics but I believe the value of our currency would decrease. I believe US dollar would be an example of this. I would guess value of each unit of currency is National worth divided by number of units in circulation?

I was thinking if we had our own currency and the Gov printing the equivalent value of €100m to pay bills at home in a cash flow crisis. That action would decrease the value of the currency.

Instead of printing, if the Gov decided to take a foreign loan the equivalent €100m to pay the bills, then not only will that devalue the currency but the loan would have to paid back with interest.

I was just wondering which of those two actions would be more negative in the long run.

[geysir]

They're in administration, not liquidation, yeah? Big difference (difference between, well, being bust and being in serious problems but not being bust).

Exactly.
Landsbanki, the 2nd biggest bank in Iceland is in liquidation.
But it's still operating, sort of. There is a €3k limit to withdrawls, money is circulating and it should get going a bit more.
Liquidation is a bigger problem when there is not enough liquid to sell or you don't get enough value for the liquid assets.
The latter is the problem with Landsbanki in these panicky times.

Some economists say the Gov should not have nationalised the 3rd Bank Glitner in the beginning, all those days ago. From my observations the State got a good deal and hammered the greedy obnoxious arrogant cold hearted picks who owned most of the shares but they say it was perceived as a desperate action and caused more panic worldwide causing Iceland to be frozened out.
The director and largest shareholder was on tv almost in tears at the loss of his fortune, $300m down to $75m, but said at least he has enough for his family. No heart, complete and utter lack of compassion for the suffering that has resulted as now hundreds of thousands of average honest savers face at a minimum some severe losses.

Next time you fly to Iceland, you may well be landing at Putinvik Airport

[pete]

The ran out of room on the National debt clock as the US now owes 10 trillion!

[Billsthoughts]

They're in administration, not liquidation, yeah? Big difference (difference between, well, being bust and being in serious problems but not being bust).

Only because of UK Govt.

[Dodge]

I see Kaupthing has been nationalised by the Icelandic government today. not sure to which degree.

Bit on BBC news this morning listed several UK councils that had money in Icelandic banks. Can't remember the figures but I think Kent and barnet councils had the mnost at about £40-50 million each

http://www.guardian.co.uk/society/20...vernment.banks

Guardian article on this, with some actual figures

[geysir]

Kaupthing in Iceland has not been nationalised yet.
The Government has just taken control of the operations by appointing a Financial regulator.
I know
It sounds like a Father Ted 'the money was just temporarily parked in my account' type of thing.
Means that the Bank needs to be directly supervised and also are subservient to the supervising authority.
Which actually should be normal practice along with regulations to be followed and enforced.

Talking of which
Several notches up the reason to panic like mad richter scale was
something about something I heard on the radio this morning that the greatest buffoon in Irish Economics, the grinning puppet of the de-regulaters, Charlie McCreevy, is to be part of a top level 3 person EU committee to suggest fixes or decide on fixes.

[pete]

Reading about Iceland & seems like the government there used Interest rates to control inflation so had 15% rates. Seems like this caused a lot of speculation on their currency & lead to domestic businesses taking out loans in foreign currencies (I presume for lower interest rates). They have their own sources of energy which will protect in the long run but going to see very high inflation & reduction of incomes in the short term

[geysir]

It's bankrupt plain and simple.
Looking for a €4bn loan from the Russians.
Already bankrupt and looking for a loan 40% of the value of the GDP.

The big difference for the house "owner" in Iceland compared to elsewhere is all loans are tied to the inflation index.
It means that a house loan carries a normal 5% p/a interest and approx. you pay another 5% p/a to cover part of the inflation growth, while the unpaid part of the loan (the capital) grew in the background by about 10% p/a. Mostly that was doable, Icelanders are hardworking and resourceful.
That was then, this is now - in the last 6 months up to end of Sept. house loans (the capital) have risen by 10% with the index.
When I saw this happening 5 months ago, I withdrew savings and paid up 95% of the remaining value of the house loans, I know féck all about scales of economy but something smelt foul.

Add to the current woes, in the last 5 years people were offered and accepted more attractive 100% loans in foreign currency for cars, jeeps, houses. Imagine that one when the kronur is on the down part of the helter skelter.

So there is no short term for Iceland. Natural sourced heating and electricity is taken for granted but it can't be exchanged for anything.
But there is fish. One time in the late 70´s came a big slump, the herring stocks vanished, then there was a deal done with the USSR to save the economy. Thats why then 1/2 the cars were Ladas, Moskovitches from USSR, Wartburg and Trabants from East Germany, Skodas from Czech even the odd Yugo. About a 1/4 were huge fécking 8 and 12 cylinder american cars left over from the US base, they were called carpets as in flying carpets.

I suspect that Russia will want the Icelandic fish in exchange, hopefully to buy rather than the rights to trawl. Just like a family has to secure a food supply so does a country.

[pete]

Any particular reason why Iceland never joined the EU? Fish stocks?