More theft coming to a country near you



I have been tracking the Irish Banks for years. The level of corruption, incompetence and collusion is breathtaking in it's audacity. Most people have an idea of what's going on so I'll just point out the most recent and some of the more amusing.

Minister for Finance and beating up old ladies, Michael Noonan, assured the Irish people shortly after the Cypriots learned a lesson about trusting banks and politicians that "deposits of over 100,000 euros are sacrosanct" appears to be getting ready to either make good on that promise  or prove himself a liar once more.
a) The Irish banks have been putting out reassuring headline after headline that they are solid and "we only lost xxx million last year".
b) They appear to be trying to dump their UK mortgage portfolios or at least gouge their customers by hiking their mortgage repayments.
c) Blackrock audited them a couple of years back and reported a 24 billion shortfall. This was after the bailout which required the Irish people to be on the hook for their incompetence.
d) Because of the way property transactions in Ireland are conducted it is was entirely possible to pull multiple mortgages on a single property on the full value of the property. This means that it is possible to by a house for a million and borrow 5 Million against it or more. It just depends on whether you have the time to visit a 6th or 7th bank etc. So now the banks are fighting over ownership of houses that have been vacant for years. I could go on and on.  

For the last few months Reggie Middleton has been looking at the Irish banks and he doesn't like what he sees. Reggie is a great analyst but unfortunately his articles are horribly constructed with facts just randomly thrown on a page and links to more articles with links to more articles. The bottom line Reggie says "fraud".

Anyway, to my point. There are two articles that you need to read and it becomes blatantly obvious what is going to happen.

The first is this Ireland Agrees to Stress test ahead of EU Summit
"The Government has agreed the tests – aimed at gauging banks’ resilience to economic shocks – could take place ahead of a Europe-wide exercise, in line with the European Union and International Monetary Fund’s desire for the banks to be checked before the end of Ireland’s sovereign bailout deal in December.
Dublin had wanted the tests carried out in conjunction with a European-wide exercise, expected in early 2014."


Not terribly exciting except it points out the level of distrust is growing in the EU but then you have this today "Bank deposits of over 100K may be at risk"
"While the inclusion of large savers in future bank bailouts is now widely accepted, significant differences still remain between member states.
While the new rules governing bank resolution were first intended to come into place in 2018, since the Cypriot bailout there have been calls from senior EU figures such as European Central Bank president Mario Draghi and EU economics affairs commissioner Olli Rehn to introduce the new regime as early as 2015.
The Irish presidency of the European Council is hoping to reach a common position by the end of next month."


I read this as the next bail in outright theft will happen sooner than expected. It may happen across Europe in one shot because if this is just a gradual roll out then the smart people will be long gone.


22 comments:

duggo said...

Louis
You mean to say there are people who are so stupid they still have their money in a conventional bank? Can't be anyone who is a regular at Screwtapes surely?

I still think the interview regarding the corrupt World Bank over at Tekoa Da Silva's site is worth a listen.

http://bullmarketthinking.com/world-bank-whistle-blower-precious-metals-to-serve-as-an-underpinning-for-paper-currencies/

Louis Cypher said...

The guy who has to meet payroll, pay suppliers etc. what's he to do pay in bitcoins or Silver :)
If everyone over 100K picks up sticks or tries to diversify across continents then they will just have to lower the 100K to say 50K or just spend a decade chasing people across the planet. But yes, anyone with money in a European bank needs an exit plan now or have their head examined.
I especially like the language these guys use "While the inclusion of large savers in future bank bailouts is now widely accepted"

I guess this is the new norm.

I'll take a listen to that link a little later. Thx for that.

duggo said...

Louis
"The guy who has to meet payroll, pay suppliers etc. what's he to do"

Easy. Stick your money into BullionVault or Goldmoney and sell enough each time to cover these expenses.

Lord Sidcup said...

Duggo

I listened to that interview. It is content-free drivel.

SugarLover said...

Hello Louis.

Just wondered, what alternative approach would you propose to remedy these issues?

Can't have STF going all ZHedge on us!

duggo said...

Lord Sidcup

Read your comment. It looks like it came from a content-free head.

Louis Cypher said...

@sugarlover,
From the perspective of govt.s or from the perspective of someone with any savings?
From a savers perspective. Get on a plane and buy some Gold in the USA or anywhere there is no VAT. Even if Gold get's another 20% haircut from this point at least you wouldn't have to worry about the Troika deciding that you have too much money. I wouldn't trust brokerage accounts or anything else at this point. This may be an extreme viewpoint (Spain wants all residents to declare all foreign banks accounts etc ... this targets foreign retirees more so than locals) but I'm sure there are lots of Cypriots who thought it was an extreme viewpoint.
As for fixing the underlying problem ... Armstrong makes the point that the EU monetary union was doomed to failure. Lot's of reasons why. For those reasons and more it's time to let the peripherals banks blow up and allow them to print local currency.
Perhaps a two tier currency is what's needed for all the peripherals until they can get their affairs in order.
It's either that or keep kicking the can and wait for another industrial revolution to drag them up by the bootstraps. Wishful thinking doesn't pay the bills.

Louis Cypher said...

This article is a little light on details but besides the excel errors there appears there was cheery picking of data. But you will get the gist.

http://www.theatlantic.com/business/archive/2013/04/who-is-defending-austerity-now/275200/

Lord Sidcup said...

"Armstrong makes the point that the EU monetary union was doomed to failure.""
That has been a very fashionable point in the last five years - When did MA say this? I never heard the argument (even from UK Eurosceptics) until after 2008.

You are mistaken about needing to go to the USA to buy gold. In the EU there is no VAT on investment gold coins and bars (EU Gold Directive 98-80-EC).

"Perhaps a two tier currency is what's needed for all the peripherals until they can get their affairs in order."
Perhaps the USA needs a two-tier currency? One for places like Beverly Hills and another for South Central LA?
How about a two-tier clock system for people who find it difficult to get out of bed in the morning and are often late?

The PIIGS are getting a harsh lesson in how to run an economy without cheating. The fact that the people giving the lesson look/sound the same as the ones who enabled the cheating is a source of cognitive dissonance.

Ireland will stay in the Euro.
If the PIIGs leave the Euro they would have huge external debts (in Euro) and a devalued currency making the debt X times bigger.
For most of it's history Ireland had monetary union with the UK. The 30-year experiment with running own monetary policy has been a disaster. Of all the PIIGS, Ireland has the least protests against the ECB/nasty Merkel, because the people there see (clearer than most) that the combination of national government and national central bank is what is doomed to failure.

SugarLover said...

@Louis,

I was glad to see that you would encourage savers to buy physical gold (not so sure I would want that in the USA though).

Your answer to the solution was to let the banks blow up, and then subsequently to allow countries to print their own currencies.

It seems the banks are indeed being allowed to 'blow-up' as we have seen in Cyprus. And I have read that Europe generally has not recapitalised its banks, like in the UK and US. So maybe a lot more banks will be allowed to 'blow up', unless they get their own houses in order (and we have seen recently a big rights issue from a big bank, forget which one now).

It's the right approach, market led, no bailouts.

As for introducing new (presumably devalued) currencies, who exactly would that 'bail out'?

It would be very harmful to savers, all savers, and to pensioners, and potentially to those working for a living and running businesses. But it would bail out those in debt, such as the banks, and also governments.

No, a devalued currency is just a socialist escape route, hit those who have worked hard, at the expense of the feckless. I think most European countries have come to value a stable currency now, not just the Irish, and if even the Greeks didn't want to leave, no one will.

Besides which, the Euro is irreversibe of course, so there is no way out.

Louis Cypher said...

I'll stick with one country, if I may, otherwise the discussion will bounce all over the place.

On Ireland:


The social programs instituted pre crash most would consider completely over the top but they could afford it (past tense). The problem arose with the banks not the govt. for once.
The pre Euro local currency the "Punt" decouple from Sterling caused a lot of pain mostly because balance of payments shot up and horrible mismanagement of successive govt expenditure created that situation. It was a (relatively) short term pain because the ground work was being seeded with generous grants and subsidies to industry and grass roots campaigns aimed at buying local. The "Guaranteed Irish" label is what shoppers looked for whenever possible and even though they were gouged in some cases (insurance companies for example) it was successful. The "Buy Irish" campaign was a grass roots push not govt.
It's convenient to say that the population by and large were living and benefiting from foreign credit and therefore they should suffer but that is not a granular look. The population were subsidizing growth through higher than normal financial services costs, high taxation, disproportionately high utility bills, emigration, stagnant wages, high unemployment in return for a promise of a better future for their children. When Ireland joined the EU and later the Euro the whole experience and entry requirement was dictated by austerity. The pump was primed and access to EU funds transformed the country. Ireland was going to be successful whether they adopted the Euro or not. Adoption of the EU and the Euro sped up the process by opening up lines of credit for targeted infrastructure investment and markets with membership.

Until the bank bail outs Ireland had a positive cash flow situation (mostly because of low corp tax incentives and extremely generous grants to set up shop there. Subsidized plant,equipment and workers. Infrastructure improvements with money borrowed from the EU attracted investment and created local jobs).

The govt decided that the banks should be bailed out otherwise the credit markets would be closed to them. Which is certainly true but Iceland is a prime example of a people not bowing to IMF etc bully tactics. Short term pain allowed for potential long term stability and quantifiable renewed growth. A steady growth not a boom.

Cash flow went negative as soon as the Irish govt. decided to bail out the banks without even knowing exactly how much they were guaranteeing.

Louis Cypher said...

The bail out of the peripheral banks benefits the core banks. There were bad investments made all round. Bad investments by the Irish banks and bad investments to the Irish banks. For a country to honor ALL bad investments made by local and foreign banks is short sighted. A sharing of the pain would have been more appropriate through write down of the debts and this should have been left to the banks to figure out by themselves the same way as any business or person would have to do. The law may say someone who deposits money in the bank is a creditor to the bank and therefore their money is not safe but the law doesn't make the situation just. Deposits need to be guaranteed and safe otherwise we may as well just turn the clock back to the Wild West era with low growth economies and debtors prisons. Bali in's (Orwell would be impressed by that phrase) should be reserved for bond holders i.e. conscious risk takers not someone who thinks they are paying for a service to allow them to use credit cards and write checks.
These are customers not investors. They should have the same protection as employees in any bankrupt business. By painting the population with the brush of slackers, non taxpayers or siesta lovers it gives other populations a false sense of security thinking it cannot happen here because we pay our taxes etc.

Being unaware or uneducated of the law and the risks involved in using a bank thinking you are paying for a service or because it's a perceived necessity should not make one a target. So I agree 100% this is an issue for the markets not Govt.'s.
Let them sue each other. Let them rape the investor. Let them take a write down on debt. Let them fold if necessary. There will be another bank to fill the gap and there are always plenty of bankers. So i reject the notion of bail in's.

On austerity:
It's not just social programs being cut. It effects every blue collar and lower level white collar worker. Lowered wages, benefits and eventual layoffs are rippling through the economy. They will work their way up through the economy very rapidly to upper middle class.

I talked with a friend of mine in Ireland last week and since the crash his hourly pay has seen 3 negotiated cuts in order to save his job and now he is getting laid off in 6 months. He is earning 60% of his take home compared to 2008. He is underwater by 50% and behind in his mortgage. This is hole he cannot dig himself out of. His modest savings have been spent trying to keep up with bills. His life has gone from taking a few vacations abroad a year to contemplating moving back in with Mom when he is in his mid 40's after he gets foreclosed upon. This sort of stagnation helps no one except to concentrate wealth and hoarding of wealth in non producing assets. He will never find another job that pays what he was earning in the same position. It's not that he was being overpaid it's simply a job that can be cut and the short term is he will not be missed until something really bad happens and someone is injured or dies.

Louis Cypher said...

On Currency:
There is a defacto two tier currency situation in Europe (bond markets) already which benefits only the specs (again see Armstrong). You are correct Armstrong only raised that flag about shared debts relatively recently. He does claim he told the boys at the time that without distribution of debt the currency and union was flawed. I'll take his word on it simply because he has enough I told you so's that he doesn't need to embellish his record through rewriting his history or accomplishments. Also, he was an advisor and not a crusader at the time.

There are countries, both large and small, where a two tier currency is perfectly acceptable and works. Sometimes it's official and sometimes unofficial. The market will decide what the local currency is worth or the govt can peg it initially. An economy with low velocity of money is one that cannot grow. Like any good Ponzi it requires productive growth and expansion of money (and of course confidence). Monetary expansion does not have to be a socialist paradise or a bail out of debtors. Only stupid and incompetent politicians make it that way. A stagnant or low growth economy concentrates the wealth and power to the few leaving the many poor much the same way as raising interest rates on credit cards makes a pauper out of debtor and a credit card company rich. In this case it is concentrating the money and when that happens growth is limited or stagnant in the worst cases.


"Besides which, the Euro is irreversibe of course, so there is no way out" You are correct .. the EU as a whole would have to agree to this so this is mental masturbation to a certain extent. The Euro is more flawed than bitcoin in this regard. However, buried in the banking regulations local govts CAN print up more euros if they get the nod from the EU central bank. Ireland got that nod back in 2009 or early 2010 if memory serves for a 20 Billion print. So there is room to maneuver.

The solution may have to come in the form of money not tied to any country but acceptable to the black market economy.
It may require people accepting a new mindset that divorces them from decades of conditioning and dependance on govt and banks to make their lives orderly and take matters into their own hands. Hmmm, I wonder what we could use that is acceptable to all to settle a debt or pay for goods?

Louis Cypher said...

Sorry about the long winded reply but I kind of got carried away :)

SugarLover said...

That was a long reply, but no need to apologise! I noted a few of your comments below:


'Which is certainly true but Iceland is a prime example of a people not bowing to IMF etc bully tactics'

But if you look at this chart of Iceland's currency versus the Euro, you can see that savers ALL suffered the pain:

http://www.xe.com/currencycharts/?from=EUR&to=ISK&view=10Y

A huge loss, and if you think about, that's what you get when your following statement is applied:


'Deposits need to be guaranteed and safe'

One has to choose one's poison, currency demise, or actual capital losses. Is there a right and wrong? Not sure, but my preference is the Cypriot approach, which might well have seen Ireland in a better position today...especially as they potentially have the Cypriot bail-ins still to suffer.

Sorry to hear about your friend, but the world is becoming level, and most people get by on a few dollars a week, so we should all count our blessings in the developed world. Even as the pain bites in the years ahead, we'll all still be better off than most on this planet.

victorthecleaner said...


Louis,

if you lend your money to a junkie, and after some time it turns out he has spent your money, and there is no way of getting it back, how do you call it?
a) theft
b) stupidity

Just asking.

Victor

Lord Sidcup said...
This comment has been removed by the author.
Lord Sidcup said...

Louis

“The social programs instituted pre crash most would consider completely over the top but they could afford it (past tense).“
You have missed the basic dynamic in Ireland - the ruling party deliberately created and prolonged bubbles to get re-elected. This was abetted by the central and commercial banks. The bubbles meant a huge tax intake which made the generous social programs look affordable ... which was then helpful at election time.

The boom was a political creation. F.eks; Bertie Ahern (prime minister) famously said the “The boom is getting boomier” in 2006, and went on to win an election.
Ireland is an object lesson on how democracy will fail if the population can be bought with easy money.

"There are countries, both large and small, where a two tier currency is perfectly acceptable and works."
But you were talking about separate currencies for the core / peripheral EZ countries, no? This is something entirely different ... unless you’re seriously suggesting that two currencies be issued by one central bank in the same currency area ... Really?

“The solution may have to come in the form of money not tied to any country but acceptable to the black market economy“
That form of money already exists. I hope Ireland sees this obvious solution to it’s problems and adopts Bitcoin as legal tender.

Louis Cypher said...

@Sugarlover,
"One has to choose one's poison, currency demise, or actual capital losses. Is there a right and wrong? Not sure, but my preference is the Cypriot approach, which might well have seen Ireland in a better position today...especially as they potentially have the Cypriot bail-ins still to suffer."

Setting aside all morals and emotions the "bail in" approach guarantees all future business in cypress will be conducted as far away as possible from local banks or at least with a very wary eye. Collection of taxes down.
An essential part of their GDP has been nuked. The support, financial advisors, accountans etc. are looking for gainful employment or have taken a big hit in their businesses. Taxes down.
It's not the big pharma or big oil companies that create an economy it's the little guy employing a few people who contribute most. If you wipe him out you have just shot your self in the foot. It's even worse than nationalizing a mine. It scares foreign investors away and discourages enterprise.

The only thing that will bring International investors back is greed and it will have to be a hell of a deal.

@Victor, You mean the depositors should have known better?

@Lord Sidcup, All democracies are bought with easy money. Back in 2006
it was obvious things were going to blow up if you were paying attention and didn't get your news and views from political hacks and hack economists. So yeah, he was being a typical politician with one goal; get elected.


Can you point to any studies that show what or how Ahern created a bubble(s). He is going to Hell but it's a pretty broad statement so I need to know if there are any other tortures to be added.

What I am seriously suggesting is ALL alternative approaches need to be looked at. Endless rounds of austerity hurts the little guy and stifles the economy and printing of money that serves only as a wealth multiplier for the already wealthy or simply as a backstop to bad investments by the same people. google Warren Buffet.

As I said it's not unusual for one central bank to issue two currencies one specifically for local use and another for International settlement. I have a few paper bookmarks and a jar full of shrapnel from some of these countries that cannot be used or exchanged unless I revisit.

We do it anyway on a daily basis every time we whip out a credit card or municipality pays it's workers indirectly through IOU's bought by investors. It's even been done directly from employer to worker. It's been done by small banks on a local level. It really isn't that far fetched and far from original thinking.
Also, absolutely, exit from the Euro is not such a horrible notion either if the constitution contains constraints against stupidity and spending by politicians. Whilst it's true that human nature being what it is will invariably take the easy way out today to the detriment of tomorrow it doesn't have to be that way.


I was not referring to bitcoin. It's an interesting idea but I don't think the guy at the 711 would be impressed by the notion just yet. Time will tell.


OK that's enough out of me today. Please click on the twitter link as every little bit counts. Bankster shilling is just not what it used to be.

victorthecleaner said...


Louis, what was unfair, was that the governments always told their people that government debt was safe and the banks, too. Sure, they had a lot of incentives to claim that as that ensured that the little people kept carrying their savings to the bank for their government to spend.

The little people will learn it. They will have to learn it, if necessary, learn it the hard way.

I still think the Irish government was foolish to rescue the banks (I guess the true reason was usual corruption). They had better defaulted inside the Euro zone.

Well, I am confident they will get a second chance and will at least negotiate a restructuring with some 30% to 50% haircut or something like that.

Victor

Louis Cypher said...

@Victor,
Based on the cowering and mewling statements from the ruling party and it's published articles it looks like the only negotiating the Irish "govt" is doing is on the percentage rate of rape/ interest and not the principal/ pillage.

Just look at the second articles language. Broad sweeping statements presented as fact and most ascribed to no one or some nameless official.
"The European Commission argues that this switch from so-called “bailouts” to “bail-ins” would result in an allocation of losses that would not be worse than the losses that shareholders and creditors would have suffered in regular insolvency proceedings that apply to other private companies."
Who says? Where are the numbers? Not be worse? Who writes this crap?

Just this line alone is worth the read
" While the inclusion of large savers in future bank bailouts is now widely accepted, significant differences still remain between member states."
Widely accepted by who? based on what survey and who said this?
This crap is a carefully crafted statement by a PR committee of which there will be many.

The implication is that this is going to happen but probably not in some member states 'cos y'know, like, it saves money in the end. It said so in the paper so, like, it must be true.


Ireland get the best boy in the class pat on the head from the Troika and maybe in a generation or two they get the deeds to the country back. They will even thank the Troika for being so understanding.
Is Stockholm Syndrome viable on a large scale?

Anyway, really I'm shutting up now.

S Roche said...

Good catch Louis,

"While the inclusion of large savers in future bank bailouts is now widely accepted"

There must be one helluva bank run going on right now from the periphery.