Economy Rigging 1

IRELAND ON THE BRINK II November 17, 2010

Filed under: Uncategorized — bashstreetkidjailbreak @ 11:32 am

MAIN ITEM:

BY MAX KEISER ON IRELAND AND CURRENCY WARS : YouTube – Max Keiser: Irish govt slaves to IMF terror machine!

~ Max points out in the interview the dollar world reserve currency era is finished and afoot a battle to replace it and gain the political power which comes with holding the reserve currency cards.

BY WASHINGTON POST ~ IRELAND OVER THE BRINK : Britain joins E.U. in effort to help Ireland

BY REBEL CAPITALISM ~ IRELAND OVER THE BRINK : RebelCapitalist: Financial Information for the Rest of Us | Ireland, Argentina and U.S. – Very Different

BY YAHOO FINANCE ~ IRELAND OVER THE BRINK : Why the Irish Crisis is Going Global – Yahoo! Finance

ITEM 1:

BY FT ~ IRELAND OVER THE BRINK : FT Alphaville » Thou shalt not bluff

As all eyes focus on what should be done about the Irish banking crisis, perhaps it’s time for the European Union, IMF and other related parties to take a closer look at some of the factors that may have exacerbated the problem.

After all, it’s now becoming abundantly clear that the dishing out of an elaborate 100 per cent deposit guarantee back in September 2008 was largely nothing more than a massive bluff designed to steal attract deposit flows from neighbouring states to for the purpose of propping up Irish banks.

Furthermore, as we’ve mentioned already, the EFSF is already turning out to resemble something like Paulson’s bazooka in its own right too.

Which means  — with everything becoming a high-stakes game of ‘Call my bluff‘ — it could be time to restrict the ability of sovereigns  generally to randomly guarantee things they clearly can’t afford to guarantee in the first place. (If confidence in the Eurozone is to be restored properly that is.)

After all, let’s just look at the dynamics of the Irish deposit guarantee itself.

As the Irish Times wrote back in October 2008:

The €440 billion guarantee flooded the six Irish-owned financial institutions with deposits after it was announced on the last day of September, though it appears the banks mostly recovered what they had lost in the preceding weeks.

It helped to stop further leakage of deposits and gave much-needed short-term liquidity to the cash-starved Irish banks. However, it has not solved the long-term funding issue or encouraged bloodied debt investors and asset managers to place large lump sums with Irish banks.

What’s more, it was always seen as a dangerously unilateral move from the outset. As Willem Buiter commented rather astutely at the time:

Financial crises may not be the best time to make friends and influence people, but the Irish guarantee is the most ‘in-your-face’ beggar-thy-neighbour provocation since medieval armies catapulted bubonic-plague-ridden corpses into the cities they were besieging. Between the attempt to favour Irish shareholders at the expense of foreign shareholders and the poaching of UK sterling deposits (and indeed euro deposits anywhere else in the euro area) through subsidy-fuelled interest rate offers, Ireland should not be surprised to encounter limited support and solidarity in the EU the next time the country is up against it, for whatever issue.

The Economist, meanwhile, did well to note the shocking magnitude of reckless guarantees coming out of desperate sovereigns all round:

Although no other European country is as exposed as Iceland, all should heed it tale. In their desperation to shore up their banking systems, several governments have made reckless promises that they would be hard pressed to make good on. After loudly denouncing Ireland’s beggar-thy-neighbour decision last week to guarantee all the liabilities of its banks, Germany on Sunday promised to stand behind all retail deposits in its banking system, though the government gave few details of how this would be funded. Denmark set up a fund to insure deposits. Britain has also raised the level on its deposit insurance to £50,000, from £35,000, in a bid to stem an outflow of deposits to Irish banks.

In which case (in the event of bailout, of course) might we  expect an IMF or European Union conditional ruling of the following sort: ‘Thou shalt not promise what you can’t deliver’.

End of.

Of course, if anyone has seen any rough estimates of just how much is riding on European Union sovereign guarantees, versus existing European Union assets …\

ITEM 2:

BY TIME MAGAZINE ~ ECB LOOKING UNDER THE CARPET : E.U. Officials to Lift Lid on Irish Banks – TIME

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