What Ireland's Massive Financial Bailout Means To You

[No DUplicitous DUpe]

What Ireland's Massive Financial Bailout Means To You
posted with permission from http://sane-ramblings.blogspot.com/2010/11/what-irelands-financial-bailout-means.html

Without a massive European Union and International Monetary Fund bailout, Ireland's financial system will collapse, risking the life savings of the Irish people. But the real reason for the bailout is European banks have a staggering $650 billion of exposure in Ireland.* If Ireland's finances collapse, it could take many banks with it.

Last Spring when the European Union and the IMF rescued Greece, it supposedly ended the European financial crisis. Yet now Ireland is falling and in the months to come so will Portugal, Spain and Italy.

How can bailed out nations pay that money back? They are already in dire financial straits or they wouldn't be borrowing it. Now they must pay interest payments on their borrowings. They could easily default. Worse yet, the European Union does not have the money to bail them out and it too could collapse.

To understand what is happening, let's take a closer look at Ireland. It has tax revenue of $41 billion and debts of $59 billion which will mushroom to $459 billion** to guarantee all bank deposits. They don't have the money even after the bailout.

Greece, Portugal, Spain and Italy can't sustain their financial position either. They will default and may be dropped from the euro zone. If so, they will print their own money, which will lose value. This means inflation and to offset it, you will want to own tangible, usable assets. If you can afford it, invest in some gold as well.

What else does this mean to you? If you are European, you will be facing job cuts, higher taxes and reduced medical and retirement benefits, as your economies are squeezed.

If you are American, your country is already the world's biggest debtor nation and constantly borrowing more money. Much of that European money will now stay in Europe, thus straining the U.S.'s ability to finance its debts, even more. And all the problems facing Greece and Ireland from reckless spending and bailouts await you.

If you are Asian or in other export nations like Brazil and Chili, or a Middle East oil producer, your European export market is contracting and in the best case, it will slow your rate of growth. However as the U.S. gets hit, it will strongly impact you.

We have in front of us a titanic struggle and enormous hardship. Each of us must get involved in the fight to reign in our politicians and stop their threats and counter-threats on each other and focus them on solutions. We must also help one another much as people did during the Great Depression. Together we can prevail over our problems and build a better, more compassionate world.

Dick

*Source for the the $650 billion in European bank exposure, The Wall Street Journal, 11/20, 11/21/10 World: "The Irish government all but buckled to pressure to accept a historic international bailout."

** Ireland's financial statistics from prominent hedge fund manager William Browder. http://dealbook.nytimes.com/2010/11/18/from-russia-expert-a-gloomy-outlook/

[muriel_volestrangler]

1. I think the $650 billion exposure figure isn't right

I assume it's the €750 billion figure from the WSJ story, because I can't see anything else that large there. But that is the ECB's "€750 billion bailout fund from which Ireland likely will draw (which) was established just this spring". I think that's the size of the fund the ECB has to try and deal with all the European problems. That doesn't mean Ireland needs all of it.

I'd say that first, we have your other, slightly smaller figure - $400 billion (=$459 billion-$59 billion) which appears to be the total size of all bank deposits (that's nearly $100,000 per person in Ireland). While Browder quotes that, I think maybe the better figure to focus on is the estimate, by the Irish economist who is the equivalent of Dr. Nourini - a bailout bill of €70 billion - about $94 billion. That's what he calculates is what the Irish government would have to spend to bail out the 3 big banks in trouble. That's still huge - $12,000 per person - but in the realms of possibility.

Or, perhaps, it could be roughly the amount that bank investors have to take as a loss. Give a guarantee up to a fixed amount per saver in the banks - €75,000 might be equivalent to what other EU countries have said, I think - and then tell those with more invested that they take a loss on the amount above that, and normal investors are, while the richer ones, and institutional investors, would lose perhaps 20% of their investments above that.

On edit: I see another estimate for the bailout is 85 billion euros ($114 billion).

[dixiegrrrrl]

2. The irony is that the bank "losses" are pretend numbers.

The banks count their bad loans as "good assets", they count all the derivatives as notional value ( several respected money people are saying derivatives run into TRILLIONs)
and rather than let the banks die in their debts, country after country subjects its people to theft and loss of wealth,
and future generations to staggering debt. World wide.

This is insane.

[No DUplicitous DUpe]

3. "We have in front of us a titanic struggle and enormous hardship."

That's for sure!

[xchrom]

4. Beat the money out of the people for the screw ups of

The corporate and political elite.

[Octafish]

5. Raise the retirment age and give the banks and corporations a tax cut, too.

That'll work.

PS: K&R for an excellent OP.

[No DUplicitous DUpe]

6. From the online version of USA today...

Irish unveil 4-year plan to claw back $20B, slash deficit
http://www.usatoday.com/money/world/2010-11-24-ireland-cuts_N.htm