Murphy's Law, Kelly's Corollary, Part Deux: Irish Banks

OS mentioned this yesterday, and the news is beginning to trickle in.

If you don't believe OS, check out today's Irish Times front page. That unemployment number is pretty chilling. We don't think it can happen here?

(Click to enlarge..)

Kelly's Corollary--Murphy Was An Optimist: The Irish Banks Admit The Extent Of Their Losses

Murphy was Irish, no doubt about it. And, in his honor, that black-humor classic 'Murphy's Law' has attained immortality. There are many versions of it floating about, but it goes like this:

1. If anything can go wrong, it will, at the most inopportune time.
2. If there is a possibility of several things going wrong, the one that will cause the most damage will be the one to go wrong...first.
3. If anything just cannot go wrong, it will anyway.
4. If you perceive that there are four possible ways in which something can go wrong, and circumvent these, then a fifth way, unprepared for, will promptly develop.
5. If everything seems to be going well, you have obviously overlooked something.
6. It is impossible to make anything foolproof because fools are so ingenious.

The list stretches on, but OS's hands-down favorite is Kelly's Corollary: Murphy was an optimist.

All this as an introduction to Robert Peston's most recent droll post on the basket case that Ireland has become.

To prevent Irish banks toppling over one after another, the European Central Bank has lent €117bn to them and the Central Bank of Ireland has lent them a further €71bn. So that's €188bn of loans from the eurozone's taxpayers to Ireland's banks - which makes the €67.5bn lent directly by the eurozone and IMF to the Irish government look like peanuts.

And a further €20bn of bank bonds - another form of bank debt - is still guaranteed by the Irish state through the Eligible Guarantee Scheme.

So that is €208bn of taxpayer loans to Ireland's banks - equivalent to a remarkable 154% of GDP.

It gets much worse, in the tradition of Murphy, and OS hopes you take time to read the entire essay.

Today, the banks will have to announce the extent of the damage that has hitherto not been discussed in public. And then, some hard decisions will follow. The illusion spun by The Left that there is no problem, that the massive debts aren't deleterious to a culture's health, that we can just go about business as usual--is just that, and is finally seen for what it is in Eire.

When will our leadership admit the same in the US? Not anytime soon. The story about Chuckie Shumer coaching everyone on the party line within earshot of the press would normally be funny, but the time for laughter has long passed.

Tuesday's effort by the House GOP to wind down the HAMP program, a scandalous failure, in order to save a few billion and protect homeowners from disaster, was met with scorn and vitriol by House Democrats today. It was like watching bad opera, with Barney Frank holding the big spear, wearing the horned helmet.

By noon today in the US, we'll have the news. It will be interesting to see if the markets have any reaction, at all, or even a moment's reflection on what it means.

OS ain't holding his breath, but he sure ain't sitting long on the market either, if yuh know-whudd-I-mean.

The European Bailout Trip Through The Twilight Zone

From NPR's Planet Money, this morning.

(If hard-core libs like the NPR folks have figured out the math doesn't work, then it's gotta be problematic.)

December 3, 2010 - STEVE INSKEEP, host:

For a long time, people in the financial industry seemed to be following a don't ask, don't tell policy when it came to financial risks. Ireland is the latest country being forced to change that. Like its other European neighbors, it's been spending a lot of money it doesn't have. And it wound up in the situation that debt-ridden countries fear - unable to borrow, at least not at a reasonable rate.

This week, Europe agreed to lend Ireland the money that nobody else will. Alex Blumberg and Chana Joffe-Walt of our Planet Money team report that the money to bail out Ireland comes from a surprising place.

CHANA JOFFE-WALT: The bailout sounds very serious and very substantial.

Mr. SATYAJIT DAS (Financial risk consultant): The European Financial stability fund. This is a 750 billion euro, so it's pretty close to a trillion dollar facility.

ALEX BLUMBERG: Satyajit Das is an author and financial risk consultant. And he says two things. One, that trillion dollars, it's not all for Ireland. Two, that trillion dollars doesnt actually exist. In fact, the stabilization fund currently has no money in it at all.

JOFFE-WALT: The trillion dollars, its more aspirational - a trillion dollars that could be there, if needed.

BLUMBERG: If needed, the Stabilization Fund could borrow money and then lend that money to Ireland. And maybe in the future, other European countries that are having trouble borrowing, like Portugal and Spain.

JOFFE-WALT: But that's confusing, because if people are scared of loaning money to Ireland, Portugal and Spain, why would they loan money to a fund, whose sole function is to loan money to Ireland, Portugal and Spain?

BLUMBERG: Ah, because the fund is safer, it's backed by 14 different European countries who all guarantee your money back.

JOFFE-WALT: Wait. But don't those European countries include Spain and Portugal?

BLUMBERG: Well, yes. They do.

Mr. DAS: Portugal, who can't borrow is guaranteeing this. So you've got basically, people who are being lent to who can't pay you back, and the guarantors aren't solvent either. So exactly, what are you doing?


Does one get the sinking feeling that we'll be called upon to 'contribute' to this venture? Or that the Chinese and Indians will be ponying up money, and extracting interest in some interesting ways besides cash payments?

OS says it again. The Euro is not a currency. It is a ball and chain, shackled to the feet of every child in Europe.

Clarke and Daw, the Australian comedy team, sum it all up best.

Charles Hugh Smith Proposes A Reasonable Path For Ireland: Go Ahead and Default

Well worth the time spent to read. Smith's illustrations are a great explanation of where we are, and how we got here.

The Euro: The Worst Idea Of The Past Fifty Years

The serious bloggers and thinkers, like Mish and Calculated Risk, and Bloomberg, etc. are all over this one, so you don't need to hear much about this from OS.

Financial Times has a good article summarizing the inevitable posturing and stupidity that precedes the really bad stuff happening.

They're all prickly and stuff about being quoted, so best to go there yerself.

Ireland is about to be enslaved by the banksters, 'cuz the taxpayers had to bail out the banksters a couple of years ago, 'cuz the banksters were acting like yer worst nephew with a meth habit and keys to the Porsche, and wrapped it 'round a telephone pole.

The Spanish and Portugese aren't far behind. The UK is getting hammered, and they're not even on the Euro.

There's something wrong with this picture. It's like the gorilla in the room no one wants to talk about.

The Euro is not so much a currency as a huge anvil attached to the ankles of every man, woman, and child from the Polish border to the west coast of the Emerald Isles.
That ten-year-old kid playing soccer in Dresden or rugby in Cork is gonna be stuck with the debts generated because a thirty-something banker in Barcelona rolls the dice on one more condo development on the Costa del Sol or sovereign debt offering from Athens. All profits are privatized, all risks are laid off onto the society at large.

Sweet. Where does OS go to sign up for that arrangement? (Just kidding...)

This will end in tears, ya'll, if we're lucky.

Only one question: Who's making money off this?

Cranmer's Requiem For Ireland: The Eurocrat Coup

Cranmer says it best.

The Celtic Tiger must be very sick indeed.

But it is the karmically inevitable contagion which follows Brian Cowan’s lies and deceit about the Lisbon Treaty.

If you recall, the wise and proud people of Ireland rejected the Treaty, and so they were ordered to vote again until they gave the right answer. It shows a marked lack of political discernment that the Irish Times didn’t realise at that point that Irish sovereignty had ceased to be.

For the UK, this bail-out is about assisting a long-time friend and trading partner whose history, culture and traditions are tied to our own: for the EU, this bail-out is about saving the euro, and so saving ‘Europe’.

Are Ireland’s politicians so incompetent and obtuse that they could not grasp that the abolition of the punt heralded the end of national sovereignty? Did they not understand that there can be no ‘pooling’ of the essential sovereignty by which the independence of the state is defined?

Why were they not honest about the euro and Lisbon being concerned with the depriving the Dáil of the right to make its own decisions on behalf of the Irish people? Why would the people who still talk of the potato famine as though it were yesterday and of Cromwell as though he were a demon from hell ever wish to surrender their right to the ‘self-determination’ which has been on the lips of Irishmen for centuries?

The control of money is at the core of politics, self-government and sovereignty itself. The monarch’s head upon a nation’s currency is a symbol of that sovereignty: the denarius that bore the head of Caesar belonged to Caesar; the sterling that bears the head of the Queen means that her authority in Parliament is absolute; the euro that bears the insignia of the European Union shall be rendered unto the European government because it belongs to the European government. The introduction of the euro was not only the crowning of economic integration, it was a profoundly political act, because a currency is not just another economic factor but also symbolises the power of the sovereign who guarantees it. Since this power is guaranteed by the European Central Bank, the ECB is Europe’s Caesar. Whatever other token national symbols the currency displays, they are as nothing compared to the supra-national power and authority of Caesar’s European Bank.

And, from Germany, Weimar Ben now speaks openly of global coordination of currencies and economies, which also means nations and cultures. Of course, it would all be run by people like him, and Little Timmy, and Tony Blair, and...fill in the blank.

It is not yet too late, but the danger approaches.

When Irish Eyes Aren't Smiling: The Proposed Bail-Out Of Anglo-Irish Bank

To quote that great philosopher, Scooby-Doo: Ruh-Roh!

Or to quote the late Harry Cary, that wonderful voice of the usually hapless Chicago Cubs: Holeee Cow!

From France24:

AFP - Ireland warned on Thursday that the state rescue of Anglo Irish Bank could cost 34.3 billion euros, pushing the public deficit up to 32 percent of economic output this year.

The potential rescue bill, equivalent to 46.6 billion dollars, is roughly the same as Ireland's annual taxation revenues.

The news that the deficit could be equivalent to almost one third of everything produced by the country in a year comes amid mounting investor concern about soaring levels of eurozone state debt.

This week, the yield, or rate, on Irish government debt rose at one point to the highest level since the euro was created, signalling that the government could have trouble in financing its overspending.

Finance Minister Brian Lenihan defended the rescue, saying the "nightmare" collapse of Anglo Irish would have pushed the country into insolvency, in remarks redolent of the recent crises in Greece and non-eurozone country Iceland.

"Unfortunately this bank grew to half the size of our annual wealth and the failure of a bank of that scale would render the country itself insolvent," he told RTE state radio.

Denninger passes along the account of a conference call last week hosted by Mr. Lehihan, designed to calm investor nerves, that turned into a free-for-all, and had to be abandoned.

Remember last spring, when we were assured that ThePeopleInChargeOfTheseThings had resolved all these nasty questions about governments defaulting on their debts?

Lucy! Wha' Happen'd??!!!