March 15, 2011

Forcing ECB to convert debt into equity

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Great to hear Karl Whelan repeating this morning what has been advocated on this site for some time. He’s a fine economist and nice to see the economic establishment is looking at the alternatives. What he is saying in today’s Irish Times is basically points 6 and 7 in this article. Forcing ECB into a debt/equity swap was one of the cornerstones of “Outsiders” the show I toured around the country. The ordinary people in theatres got it, maybe the new government will get it too.


  1. Annieke

    Yep too, just how come we all got it but the ‘government’ don’t seem able to get the obvious?

  2. donal jackson

    This exchange is acceptable when there is no alternative. Why were these loans not insured? You know the answer to this question David as well as I do. The difficulty for me is the attitude of Mr Trichet??? He knows the answer also.

  3. [...] Karl Whelan (professor of economics at University College Dublin): “€150bn debt-for-equity conversion could facilitate sale of banks and help the State avoid a much-mooted sovereign default“ – I believe the answer is that the Central Bank loans need to be converted to equity. The problem is that many suspect the banks are insolvent but the scale of the insolvency hole is simply unknown. Under these conditions, it is hard to expect international stock or bond investors to hand over their money. However, if the €150 billion in funding from the ECB and Irish Central Bank is converted into equity, then these banks will immediately be solvent beyond even the doubts of the most pessimistic observers and, at that point, they could be sold into private ownership. [Via David McWilliams] [...]

  4. Jargon

    At this stage is there any doubt that there is a hidden agenda within Europe. If they had a true interest in the welfare of the state they would not allow the Merkozy twins to dictate and try to raise our corpo tax. They are not interested in solutions to the problems they made.
    Economists like Dmac are like doctors, outside the flaming insane asylum, trying to talk the patients into saving themselves.

  5. ladygee2

    Enda did a great job in telling Sarkozy where to go last week and he should now keep it up by telling the ECB that it should accept a debt for equity swap as it’s going to be the only way that it’ll ever get a chance to get it’s money back. It might take a long time, but they’ll probably get it back at some stage. Look at Germany it only finally paid back it’s reparations for World War One last year!!!

  6. murph

    hi David …I don’t understand the numbers but is the problem not that the bond-holders are the same people who we have borrowed moula from to pay…yes the banks who are in turn paying the bond-holders? if this is correct then this is really a merry-go-round….

  7. gussy

    I’m confused, can someone explain to me how this can be done without first mark to marketing of the debt, I seem to be missing something.

  8. bara

    Debt forgivness is a no brainer the plate has to be wiped clean, our smart government and bankers have not cop on to this yet,this is what they should be working on. Instead our bankers are busy forcing people to sell there properties putting them into debt, and pushing down their value destroying people wealth,these are the same people bailing out the banke this is the type of daft ideas coming from our banks.

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