December 8, 2014

Opportunity knocks, but will we take it?

Posted in Sunday Business Post · 62 comments ·

Forty years ago this weekend, at the Geneva peace conference between the Arabs and the Israelis, the Israeli foreign minister and one-time Belfast resident, Abba Eban, declared of the Palestinian negotiators that “they never miss an opportunity to miss an opportunity”.

Eban – born Aubrey Eban – was a great believer in trading land for peace and when seen now with the benefit of hindsight, it’s clear that the Israeli leaders of the 1970s, like Eban, were just the type of people the Palestinians should have dealt with – but didn’t. By holding out for a better negotiating hand, the Palestinian leadership could accurately have been characterised as never missing an opportunity to miss an opportunity. Now Israel is a different country; its shift to the right is permanent and today, the Palestinians have fewer influential friends than ever.

When looking at how our government is handling Ireland’s mortgage timebomb – the one obvious internal landmine that could blow the country’s economic recovery apart – you might quote Eban’s quip about missing opportunities.

The mortgage problem hasn’t gone away. We are still the most indebted people in the world.

The time bomb has been temporarily defused by incredibly low interest rates helping to push up house prices and push down negative equity. A boom in our real trading partners, the US and Britain, has allowed many Irish companies to weather the domestic slump of the past five years. It is no surprise that when the English-speaking world moved out of recession in 2011, it dragged its reticent cousin, Ireland, up too.

We have benefited too by the fact that our so-called partners in the eurozone are in trouble, driving down rates to the lowest level since the 16th century.

Incomes are slowly improving and there is effervescence in the economy, partly due to the pent-up demand of money that hasn’t been spent for six or seven years.

However, it’s clear for anyone who takes a long-term, mortgage-length view of the world that interest rates will rise at some stage and, when this happens, it is quite likely that we will experience another mortgage default crisis. The reason is simple: many hundreds of thousands of people – mainly those on trackers – can just afford their mortgages because interest rates have never been lower.

Just to get an idea of how precarious the situation still is, look at the latest figures published by the Central Bank.

Despite the fact that interest rates in Ireland are at the lowest for 500 years, the number of accounts in arrears over 90 days in Q3 was more than 117,000. There has been a small improvement in this figure in recent months.

If the situation is still fragile, why is there not a greater incentive to consider what might happen if the rate environment were to change?

The relatively sanguine approach to the mortgage time bomb can be explained primarily by the fact that property prices are going up and going up quickly. This is repairing the balance sheet of the Irish banks at a much quicker rate than many imagined possible even a year ago. So there is no incentive for the banks to try to do anything about the overhang of mortgages that could turn sour in the years ahead.

The banks have been focusing on having enough capital. Bank capital is only all the assets of the bank added up and all the liabilities subtracted. So if assets are rising, then the bank’s capital looks better, so there is no need to worry. When property prices were falling, the banks’ capital was being wiped out and so, in order to prevent bankruptcy, there was huge incentive to get these bad loans off the banks’ balance sheets. No there is no such incentive.

The easiest way to deal with a bad loan now is simply to roll it over. As my old mate the former US bank regulator Bill Black explains, when speaking about the banks’ current attitude, “a rolling loan gathers no loss”.

After years of trauma, the Irish banks are happy as long as there are no losses today, so they might worry about tomorrow but don’t care about one year hence – and as for five years ahead, well that’s an eternity.

While the banks’ management might be able to behave like that, the managers of the country can’t. The state shouldn’t be so chilled about the possible impact of higher rates in Ireland. Because we have such huge mortgages, Irish incomes are very sensitive to changes in interest rates. When rates fall, our incomes recover, but when they rise the impact on Irish after-tax incomes is amplified by the size of our borrowings.

Dermot O’Leary, chief economist at Goodbody Stockbrokers, has examined the impact of a return to “normal” interest rates in Europe and has come up with this wonderful chart.


Looking back to 2004, you can see modest rises in interest rates; the huge increases in debts caused interest payments as a percentage of disposable income to rise rapidly from 6 per cent to 14 per cent. As interest rates collapsed after the crash, so too did interest repayments as a proportion of income.

Now look at what would happen if rates were to go from where they are now (0.7 per cent) to 2.5 per cent and then to 4 per cent (which is a historic norm). You can see that, very quickly, interest payments as a proportion of income would move up rapidly.

This would cause Irish disposable income to contract very quickly, and consumer effervescence to disappear overnight, leaving another mountain of debt.

So what could be done to avoid this? Is there an opportunity to take this debt (these tracker mortgages) off the banks’ balance sheets? And if so, would we be mad to miss an opportunity?

At the moment, the ECB under Mario Draghi is doing its best to get European banks to wrap up all these types of loans into what’s called “asset-backed security” instruments and loan them to the ECB in return for cash.

The ECB is bending over backwards to get these loans off the banks’ balance sheets in order to encourage the banks to use the cash to lend out to get the Eurozone economy going again. This is a huge opportunity for us.

If we can get the trackers off the banks’ balance sheets, we pass the risk on to the ECB. Who knows, given its proclivity for the unorthodox, the ECB may be persuaded to take equity in the banks in a debt for equity swap. Why not? The ECB has broken all the rules in Draghi’s quest to turn the euro into the lira, behind the backs of the Germans, to save the EU economy.

This is the opportunity, and it is staring us in the face. As long as the European economy is a basket case, which it is now, the ECB will try all sorts of stuff that it won’t when things recover.

However, Draghi won’t be around indefinitely. Last week there were signs of a mutiny at the ECB with the Germans saying enough of all this Italian flexibility. The opportunity is to negotiate with the practical Italian now rather than the hardline German who will replace him in in the years ahead.

Will we take this chance, or will we revert to form and never miss an opportunity to miss an opportunity? That’s the question.

    • that infers a Charity Collection or maybe you took a ticket in the Exchange …..or maybe you want to pay and you don’t …perhaps you wear mittens and and climb a greasy pole and save the halfpence …this word has many faces and lots more .

  1. I’ve just started reading Thomas Piketty’s book ‘Capital in the Twenty First Century’ David and he reckons that interest rates might stay at their current level for another generation, or even 40 years.

    Therefore indebted people might leave it to their kids to worry about, even if that’s not their direct intention.

    Have you read that book and what do you think of that prediction?

    • He is a member of the ENA -Ecole Nationale Administrif – ENARCHY I call it …there are many of them in Ireland leading the biggest changes in our economy now and …no one sees them . I find this fascinating that we grovel in our vomit and lose our head and that means lose everything .

  2. And to answer your final question, of course we will miss the opportunity – we always do.

    • Adam, I haven’t read it. Might get around to it as Christmas.

      If rates stay low for 40 years, you are spot on


    • CorkPlasticPaddy

      Couldn’t agree more with you, Adam!!

      The shower of gobshites that we have running this country simply haven’t a bull’s notion of how things are turning in this countries favour, so, this opportunity is another one that’s going to be missed!

  3. CorkPlasticPaddy

    Couldn’t agree more with you, Adam! The shower of gobsh*tes that are supposedly governing the country will do their best to miss this opportunity and then we’ll more than likely end up in even deeper doo-doo!

  4. EugeneN

    My preferred fix is simple.

    1) Seize the houses of those in arrears over the next year pushing them onto the rental market, meanwhile building supply.
    2) Change the rental laws to be like Germany etc.

    This will allow those who were prudent during the boom, or not old enough to be imprudent to get onto the ladder at the expense of a fair amount of people clearly taking the piss because the State owned banks won’t touch them. It will remove future bad loans from the books, and make housing cheap for new buyers so we also have the benefit of cheaper housing, clearly a good thing.

    That won’t happen because more people would be harmed than benefit and because we consider a family not paying their mortgage to be untouchable while a renting family paying their rent fair game for eviction if they can’t afford the rent increase, even if the guy evicting them is not paying his mortgage, as 30,000+ plist BTLers are not. All subsidised by the renter in his taxes.

    So cut the crap. The housing crisis is designed to protect the interests of the Gombeen rentier, the investor and the imprudent. Its is stamped in Leinster house, and carried out by Nama, it benefits the major and minor elites at the expense of a rental class less likely to vote as they are young, not registered in the area, immigrants or all three.

    Throwing the problem to Europe is a Gombeen fix.

    • Colin

      Agree 100% EugeneN

    • CorkRob

      Have you not been watching the reports in the media about a supply shortage – with rising rates of homelessness ??
      I’m in arrears as I lost my (well paid Senior Management) job a few years ago – and with only minimum wage/call centre jobs on offer, I find myself trapped in a Social Welfare trap.
      My outstanding home mortgage (€80k) is small by comparison with those who bought in the boom, but getting a job which would allow me to make full repayments rather than interest only, is proving nearly impossible.
      There are many different scenarios and many different reasons why people are in arrears and a simple “Seize their Houses” is not the “Fix-all” solution.

      • EugeneN

        The supply problem is in part because of your situation, at least for purchasers. you staying in your place keeps others out.

        • CorkRob

          I bought my home in 1998, well before any boom. It was not a speculative buy but a long term family home purchase.

          I don’t see why I should have to vacate my family home to allow some BTL speculator buy it (haven’t you heard, it’s mainly BTL people buying at present with saved cash from boom time sales, not mainly 1st time buyers !!!).

          In the medium to long term I will be financially sound and well able to clear the outstanding balance on my home.

          If we accept that there are 119,000 mortgages in arrears and granted you your wish to have all of them “seized” and the owners thrown out, that would only fulfil the demand for housing for 1 – 3 years, especially as not all of them would be in Dublin , where the demand mostly lies.

          If your solution was correct in it’s assumptions, do you not think that there would be lines of developers queueing up to complete all the Ghost Estates around the country, especially as they could buy them from their NAMA cronies at a snip???

          Seizing homes in Cork, Waterford and Galway etc and evicting the families and forcing them into the undersupplied rental market will not solve the housing shortage in Dublin.

          It is not greed that has me in this position – it is more the result of a downturn in the economy as a result of speculative banking and building transactions that caused my company to downsize as the market for its products contracted.

          I therefore resent your suggestion that I and my family be made a scapegoat again to correct the shortcomings of those sectors – Housing supply and financing it.

          Just like your suggestion below on screwing the Variable Rate holders to keep the banks liquid, you seem to have a very narrow focus on finding real solutions to a much bigger problem.

          By the way, I am NOT “Taking The Piss !!!”

          • While I would put it in a less callous way than EugeneN, allowing people to stay in houses they overpaid for and/or can’t afford does seriously exacerbate the social fallout in the long term. If this basic principle of losing the asset (and debt) was maintained, the economic fallout that probably lead to your job loss may not have been so severe and prolonged. As I’m sure has been said before, expensive housing (high relative mortgage payments) doesn’t really benefit society as a whole because of reduced competitiveness and reduced discretionary spending power, which cripples the domestic economy. Allowing people to remain in homes they can’t pay for simply defies any rational economic framework, and inflates housing prices (helping NAMA succeed). A house isn’t a home, and losing it isn’t the end of the world. While there are many other influencing factors (such as the absurdity of foreign/non resident ownership), I do think that if a more standard approach of repossession with non recourse lending had occurred, it would have made housing more affordable, and increased the likelihood of gaining the employment you need. Think of the prolonged stress people are under not knowing if/when they’ll lose their homes in the last 8 years. What if they lost them in the first year, maintained employment, and were able to consider repurchasing since- wouldn’t that be a better outcome?

          • Colin


            You’ve put it in words much better than myself.


        • michaelcoughlan

          “The supply problem is in part because of your situation, at least for purchasers. you staying in your place keeps others out”

          Hi. Replacing corkrob with a new purchaser and putting corkrob on the street has nothing got to do with the supply problem. Supply problems are onlty solved by oh yes; increasing supply. Increased supply would allow a new purchaser to buy a house at lower cost and cork rob to stay in his home.

          • CallerNJ

            Strongly disagree, blatantly incorrect. Solving the supply problem is not only created by increasing supply, it can also be solved by decreasing demand (which includes outward movement). You’re simplistic view would be to kick Cork Rob out thereby adding +1 unit of supply and also creating +1 unit of demand = zero benefit.
            Also to make matters worse, you’ve created possibly a homeless increase (in some cases), a welfare increase, and if he does get another mortgage it’ll be far larger than 80k increasing Irelands mortgage problems.
            Solution not thought through and quite ruthless with no consideration of the after effects or the people in the economy.

          • michaelcoughlan

            I don’t mean to sound snobbish or disrespectful but your post is a load of self contradictory gibberish and moreover is a complete misrepresentation of my post.


  5. CorkRob

    My Variable loan with AIB has only gone UP in the last few years – as ECB rates dropped, AIB et al have been raising Variable Rates to compensate for losses on Trackers.
    So, I like hundreds of thousands of mortgage holders on Variable rates have not seen our percentage income to repayments drop.

    If ECB rates drop, we get hit. If ECB rates rise, we get hit.

    We have not enjoyed the same benefits as tracker &/or fixed rate from the government on this matter, despite them holding a 98+% share in AIB.

    If the government forced AIB and other banks to drop variable rates in line with ECB rates, then perhaps we might have seen a quicker and more sustained rise in consumer confidence and spending over the last 6 – 7 years.
    I’m not sure what percentage of mortgages are on Variable rates, but I assume it must be in the majority.
    Last month I actually saw my mortgage interest with AIB rise as a further ECB rate drop was announced. It is only in the last week that I’ve had notification of a 0.25% drop in my Variable Rate from AIB from December.
    When will anything be done to safeguard the Variable Mortgage holders ?

    • EugeneN

      If the variable rates weren’t increased two things would have happened.

      1) The banks would have needed more money for cash flow. Probably billions more.
      2) The present boomlet would have been much worse.

      Both bad scenarios.

      • CorkRob

        So what ?

        Screw the Variable rate guys because you can – that’s just a cop out from a real solution and plainly stupid and not very well thought out.
        It’s a short term patch for a major problem.

        I’m not sure what you mean by “Worse” in your 2nd point ??

  6. Ducklady

    Can someone explain what a tracker mortgage is? I was thinking it was a variable rate loan, but after reading CorkRob’s comment I’m thinking maybe not.

    Also, I’m dying to know why every comment section starts with Mr. Byrne weighing in with “Subscribe.” Do you have to subscribe every time, Mr. Byrne?

    It’s minus 13 C. here in New England. Our dirt road is a sheet of glare ice. And they wonder why I’m moving to Ireland…

    • Ok I have explained this a million times before, I am always on the move (off to the Caribbean for a month today) so I prefer to get emails with the comments as they come in – I don’t have time to monitor the site.

      I asked the webmaster (about 4 years ago) was there a way to get the comments by email without actually having to say something, he said no, he can’t find a way (!), so he advised me just to say something.

      So I do, even if it’s just one word (subscribe) or a ‘good morning’ or sometimes I just put a full stop.

      So I get the emails all day, but sometimes I’m so busy that I don’t even read the article until the evening, but I wouldn’t like to miss the comments.

      Hope I never have to explain that one again. It’s seriously about the 20th time.

      Have a nice Christmas everyone in Ireland and elsewhere.

      • tomahawk

        it is so named because if you have one, you agree to be embedded with a GPS monitor chip alerting your bank to your exact whereabouts should you miss a payment. If you miss consecutive payments you automatically receive the painful chip and pin….not for the faint hearted. They will find you.. even in new-england

      • Colin

        Adam, enjoy the Caribbean. But you do ask for it regarding subscribe. Why not vary it with, say, ‘good article’ or ‘bad article’….come on, mix it up a little, subscribe is boring, unless its someone else getting in ahead of you?

    • CorkRob

      A Tracker Mortgage is a Mortgage that tracks the ECB (European Central Bank) lending rate – it usually has a fixed additional rate (e.g. 1% – 1.75% ) which is levied on top of the ECB rate.
      Unlike Variable Rates which can be changed by the Bank, the Tracker Mortgages are locked-in on a parallel trajectory with the ECB rate , for the life of the mortgage.
      I hope this helps.

  7. Mike Lucey

    Getting into QE is not the answer. It doesn’t look to be really working in the USA and has not worked in Japan. Its just a treadmill of ever increasing speed that only kicks the can down the road until the can gets so big and the road narrows to the extent that the can won’t move any further, then then back to the original problem.

    Why should a typical house mortgage be 20-30 years? A newly constructed or renovated house is quite capable of providing adequate shelter for 90 years plus with ongoing upkeep.

    Why not have mortgage lengths that reflect the productive life of the house rather than the productive life the mortgagee …. I won’t say owner!

    The average price of a three-bed semi in Ireland is now around €180,000 and rising annually from 5% to 30% depending on which part of Ireland you look at.

    Taking a 4% fixed rate mortgage with 10% deposit over a 90 year period pans out at roughly €555 per month which is what an average renter would pay outside the Pale.

    You buy your house at age 30 and no longer need it for various reasons at age 80, still leaving 40 years of mortgage payments due. The option then should be to sell on, leave it to a relative or maybe a Cat’s Home with remaining the 40 year balance of the fixed rate 4% mortgage.

    • Good idea, as long as the kids are not legally liable for the mortgage if they don’t want it – they should be free to walk away with whatever their parents have put into it (adjusted for A, B and C -eg. inflation, depreciation etc.) and then the bank or whoever, can have the rest of the value.

    • EugeneN

      That’s an incredibly stupid idea. Really. You are assuming that this vast increase in credit would allow people to buy the average house at 555 euro ( I am sure that is an over-estimate of the per monthly cost but lets go with it).

      In fact given the competition for houses house prices will shoot up. All house purchases are won by paying more than the other guy, so with housing supply contained prices will go up to the level that the buyers who can pay the existing monthly payments are comfortable with now. So if the average house now costs 1,300 a month, thats what the average consumer can pay. He will bid that for a 90 year mortgage, and the house will cost a million. Good for sellers, not for anybody else. Leaving the cost to your children is a cop out too.

      BTW Japan friend this just before they collapsed their market.

      • Mike Lucey


        It would be up to the owners to do as they wish with the property once they have no further use for it, sell on, leave to kids or the Cat Home.


        Sorry you think my suggestion is stupid. I used an on-line loan calculator to work out the repayment. I imagine its about right.

        However, I think you may be thinking within the box a little to much when you say,

        “All house purchases are won by paying more than the other guy, so with housing supply contained prices will go up to the level that the buyers who can pay the existing monthly payments are comfortable with now.”

        Not all houses are ‘won’ by paying more than the other guy. Housing is a basic necessity and should not be looked on a commodity. Folks wishing to house themselves should be looking at and leveraging ways to self-build individually or via co-ops.

        I remember about 30 years ago our local Council acquiring land, providing services and selling off lots to cover their costs with a condition that the house builder had to remain in the house for a specified period of time. In other words there was to be no speculation.

        This scheme worked well as it was great way for many young families to get a house at a low cost, in many cases at ‘wholesale’ value if they themselves had building skills.

        There is a need for National and Local Gov to get involved this type of joint partnership with the actual families that need houses. Most real / genuine builders (not property moguls / speculators) would be quite happy to work within such a scheme as most just want an honest days pay for an honest days work.

        Here is some info on NABCO,

        • Hi Mike,

          That wasn’t what I meant. The perspective I was talking about was where the parents would die and the kids would become legally responsible and liable for the mortgage – whether they liked it or not.

          Forget that, they should be able to walk away from it if they want – with the equity that the parents put into it – the bank can have the rest.

          In other words, leave the choice to the individual – not to a bank or a government.

          • Mike Lucey

            Well I suppose it would depend of a will and such like also.

            Expanding the idea a little further.

            We see of late car manufacturing companies offering new cars more or less via direct purchase from the car company. This was unheard of until recently.

            I’m wondering if the banks could be cut out of the circle? Could a system involving families, land owners, material manufactures and suppliers, builders and essential professionals be set up under co-ops to deliver housing as needed?

            Maybe working with Credit Unions might be an idea also. This would help to eliminate a lot of the unnecessary profit making from family shelter provision.

    • gcy_1980

      The idea of problems and solutions around the length of mortgages cropped up during the Great Depression. At that time, mortgages were typically 2-5 years long. They worked on the idea of a down payment, then interest payments for the duration and then a balloon payment. If a person could not meet the balloon payment, they could refinance. However, this all stopped with the Depression. The market came to a standstill.
      So the Federal Housing Association said they would provide insurance to lenders. If a house was in negative equity and the house was dumped, the FHA would meet the loss. This was an incentive to the lenders.
      However, the FHA insisted on no mortgages less than 15 years and amortization of the loan. Balloon payments could not occur. This was a benefit to the consumer.
      The main lesson is that housing and financial markets can be highly volatile. Protections and regulation are needed. The lengthening of mortgages has happened before. To simply called something stupid without actually understanding the history of amortized loans for housing doesn’t cut it for me.

  8. john

    What would happen to me if my tracker goes the way David wants it to go ? I have no problem paying at 1.75 % right now and never had a problem paying my mortgage . In fact as the interest rate is so low we can save money at present . I don’t want to lose my tracker . Is that what David is saying should happen?? If so then I’ll lose out considerably along with many others .

    • McGoo

      He’s not saying that you should lose your tracker. He’s saying that, instead of an Irish bank losing money on your mortgage deal, the ECB should lose money instead. Except, of course, they wouldn’t lose money, because they can create the stuff out of thin air free of charge. Anyway, it wouldn’t make any difference to you.

  9. It’s good journalism from David that his figure of 117,000 mortgages in arrears for more than 90 days, includes the figures for BTL mortgages as the Central Bank keep the statistics for owner occupier and BTL mortgages separate – an issue which seems to mislead certain business columnists (who will remain nameless!) and hence inadvertently mislead the public. The total value of all mortgages is around €135 billion.
    What surprised me at first is that the average value of a BTL mortgage is around €201,000 (according to these Q3 Central Bank figures) and the average owner occupier mortgage (or principal dwelling house (PDH) as central bank like to call it) is around €139,000! Then I thought of 2 possible explanations for this odd fact (which means that BTLs account for 15% of all mortgages yet 22% of total value) which is that 1. New BTL holders were probably more likely to have already paid off their main mortgage and 2. The total PDH mortgage holders’ book would obviously include some mortgages which were drawn down nearly 25 years ago – There couldn’t possibly have been many people taking out a BTL mortgage in 1990!
    The Accounts for Bank of Ireland H1 2014 tell us that just 2% of its mortgage book value relates to mortgages taken out on or before the Year 2000 while nearly 19% relates to mortgages drawn down in the year 2006 alone(I don’t know if this is a mandatory requirement of the banks to publish this info but this is a good sample since BOI appears to have 20% of the total mortgage value in the country).

  10. Pat Flannery

    “If we can get the trackers off the banks’ balance sheets, we pass the risk on to the ECB.”

    Are you saying that the ECB will not require a re-purchase (buy-back) agreement, as did all mortgage-backed security instruments created and sold by the Irish banks during the boom? Is that what you think Draghi is proposing? Is that the opportunity you think is knocking?

    If the ECB, or anybody else, was to buy mortgage-backed securities without a repurchase agreement it would undermine the entire asset-backed securities market.

    Therefore your premise is misplaced. There is no opportunity to “get trackers off the banks’ balance sheets”. They would remain on the balance sheets because of re-purchase agreements, as happened during the boom. It was the re-purchase agreements that bankrupted Ireland.

    • john

      That’s why I’m asking would I lose my tracker in such a scenario I made an agreement ie a mortgage with Ulster Bank not the ECB even though it was the ECB that determined the interest rate . That rate was part of my agreement ie a tracker mortgage . If ” asset backed securities” is played out to its full extent that surely means I would have to get a new mortgage agreement…at 4% ! Ulster actually might encourage me at this moment to try to do so because I’d be off the tracker and on to a new mortgage at 4% which would be crazy for me to do .
      So ,David you need to be clearer as to how your proposal would work in practical terms for some of us who didn’t go buying during the boom years and kept our properties.

      • Pat Flannery


        Brian Hayes MEP is behind this idiotic idea of Irish banks offloading their tracker mortgages onto the ECB. It is not going to happen – at least not without the Irish Government guaranteeing the ECB against all loss, which would amount to a whole new bank guarantee. If the Irish Government was to try such an idiotic thing it would make the Water thing look like a children’s. picnic. So you and your tracker mortgage are mated for life.

  11. StephenKenny

    Interest rates staying low for years will not solve the national problem:
    Firstly, cheap money makes speculative investment more attractive over productive investment.
    Secondly we’ll have an increasingly expensive problem of pension poverty, which absorb a greater and greater proportion of GDP.
    I’m surprised at David trying to punt the idea of a free lunch.

  12. michaelcoughlan

    “The ECB has broken all the rules in Draghi’s quest to turn the euro into the lira, behind the backs of the Germans, to save the EU economy”

    Saving the EU economy by turning the euro into the Lira?

    Do you remember there was a prolonged bank strike in the 80′s I think. Did the economy collapse? No. people simply wrote IOU’s and life went on.

    The economy won’t be saved by dicking around with currencies.

  13. Forecast 2015

    The economic outlook for European banks in 2015 will be hampered by weak profits, risks of bail-ins and litigation charges, Moody’s Investors Service announced Monday.

  14. Sterling Base Readers – Take Note

    Higher rates are coming – take action now

    Whatever happens, the Bank’s report – and the confident tone – makes it pretty clear that the plan is for rates to go up at some point in 2015. The autumn looks most likely at the moment, according to City forecasts. But the Bank might even be laying the groundwork now for a rise in the summer.

    This means that if you own a home, or are buying one, it makes a lot of sense to lock in low interest rates now, by getting a fixed-rate mortgage.

    • Colin

      You would have to be nuts to even think about buying a house in the London area. If you are working anywhere else in the UK, then fine, but I don’t think many Paddies have ended up in the regions since 2007 in comparison to London.

      Quick question John, if you work in the UK, and wish to investigate taking out a mortgage for a house in Ireland (to become your principle residence from where you will commute to the UK and back at weekends), where can you go to get one? I can see this becoming a trend, especially if Sterling becomes stronger against the euro, making properties in Ireland (outside the pale) a lot more affordable.

  15. Colin

    An opportunity to fcuk up was recently taken by Heineken. Wetherspoons are determined to offer their customers value. By doing this, they are exposing the gombeens for what they are. So the captains of gombeenism have embarked on more gombeenism to avoid making the pub market a fair place to do business.

    But the giant Wetherspoons are taking no sh1t now, and have raised the stakes. All of this could have been avoided if the gombeens had stopped being gombeens. But in a week where RTE are happy to offer Ray D’arcy €500,000 a year to talk to the nation, protection gombeen racketeering has raised its ugly head again and again.

    this has parallels all over irish business.

  16. DB4545

    Hi Colin,
    It certainly has. I don’t drink any of the products mentioned but if Wetherspoons can knock out Heineken for 3 Euro and make a profit and most pubs are charging in excess of 5 Euro that is serious profit margin. Even factoring in Wetherspoons buying power something is seriously amiss. The bizarre thing is that people get worked up over alcohol prices. Regional UK presenters serving a similar market and demographic would command £130,000 at most. What justifies the other 335,000 Euro for Mr. D’arcy’s services paid for by taxpayers? When buying a house in the UK the legal fees are transparent and competitive quotes are readily available. Try that here and you’ll quoted a percentage of the purchase price as a “guide” if you’re lucky. A 2 bed house in a safe area within a 15 min walk of Queens University is £55,000 to £65000. The equivalent in Dublin is 250,000 to 300,000 Euro. How much does it cost to see a GP in other European Countries? What are legal costs compared to European levels? We had an earlier robust discussion about labour costs but those costs reflect the cost of housing food insurance etc. and all those other living costs for consumers. Unfortunately European Competition law is focused on abuse of a dominant position on a Europe wide level. Maybe its time to focus on abuse of a dominant position within National markets by professional and business cartels? The Troika did attempt this but the issue clearly got kicked to touch by vested interests or “the captains of gombeenism” as you called them.

  17. All markets are corruted by the money masters. This corruption seeps into the general business models as eventually markets are destroyed. Only the manipulation remaims. Money and wealths is syphoned off to the elite and the rest of us are deprived of our just rewards.

    No matter what is debated above it is inconsequential until the basic problem is solved.

    “It matters because the rigging of the gold market is the rigging that facilitates the rigging of all markets — part of a much broader scheme by which a secretive and unelected elite in the United States and Western Europe controls the value of all capital, labor, goods, and services in the world — controls the value of everything and thereby impairs or destroys all markets and democracy itself everywhere and obstructs humanity’s progress.”

    Click the above. Read this brilliant presentation and follow the links. It may take you a week but be worth the effort. Otherwise your opinions are straws blowing in the wind.

    • Further to the above is another extracted quote here.

      “”This is an utterly totalitarian and parasitic system. It is also just the latest manifestation of the everlasting war of the financial class against the producing class, only it is hidden well enough that the producing class hasn’t yet figured it out.”

      • michaelcoughlan

        Hi Tony,

        I want to make a comment Tony but request that you don’t shoot me the Messenger. The story you have been telling about gold IS NOT THE MOST IMPORTANT STORY YOU TELL. THE MOST IMPORTANT STORY YOU TELL IS THE STORY ABOUT SELF SUFFICENCY IN FOOD AND WATER SUPPLY.

        Know why?

        From your excellent post and link above;

        “”Warburton concluded that the prerequisite of a hedge against monetary debasement would have to be some asset that was not attached to a futures market, since anyone with access to enough money can control any futures market, and central banks have access to infinite money. Inflation hedges Warburton suggested included farmland and clean water supplies. For as the saying goes: “The futures markets are not manipulated; the futures markets are the manipulation.”"

        This is why Jim Rogers is so bullish farming. McWilliams said that Jack Welch told him in order to prosper we must define the world as it is NOT as we would like it to be therefore;

        As a result of the gold price being a nonsense we need to take action to secure our food supply and water supply. In my view THAT’S where your energies should be focused because unlike the bonbon windbags you have demonstrated leadership by showing us all how a retired man with purpose focus and energy can get off his arse and equip himself with the skills to learn how to produce, harvest, preserve, and store his own food for a time when the price of food and water goes balubas on the markets.



        • Thanks Michael.

          It is of course a great thing that we take responsibility for ourselves.

          However it is also true that in order to treat any disease it is crucial to fix the root cause and not just the symptoms.

          The root cause of our problems is the money system itself as operated by the shadowy controllers of the central banks. Thus it is crucial that the correct diagnosis is made. I believe that the cure will only be effected when a chore of the population understands and is willing to do something about it.

          When we have the likes of David ignoring this and thus tacitly denying it is the problem there is not much hope of a solution as he continues to lead the people off into wild goose chases that resolve nothing.

          I look forward to buying you a pint soon Michael, so take care.

    • DB4545

      It’s interesting Tony but if gold price suppression/manipulation is the lever to control all other markets how come Warren Buffett is averse to gold trading? The man is far from stupid. Gold is an ancient and powerful symbol of rarity but you can’t eat it and it has value only because people are conditioned to accept it has some intrinsic value.

      • ” how come Warren Buffett is averse to gold trading?( HE INVESTS IN HARD ASSETS LIKE RAILROADS AND NOT PAPER PROMISES. HE INVESTED IN SILVER AND WAS FORCED TO DIVEST. I SUSPECT HE WAS TOLD TO GET INLINE OR ELSE.) The man is far from stupid. Gold is an ancient and powerful symbol of rarity but you can’t eat it(YOU CAN NOT EAT ANY MONEY SO THE POINT IS MOOT. START THINKING FOR YOURSELF) and it has value only because people are conditioned to accept it has some intrinsic value(NO MONEY HAS HAS VALUE UNLESS TRUSTED. READ WHO IS BUYING AROUND THE WORLD AND TELL ME WHICH MONEY IS TRUSTED THE MOST)

        • DB4545

          I get that Tony. I realise paper is just a symbol too. But Warren Buffett could have traded in derivatives of gold and made money. Why has he been so averse to the yellow metal if he knows its being shorted and he could make money from doing so and stay inline?

          • Buffet is on record as saying derivatives are instruments of financial mass destruction.

            It is a zero sum game with a counter party paying if you win.

            Buffet is also aware that it is a way to lose your shirt too.

        • Dave from Denver
          “”Faith” is defined as “believe without evidence.” Anyone buying stocks and fiat money-based assets is placing faith in some money deity for which there’s no evidence of existence. Over 6,000 years of civilized history, fiat currencies have a 100% failure rate. That’s 100% evidence of paper money’s validity. Gold and silver have survived that 6,000 years and stand alone as real money. Again, that would be considered fact backed by evidence.”

        • Get all your savings out of the system and have it at home or a local safe. The money is not safe in a bank as you will be bailed in on the next collapse. See if you trust fiat paper currency then!!

          • DB4545

            Tony I like gold. I have a couple of modest gold watches. It’s a beautiful metal. But if “paper” gold is being traded at a rate of 100/1 ratio on the back of real gold and there’s a systemic collapse why does it really matter? People need food (always) and oil(for the moment) and mankind is smart enough to find an alternative means to trade or barter.Why does it really matter? You can’t eat the stuff.

      • StephenKenny

        “Gold is an ancient and powerful symbol of rarity”. What an extraordinary thing to say. Go to any civilisation, at any time in history, and ask the man in the street what gold is. They’d probably look at bit quizzical, and point at a shop or market stall. Gold is money.
        “it has value only because people are conditioned to accept it has some intrinsic value”. Actually, this is wrong. Gold is, and always has been, the best money, because money has a number of ideal characteristics.

        Every economics course teaches this, in the ‘history’ section at the beginning of first year. Look at the first paragraph of the Wikipedia entry for ‘Money’. If you’re feeling a bit tired, and can’t be bothered to think about it, look at something like the Forbes article below, for an expansion

        Gold is simply the best form of money, and this isn’t controversial. At least it wasn’t until suddenly, very recently, some central banks started to say some pretty weird things.

        (‘Intrinsic value’ takes you down the barter route – my advice is don’t go there).

        I suggest you sit down, take a few deep breaths, and try and remember those days before the entire world went completely and utterly bonkers.

        • Mike Lucey

          On gold, I find the Swiss referendum results somewhat curious. I did a little number crunching and came up with this.

          In the pre referendum polls we were looking at the following,

          ’38% were in favor of the central bank increasing its gold reserves, 47% were against it and 15% were undecided.’

          Dividing the undecided 15% proportionally between the two camps the figures would have worked out as,

          38% Yes + 6.7 =44.7%
          47% No + 8.3 = 55.3%

          This equates to a 10.6% lead for the ‘No’ camp. What I find curious is that the actual vote produced a 56% difference between the ‘No’ and ‘Yes’ camps. The final vote result was,

          Yes = 22%
          No = 78%

          I have never seen a poll from a reputable (the leading Swiss newspaper) source get it so wrong!

          I looked into how the voting system operates and it seems that the majority of the Swiss vote via the postal service! I’m now wondering if Mr Stalin’s utterance with regard to mechanics of the vote outcome could also be true in the land of the cuckoo clocks also?

          Our Irish polling system might be old fashioned and slow but there is no questioning of the final outcomes in the vast majority of the counts.

  18. coldblow

    I wonder where David gets his information about what is going on within the ECB and why he thinks the Germans will regain (?) control of it.

    While the Germans seem to have clear (perhaps simple) ideas of right and wrong and like following rules this doesn’t necessarily mean they are any more rational than others.

    A lot of things can happen before interest rates are (or not) increased.

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