An excellent analysis of the issue with banks being bailed out, banks get into trouble and they are rescued (bailed out) or they default and creditors take a hit. However, often times the sovereign gets into trouble as well. Does the Sovereign then privatize assets or default themselves? Assets such as the banks fall into the hands of foreigners at that point – as we have already seen with Bank of Ireland.
Both the 6 and the 9 news followed up on the story of debt forgiveness, it was tied into the other story of the day about property tax.
Currently banks are not interested in dealing with customers who ‘might go into arrears’, they tend to brush them off – instead focusing on the people who are already in actual trouble. This doesn’t seem rational to me from a business perspective – and this approach would fail any standard test of common sense – if you knew a storm was coming would you carry an umbrella? If you knew and were warned in advance that it was going to be a blazing hot day would you get some sun-cream? Oddly the Irish mortgage lenders defy logic when it comes to knowing that certain clients are going to fall into arrears, and this is going to ruin thousands of credit histories that could otherwise be maintained. Credit aversion might be the name of the day now, but these same consumers may feel differently in five years time.
Any credit crisis we have encountered on individual levels has always had …
Irish Mortgage Brokers was featured on RTE’s ‘Frontline’ with Pat Kenny on Monday the 12th of April 2010. The topic of the day was about bailouts for home owners who are in trouble with their mortgages.
Noleen Blackwell of Free Legal Advice Centre was there on behalf of favouring methods to save home owners, and Karl Deeter of Irish Mortgage Brokers was there promoting the use of market mechanisms as a solution, along with arguing the case that for many people, bank ownership of their home is not necessarily a bad thing.
This is a hot topic in Ireland, in particular because many people feel, that taxpayers stepped up to save our banks, so now they should do the same in return.
Today, buried on the inner page of the Independent Business section there was an article stating that an Oireachtas committee found that the responsibility for the financial crisis in Ireland was largely down to regulators and ratings agencies (the same agencies who down-graded Irish debt in 09′).
Sadly, it didn’t make massive headlines, nor will it… If you could get a picture of Sean Fitz, or some scandal element to tag on then it would be everywhere, but the humble work of one of the few independent studies done on the matter, lacking sex-appeal & scandal will be widely ignored by the public, meaning everybody will still only see ‘banks’ as the source of the problem rather than as the conduit, when in fact the source of the problem was the gatekeeper, the person with their hand on the tap of the conduit, who allowed credit to flow too quickly for too long.
I had coffee with a well known economist last April and we spoke about this matter, he felt that it was …
The equation at the heart of prices, the ‘Quantity theory of money‘, centuries old but redeveloped by the likes of Irving Fisher, Ludwig Von Mises and Simon Newcombe, as well as being an equation restated by Milton Friedman which resulted in a Nobel prize. The equation, known as the “quantity theory of money” is MV = PT.
M is the quantity of money, V is the speed money flows round the economy, P is the level of prices and T is the number of transactions.
The formula has had one consistent feature, namely controversy. If you believe V and T are stable, then control of the money supply guarantees control of inflation. Quantitative easing (which they are talking about presently in the UK) raises M, so if V is fixed, it will push up P or T or both.
In today’s recessionary and deflationary world, that would be a welcome result. However, if …
Two world renowned commentators give their views on the economy and market. The points they are making are that the same people are in charge, the system is not fundamentally changing, and that drastic measures are required in order to solve the financial crisis.
The main points made are that cash is king, the bottom has not fully been reached, and that we need to change the way the economy is driven, we need to get back to real physical capital rather than unproductive activities such as housing and finance.