An Irish bank debt deal
Sir, – Now that the Coalition has made my nine-year-old son pay for the private debts of the banking disaster, maybe the sudden lightening of our cash- flow crisis could be used to decently compensate all the victims of the Magdalene laundries? I think we can also now afford an apology. – Yours, etc,
A chara, – With the long overdue liquidation of Anglo Irish Bank, have the pensions of Seán FitzPatrick and Michael Fingleton, et al, been liquidated as well? What pay-off will Alan Dukes and the other board members get? In fairness they should not get any; but then fairness does not apply to the Irish establishment. – Is mise,
Sir, – Your Editorial (“Frankfurt’s way”, February 8th) stands in sharp contrast to the tone of the adjacent carping and cavilling letters, decrying the Government’s achievement in getting rid of the hated promissory notes. The letters assert that unborn generations will rue the day we took out 40-year loans. They are wrong!
Perhaps a small example will help the nay-sayers understand how inflation alters debts: in 1950 The Irish Times cost 2d – two old pence. In 1975 it cost 10p, ie 24 old pence, a 12-fold increase in 25 years. Today it costs €2 – say 156 new pence, 15 times what it cost 38 years earlier.
As the new bonds “noted” by the ECB will be repaid in about 35 years, it is clear that the cost of doing so will be less than one-tenth of repaying the now-defunct promissory notes. In simple terms, the Government’s achievement is that about 90 per cent of the Anglo/IBRC debt has been written off – no longer a burden to ourselves or to the next generation. To the begrudgers I say “desist!”. – Yours, etc,
Sir, – Are Fianna Fáil really so naive in wondering where the €1 billion a year saving on the restructured bank debt will be going? It will be going to pay the salary, bonuses and pensions of the charlatans, incompetents and criminals that instigated this crisis in the first place. – Yours, etc,
Sir, – Sinn Féin is vehemently opposed to the new bank debt deal. It must be delighted really. Opposing it gives them the chance to atone for voting in favour of the bank guarantee in 2008. – Yours, etc,
A chara, – Two of the most toxic financial inventions in the lead-up to the economic crash were interest-only loans and 100 per cent-plus mortgages. On Wednesday night in the Dáil we witnessed the longest term interest-only loan and biggest 100 per cent mortgage in world history. Not alone did these two acidic banking measures help cause the problem; now, miraculously, they are put forward as the solution. God help our grandchildren. – Yours, etc,
Sir, – As a 71-year-old pensioner with serious health problems, am I supposed to be grateful that I will have to live to 111 to pay off a debt that I didn’t borrow in the first place? – Yours, etc,
Sir, – It is often said that the Republic could never afford a united Ireland. The “deal” will cost the taxpayer the equivalent of at least five years’ Westminster block grant to Northern Ireland. – Yours, etc,
Sir, – In the context of the 40-year promissory note deal with the ECB, to explain the effect of inflation has on the real size of future debts, the Minister for Finance, Michael Noonan, used the example of his home being bought in 1968 for the same money he would have earned in a month were he still working as a teacher in 1993, when he paid off his mortgage.
He could not have picked a more guileful example. The period over which the Minister paid back his mortgage was categorised by rampant inflation, primarily caused by two oil shocks and the collapse of the Bretton Woods system. Mean annual consumer price inflation in Ireland over that 25- year period ran above 8 per cent, with house prices increasing at above that rate.
We now live in a very different world. Since Ireland entered the euro in 1999, the consumer price index has increased on average at around three per cent, with the long- term trend towards ever-declining inflation rates. If this trend continues, and there’s no reason to think it will not, we may well enter a period of sustained deflation – similar to what has happened in Japan since the collapse of the housing bubble there in the early 1990s.
In the long run maybe this trend will be reversed, and inflation will start to increase once again. Maybe it won’t. But as Keynes famously said, in the long run there is only one thing we can be sure of: “We’ll all be dead”. We’ll all be dead, and it looks like our children will still be paying off the gambling losses of Anglo Irish Bank. – Yours, etc,
Sir, – I became a member of the workforce in this country in July 2008. Anglo Irish Bank was nationalised in January 2009. This week’s promissory note deal means the last payment on this debt will be made in 2053, when I will be 73 years old. Bar those first six months, I will spend my entire working life helping to pay off a debt that is not mine. And we wonder why young people are leaving this country? – Yours, etc,
Sir, – Wouldn’t it be really something if the Government celebrated the better future it has secured for our children by investing some of the money in some new maternity hospitals? – Yours, etc,
Sir, – In all the drama on the liquidation of IBRC and subsequent deal with the ECB, there was a certain poignancy. We have witnessed a sovereign democracy legislate for the conversion of a private debt into a long-term public debt and in doing so bow down to market pressure. Many may argue that the successful write-down of this debt, and burning of the bondholders, was only a pipe dream and that we have reduced the ferocity of the burden.
However, for the foreseeable future the incumbent Minister of Finance, in preparing his annual budget spreadsheet, will see a stain which cannot be removed. Like a regretted and tasteless tattoo, this debt will remain a constant reminder of reckless decision-making after excess. It will mean expense which could be used for the improvement of much-needed social services will instead go to servicing debts derived from the private gambling of corporate finance. If this is the freedom that is manifest from free market capitalism then democracy is in a damaged state. – Yours, etc,
Sir, – Given the outcome of the national debt deal this week, the time has come for the media to tone down its relentless war on the civil service and realise that patriotism is not all about wars and shouting vile abuse across the floor of the House. Real patriots actually work for this country, putting in long days and nights with no rewards (despite the lies and soundbites on the daily news). This country was brought down by private-sector greed. It will be saved by public service patriotism. We don’t realise how lucky we are to have such people. – Yours, etc,