Ireland closer to default as PM resigns and March 11th election looms
Posted on 23 January 2011 with 4 comments from readers
Will Ireland become the first euro zone country to elect a government mandated to default on its debt? That looks increasingly likely after a week of political turmoil in the emerald isle.
The Prime Minister has resigned as head of the Fianna Fail party but said he will stay on as head of government until the March 11th general election and give up then. Six government ministers resigned and a coalition collapsed after the greens threatened to pull out, forcing a general election.
Austerity hurts
Democracy has its weaker moments, and forcing government cuts onto any population is never easy. The Irish can now choose whether they want to continue with austerity or simply default on their debts.
The wider economic consequences would be hard to underestimate. This is more serious than the failure of Lehman Brothers that triggered the last financial crisis just over two years ago.
Ireland is a sovereign state with a huge network of inter-linked international debtors. Germany has held itself aloof from the debt problems of the euro zone peripheral countries but of course as the region’s biggest lender actually has the most to loose. Then again UK and French banks are big lenders too.
Perhaps Germany has become complacent after its seemingly effortless recovery from the crisis of two years ago on the back of the artificially stimulated boom in China and exports to that nation. How quickly that could all unwind in a second financial crisis with the Chinese economy already clearly overheating.
Second financial crisis
The weakest link in the global financial system is now Dublin. It is incredible that global financial markets do not seem to have understood the ramifications and the press continues to treat Ireland’s problems as a domestic issue.
But then few appreciated the gravity of Lehman until it happened, and those in authority made the same mistake of thinking a bad situation could be contained when it so obviously could not.
Ireland’s default would ricochet through the global financial system causing immense write-offs for bad debts, bank failures and consolidations and force up interest rates worldwide through the contagion of the bond markets. Other nations might also decide to default. Let us hope this does not happen but what is to stop it?
4 Comments posted by readers:
Interesting
Something has got to give, I dont see how huge debt can be simply handed to citizens many of whom are responsible financially. It really is a lot to expect, at some point somebody might say no, we will not pay other peoples debt,Take a hike.
The ramifications of this are immense, I am stunned at the continued purchase of government debt.At some point it might dawn on the market that these promises to pay shall not be honoured. No wonder people all over the world are buying precious metals both coins and bars.
Who was that professor who said you cannot find an available safe deposit box in Germany they are all full of silver and gold.
Wake up.
and now for the bad news…
Unfortunately, the people buying gold are in fact buying worthless paper.
LBMA is operating a fractional reserve system – it has sold more gold than it has or could ever have. It has sold approximately 65,000 metric tonnes, the maximum amount of London Good Delivery bars in the world is around 15,000 metric tonnes. So even if the LBMA possesses the world’s entire stock of LGD bars they are 50,000 metric tonnes short.
The banks intend to default/devalue currency. Ireland needs to get out of the EU, set up its own “Peoples Bank” similar to those set up in a number of states in America. Has the Clara man chosen to take the Blair route? – Will we see him being paid millions of dollars as consultant to a major corporation directly linked to the economic crises. We the people did not consent to a European State – but if Ireland plays it cards right it may end up like Greece – The EU will pay it 6 billion euros to grow tobacco and 4 billion euros to then burn it. Fun isint it!