It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a £100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the £100 note and runs next door to pay his debt to the butcher. The butcher takes the £100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the £100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers' Co-op takes the £100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the £100 note. The hotel proprietor then places the £100 note back on the counter so the rich traveler will not suspect anything. At that moment the traveler comes down the stairs, picks up the £100 note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism. And that, boys and girls, is how the bailout package works!
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Irish Banks Bailout!
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Posted 1 year ago #
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Posted 1 year ago # -
Good enough for me at the moment. If it creates jobs, even better.
tiggs, are you in Eire? Where about?Posted 1 year ago # -
And that, boys and girls, is how the bailout package works!
So it has to start with an act of theft - the £100 note does not belong to the hotelier after all.
It's not that I don't agree with the UK helping to bail out Ireland - I see benefits for that and it is being done on commercial terms if at a less than commercial rate of interest, it's more that I don't think the analogy above really fits.
Posted 1 year ago # -
Also, it does rather depend on everyone owing each other and not owing the german (or more likely china) in the first place.
Ireland's debt and bailout money is to/from other countries, not teh irish people.
Posted 1 year ago # -
and the hotelier never got paid by the hooker
hotelier is the taxpayer the german is the bank
Posted 1 year ago # -
or
shamelessly lifted from ZeroHedge.
Mary is the proprietor of a bar in Dublin . She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar. To solve this problem, she
comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).Word gets around about Mary’s "drink now, pay later" marketing strategy and, as a result, increasing numbers of customers flood into Mary’s bar. Soon she has the largest sales volume for any bar in Dublin .
By providing her customers' freedom from immediate payment demands, Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.
Consequently, Mary's gross sales volume increases massively. A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Mary's
borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.At the bank's corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled
and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics.
Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses.One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Mary’s bar. He
so informs Mary.Mary then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.Since, Mary cannot fulfil her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.
Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks liquidity and prevents it from issuing new loans, thus freezing credit and economic
activity in the community.The suppliers of Mary’s bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion euro no-strings attached cash infusion from their cronies in Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never
been in Mary’s bar.Now, do you understand economics in 2010?
And the oustanding (government) debt now stands at about £250k per Irish taxpayer...
Posted 1 year ago # -
You forgot about the interest. And also fractional reserve banking.
If there is a new banking system and which someone starts with £100, they are allowed to lend that out to someone. They will then ask for £100 back plus interest. But there is only £100 of "money" in this system so how can the say, £110 be paid back? Answer - with the creation of more debt : ) Hence systemic failure is always built in, since there is always more debt than there is money to pay back.
Oh - and if in theory all the debt got paid off, there would be no money left in the system. The whole economy would be dead in the water, since money is actually debt. Pay back the debts and there is no money!
Posted 1 year ago # -
Don't forget the punters who go into Marys bar and demand that they too should be given credit to buy drinks despite their having no way of paying their eventual debts.
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Posted 1 year ago # -
They should leave the Euro. It would hurt for a few years but investors have short memories whereas bankers will go on demanding repayment on those debts until they have bled the Irish dry.
Posted 1 year ago # -
Spam reported
Posted 1 year ago # -
58 seconds from report to no-more-spam. The mods have had their coffee today it seem
Posted 1 year ago #
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