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Hard Times Are Here Again

Eddie Hobbs warns of an inevitable squeeze on customers as Irish banks rebuild their capital and profits.  There will be scant reward for taxpayers who bailed them out and continue to underwrite their loans.

The phoney holiday, when Irish banks pulled in their claws during the great rescue, is nearly over. As predicted the big bank squeeze on ordinary customers is about to begin as banks turn on the taxpayers that bailed them out to fatten margins in an effort to repair their ruined balance sheets – and make their NAMA repayments.

It is the worst result for ordinary Irish depositors and borrowers that, having driven the ambulance to the scene of the accident and saved the banks from certain death, their response now is to charge us for it. Of course the butcher’s bill has been delayed while banks engaged with Government and, cut off from capital markets, desperately sought new deposits, but don’t let that fool you.

Last year that meant offering gravity defying deposit rates despite historic lows in the ECB base rate but as soon as the first tranche of NAMA loan capital is in place in a few weeks, all bets are off, as banks ruthlessly pursue every trick in the book to grow their profits. So get ready to be mugged by; (link to the bad news)

David McWilliams offers a similar depressing future for the Irish middle class who are the heaviest borrowers and now deeply in debt with no apparent way out.

We are broke. The middle aged, middle classes are rocked by the sudden unemployment of their children (30pc of our under-25s are unemployed) and the collapse in value of their second home. On top of that, their pension funds — which were invested by charlatans in the shares of Irish banks — are now worthless (and after the nationalisation of the big two, they will be wiped out altogether)….

Selling now, even if it saves money over the longer term, will crystallise the losses and leave the average family with a huge debt to the banks. So the natural tendency is to hope that something will turn up. But what if it doesn’t?

The other option is to go back to the Ahern/Cowen model of borrowing to get rich. We know that doesn’t work and anyway it has been supplanted by the Cowen/Lenihan model of the State borrowing in order to try to protect the already decimated shareholders of the banks. This leads to NAMA and the errant folly of betting the country yet again on the hope that the property market will recover to make the bad balance sheet of the banks good again.

But even looked at from first economic principles, for the Fianna Fail plan to happen, the banks have to lend out money. But the middle classes don’t want their money (even if the banks had it) because they are stuffed with debt anyway. In short, the broad middle classes still think that if we do the right thing, things will turn around. (link to article)

What does it take for the Irish middle class to rebel?

Posted in Money Systems, News.

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