[Premium] Ireland’s Private Debt Problem

You saw the chart about two weeks ago on Developed economies’ debt levels by sector. Different economies have different debt problems. A few like Greece have public sector debt woes. And this is the sort of problem that forces a default only when the country is a currency user (and not a monopoly issuer of currency) as Japan has demonstrated. Mostly, however, the problem is in the private sector, where all of the indebted parties are currency users

News Links: Iceland fared better by letting its banks fail

Financial news links for 3 January 2012. I posted this first link on twitter yesterday afternoon and it got a ton of retweets. I have seen a lot of people link out to it. Bottom line: the concept that bankruptcy is part and parcel of capitalism resonates with people. And that’s why we are viscerally opposed to bailouts, no matter how much the Tim Geithners of the world want to defend them

More News Links: Verizon’s Netflix Bid, Google’s Siri, and Mobile driving ban

More News Links for 13 December 2011 including a report of Verizon chasing Netflix, Google building a siri competitor and a potential mobile driving ban

News Links: Economists see France losing AAA in 3 months

News links for 7 December 2011 featuring thoughts on a French downgrade, the austerity budget in Ireland, patents and China and other stories

Euro bank funding, collateral, and outlook

Bank borrowing from the ECB reach a new high for the year at today’s 7-day repo operation. Banks borrowed 247.17 bln euros for a week at 1.25% fixed rate.

The key question is what are banks doing with those euros. The answer is that banks appear to be recycling those funds by putting them on deposit with the

Running through Italian unilateral euro zone exit scenarios

A unilateral exit would be a devastating event for Italy and the euro zone. Inflation would be high but bank and national solvency issues would recede. If the exit were done under these nationalistic pre-conditions of redomination, most of the adjustment burden would fall on foreign creditors. Italy would become export competitive again and could focus on economic growth strategies instead of ones of fiscal adjustment

Full Text: Moody’s: Outlook for Ireland’s banking system remains negative

The following is the text of today’s Moody’s press release on the Irish banking system. London, 21 November 2011 — The outlook on Ireland’s banking system remains negative, says Moody’s Investors Service in a Banking System Outlook published today. The negative outlook has been in place since 2008 and continues to reflect (i) the banks’

Dollar Bid as European Woes Dominate

News that the US super committee failed to reach an agreement has done little to eclipse the negative impulses coming from Europe. Rajoy won no honeymoon in Spain despite achieving an outright majority in parliament. Spain’s 10-year bond yield is up around 15 bp today, the worst performer in the euro zone. Moody’s warned that rising debt costs and weaker GDP is negative for France and maintained its negative outlook for Irish banking system, despite its improved capital position

News Links: Need to Create? Get a Constraint

Need to Create? Get a Constraint | Wired Science | Wired.com One of the many paradoxes of human creativity is that it seems to benefit from constraints. Although we imagine the imagination as requiring total freedom, the reality of the creative process is that it’s often entangled with strict conventions and formal requirements. Daring Fireball:

David McWilliams on Irish (and Italian) euro exit

When I was running through Italian default scenarios earlier in the day, I asked “Could Italy unilaterally exit the euro zone and redominate euro debts at par into a new Lira currency to forestall the default? Perhaps. That is something to consider at a later date.”

Well that later date is now. I caught David McWilliams writing how he thought the end of the euro is nigh. In his discussion he outlines how a ‘two-speed’ Europe would function after an Irish exit from the euro zone. I imagine the same could work for Italy too. The part highlighted caught my eye

Deleveraging, Banks and Economic Recovery in Ireland

The challenge that the Irish economy faces can best be described in the context of flows and stocks of assets and liabilities. Under the Memorandum of Understanding (MoU) with the IMF/EU/ECB Troika, Ireland must implement a severe fiscal austerity programme and reduce the size of its banking system. These goals must be achieved in the context of a deleveraging process in the household sector brought about by the need to repair balance sheets following a collapse in the value of housing assets. The current policy mix, which aims to reduce these stocks simultaneously, is unlikely to be successful, a feature we term the domestic trilemma. An external trilemma arising from the constraints of EMU membership also limits the policy choices for high-debt economies attempting to engineer an export-led recovery. This paper argues that a sequencing of policies is required for Ireland to achieve its goals

Roger Bootle on the European Crisis Deal: Get Austere or Die Trying

Here’s Roger Bootle talking to Bloomberg’s Maryam Nemazee about the deal hammered out yesterday to ‘save Greece.’ He is quite sceptical. First, the 120% debt to GDP figure that the deal is predicated on reaching is still high and assumes a benign economic environment. Bootle believes these assumptions are rosy given the negative impact fiscal consolidation will have on growth.

Separately, I have seen a number of other threads on the crisis. Most of the commentary has been negative. One would never know this given the incredibly bullish reaction in the markets. Here are the most interesting threads