Thursday, June 2, 2011

What went wrong, and what else - the bailout.

OK - we have been bamboozled by bullshit, that is the first point.
Using multi layer words that we are vague about is a means of control, ignorance leads to apathy.

Bondholders, bail outs, front loading etc. are all terms used to confuse and divert questions.

A bondholder is an individual or entity that is the bearer of a currently outstanding and active bond.

A bond is a type of debt capital instrument that is used to generate funds for the issuer.

Debt capital is the capital, usually money, raised through issuing bonds.

A debt instrument is any type of documented financial obligation (i.e. an IOU note) that describes a debt that is assumed by the issuer of the document (i.e the bank)

Our banks wanted money to loan out to speculators, so they issued bonds to raise money.

Other banks and investors saw the bonds on offer with their return rates and bought them as a way to make money in the long to medium term, so they gave our banks cash for IOU's and became bond holders.
Lets call this cash Block Ai

The Banks then took Block Ai and broke it up to give to individuals who speculated on returns - i.e. both parties gambled. Lets call this Block Aii
In Ireland, this was in reality a very small circle of people.

The banks also loaned money to people to buy the houses built by the speculators.
Lets call this Block Aiii

The banks gambled 3 times on Bloc A
- 1: that they would get it back and repay Block Ai
- 2: that the speculators who took Block Aii would pay them back to fund Block Ai and
- 3: that they would get a secondary return from same property through private mortgage debt, Block Aiii

When issuing block Aiii we have seen that quite often this was done in a very slipshod fashion with Government Ministers like Charlie McCreevey getting very large loans with little or no oversight.

To add to the risk factor loans were not really secure. When you borrow a large amount of money you generally are asked for collateral, something you own of value, as a guarantee against the loan in case things go wrong.

In the case of the speculators, they were allowed to use property they did not actually own outright as collateral. They were taking loans on the back of property that was already subject to repayment of another loan.
This is called leverage.

Then part of this precarious system, Block Aii, went pear shaped when repayments stopped and this had a domino effect on the unsecured leveraged loans.

The Government, or more correctly, Brian Lenehan and Brian Cowen, overnight took possetion of the banks IOU notes, this was the deposit garuantee - promising to provide money for loans they did not have.

To cover this potential cost they borrowed more money from the same investors who had supplied the initial speculative capital to the banks.

The investors could then deposit those IOU's in the guaranteed banks, and withdraw the money so the Government gave them back the 2nd loan, and still have to pay off the initial loan with interest.

The Green/FF government borrowed money to pay off a loan.

This was the bailout.

It is clear that when the bond holder loans money to the issuer (us, the tax payer represented by the Government) to cover the initial loan, it is to the benefit of the bond holder as they get a bigger return on the loan.

When they are loaning a secondary amount to get their initial capital and interest rate back, they increase their income by adding to the 2nd loan at higher rates.

In essence, they are loaning us our own money at interest.

Since 2008 there has been an international campaign to socialise debt, i.e. to cover the risks of speculators by penalising the general population.

In order to cover the banks exposure, the IMF and EU made us take out a further loan of €85 Billion.
Among the conditions attached to this are exploitation of national natural assets like minerals, resources and public services by the corporate sector.

We are told that if we do not accept these conditions and provisions the world will collapse around us.

The word default is being used as a scare tactic. Default does not mean we do not pay, it means a negotiated settlement to ride out this economic crisis, and repayments in a sustainable and equitable manner.

This is what the people of Iceland did.

But we the Irish, all 4 million of us, are faced with a per person debt burden that is off the radar, we are dragged by Fianna Fail, Fine Gael, Labour, independents like Lowry and Healy Rae and the Greens into paying for a debt that is not, and never was, our responsibility.

It is an outrageous scam and an unjust act. On the 85Bn loan we each need to pay something like €44K through increased taxes and levies, loss of services and loss of proper revenue from resources - this without the consideration of interest.
In 2013 our annual repayments will be around 9Bn per year - we are per capita the most indebted nation in the EU, with a deficit of 32% i.e. we will need to borrow a further 2.88 Bn per year just to pay a debt caused by a small group of bankers - put into context, that's about twice the amount we spend on the defence forces annually.

If this state of affairs is allowed to persist, we and the next two generations have three choices.
1-Stay here impoverished subsisting on inadequete social welfare
2-If lucky enough to have a job, pay huge taxes for crap services or
3- Get the fuck out of dodge.

If you are reading this, my advice on savings and investments is to move them to an overseas bank, or use an independent bank like Triodos.

The IMF deal will be bad for Ireland, in the Asian economic crisis of the 90's those countries that bought into the IMF policies faced tremendous disruption, those that refused did quite well.
The IMF is a private venture company, supported by multi national corporations who covet resources and income, things like health insurance, oil and gas.

I am not saying that as a conspiracy nut, UNICEF calculates that over half a million children every year under the age of five die due to IMF policies.
As countries are diverting resources away from social provisions like health care and pensions to repay debt, those most affected are the poor, especially women, children and the elderly. UNICEF’s 2000 report says 30,000 children die each day due to poverty.This poverty is generally caused by corruption AND debt servicing at an unsustainable level.

What can we do - well - start here
We need to say No to a conjob - We need to say enough is enough, we need to educate ourselves, empower ourselves and take back our country, our future and that of future generations.

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