The sums of NAMA

The banks owe 76,000 million on which they pay they pay the EURIBOR rate or 380 million per annum. The banks go to NAMA and ask that this debt is backed, NAMA says OK if you give me 1040 million ( ECB rate plus .5%) per annum NAMA will back 56,000 million. The banks go to the ECB and ask for 56,000 million , ECB says fine that will be 280 million per year. Banks now owe 132,000 million costing 1,700 million per annum. Banks go to the Irish Government and buy 56,000 million euro in bonds and get 2,800 per annum for them. Banks make 1,100 million per annum per year. Irish government gets 56,000 million for 2,800 million minus 1,040 the banks paid to NAMA or a little over 2.5%, and Irish debt to GDP ratio remains one of the lowest in Europe

NAMA Scary Simple

This is how it works. A bank is owed 12 billion euro, bank goes to NAMA and says I'm owed 12 billion and no one believes that I will get it back. NAMA says OK give me 150 million per year and I will tell the ECB that you are good for 10 Billion. Bank goes to ECB and gets 10 billion for 100 million per year. So at this stage the bank is paying 250 million a year for 10 billion. Bank then goes to the Irish Government and says "I'll give you 10 billion for 500 million a year", Irish Government says "Perfect, because even though I'm paying you 500 million, you are paying me 150 million into NAMA which is a state body, so I am really only paying 350 million a year for 10 billion". The bank says "perfect 10 billion cost me 250 million a year and I am getting 500 million a year for it".

The overall effect - the Irish Government could get up to 50 billion at 3.5%, leaving the debt to GDP ratio at about 60%, still much lower than most EU countries. Very clever Mr Lenihan - scary clever.

Economic clear losers - those in education

Primary Schools - Up to now schools could allow teachers to do further education studies in areas such as special needs, language development skills, this required that the teacher worked and studied part time or studied full time ( at the teacher's expense ), teachers could take up tempoarary posts in the department of Ed. or in teacher training schools. This is now stopped as teachers have to return to their posts as vacancies created by their absences can not now be filled. Temporary teachers will lose their jobs. Primary school teachers once qualified have to work one years under the supervision of the department of education, this is known as the "dip year" and has to be passed within five years of qualification, there are now no temporary posts for new teachers to do the "dip year". Gradually learning support teachers will be absorbed into classroom teaching, learners with problems will suffer, and classes will grow in size.

Secondary Schools - The same array of non replacement of temorary and retired teachers applies. The first service to fall victim to this will be Transition Year. 50,000 did it last year the numbers will drop to 10,000 over the next five years. Adding 10,000 a year to Leavng Cert. numbers, this will push points up dramatically.
On the subject of inflated points, over the last seven years 6,000 boys per annum with Leaving Cert will now no longer find an an apprenticeship these will have to be absorbed into the third level system ( many apprentices over the last for or five years had over 400 points).

Private Catholic secondary schools will see a drop in numbers. There are a few major drivers here - The most immediate is that less people will have the money, secondly there will be a preference for parents spending the money on third level.

Third Level - Local third level establishments will gain, less locals can afford to go up to Dublin. The entrance exibition examination in Trinity has stopped, thanks to an old guy who with the benefit of a degree from Geneva University got it in the late 70's. The real losers with the reintroduction of fees for third level are rural based students who may have just been able to afford accomodation costs are now knocked off the ladder with the fees and impossibility of getting a part time job while studying.

Those emerging from education are the most likely to become unemployed.

Irish Economic Depression who is winning

Or who is losing the least. State pensioners and public sector pensioners have only lost on the income levy, 20,000 Irish pensioners with a gross income over €30,000 have lost the medical card. Irish property has halved and will probably half again in the next year, U.K property has stablised and gives a steady rental 5% return. The Ennis wind farm will produce a constant gross profit of 15% (10% after costs) over the next 15 years.

A lot of middle income Ireland has lost on bank shares, those who had the shares for 20 to 30 years have probably made four times their original investment in the long run.

Mortgages have dropped considerably in the last year, Irish mortgage holders in stable employment, despite loss of relief are still about 10% better off in terms of disposable income. UK property investors have seen the costs of interest dropping to one third of last year's cost eg an IIB mortgage of £85,000 cost £699 (€1050) per month this time last year it now costs £179 (€200). The Manchester rental market has improved.

Back to the losers - almost anybody with anything to do with construction. Seventy five percent of members of the royal institute are unemployed - in reality 90% are not working fully. There are more solicitors unemployed now than electricians. this hasn't been the case since 1982 when I knew a solicitor who was very happy to work as a night shift cleaner in Donnybrook bus station. I know three chartered accountants who are now unemployed - this never happened before in Ireland.

Economic Recession Winners and Losers

It is clear who the losers are - the new unemployed. Those who are in the system for a while have established themselves, mortgage interest subsity or rent allowance, living allowance in place, the shock has worn off a bit and are slightly better off. For everyone else it is a case of relative poverty. Low paid civil and public servants have probably suffered a quadruple double whammy, decided to take a low risk low pay job, then lost out on the second round of benchmarking "because they had a good pension", lost out on property because they couldn't afford to buy with low pay, had to pay the pension levy "because they had a good pension", then had to pay the employment levy, no further staff being recruited and extra demand on social welfare services. Non commercial public sector are slightly worse off as they have to contribute (or pay for) their pensions. Most earn less than €37,000 pa , so they pay PRSI, Pension, Employment Levy and PAYE. The sad thing is that those paying little or no PAYE are hit harder.

The winners are keeping quiet.

Should Cowen nationalise the rest of the banks ?

Previously a question only posed by lefties and shinners with the clear intention of expanding the public service and impoverishing the fat cats. The issues of how to restructure and who takes the losses (previously profits) still exist. The sad fact is that we are the banks and no punishment can be meted out without a cost to the ordinary punter.

Share prices have collapsed, even though they are mainly owned pensions and pensioners, and sadly that is what shareholders are for. Since most of the banks assets are funded through borrowing not equity, should the taxpayer instead of creditors now take the losses through nationalisation?

If the taxpayer funds the banks, the cost of the banks failing becomes greater, but there is an upside – old shareholders have the possibility of getting some of their money back and new shareholders will make money.

Garret the Good wants more economists

I laughed til' I cried when I read in this morning's Irish Tripe, Garret twittering on about the need for loads and loads more economists in the Department of Finance. Maybe I have become harsh and maybe he is trying to be kind pretenting that there is a skill shortage in that area which is being ignored to soften the blow for the scores of unemployed economics graduates their sad parents.

Garret explained that he didn't have his usual Data Bank (no doubt electronic and very complicated and can only be operated by very intelligent people like him) so he could now give an opinion about the important and complicated work that economists him do ( in between betting their shirts on disasterous floatations like GPA and forgetting about valuable art work in the attic). There are lots of economists around, well there were up to a few weeks ago, Dan and gang have gone into hiding, some have been laid off, others are seeking refuge in academia with a few government nixers, poor old Leo is hoarse can't get anyone to do a vox pop.

You have to hand it to them, they predicted the end of the construction boom ( now we all know how complicated, technical and sophisticated that was), pity none of them predicted a global downturn. The fact is they are only sure something is going to happen after it happens.