US, world headed for 25 year depression: Jim Rickards

US, world headed for 25 year depression: Jim Rickards

“When I use the phrase 25 year depression, it sounds extreme but it’s not. We had a 30 year depression in the United States from about 1870 to 1900…The Great Depression lasted from about 1929 to 1940. The U.S. is in a depression today.” Well, it's been in the works for

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Canadian banking haven myth exposed

Canadian banking haven myth exposed

"One of the reasons that Canadians (and international commentators, other finance ministers and global financial institutions) buy this Canadian banking fairy tale is the way the government accounts for the money borrowed to support the banks." The sorry spectacle of Conservat

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Get rid of your mortgage, loans, because interest rates set to rise

Get rid of your mortgage, loans, because interest rates set to rise

Get rid of your loans, guys and gals, because we are going into a high interest rate period. Very high. It will be the equivalent of going into the double digit interest rates we had in the 80s where many people threw their house keys at the bank and we had record numbers of ba

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E-cigarettes save lives, money

E-cigarettes save lives, money

"We know that cigarettes have thousands of chemicals in them and we know that they are killing us. They have been for over a hundred years. So now, the e-cig industry comes along with only one or two chemicals in their mixture and people are freaking out over these as well. Whe

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US inches closer to big bank charges

US inches closer to big bank charges

Federal prosecutors are nearing criminal charges against some of the world’s biggest banks, according to lawyers briefed on the matter, a development that could produce the first guilty plea from a major bank in more than two decades. In doing so, prosecutors are confronting

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Canada’s home sales top predictions; why a real estate crash is inevitable

Canada’s home sales top predictions; why a real estate crash is inevitable

“The assurance of relatively low borrowing costs has likely given home buyers confidence while rising home values have kept new listings at a healthy level. Stable employment has provided some assurance to owners and buyers alike.” Our website is back after many months of

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Comparing today’s recession/depression to the 1980 recession

Comparing today's recession/depression to the 1980 recession

"Much like today, Americans were concerned not only with high unemployment but increasing budget deficits in the early 1980s. A September 1983 Gallup poll found that three-fourths of the public agreed that the federal government's budget deficit was a great threat (42%) or some

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Why savers are getting screwed

Why savers are getting screwed

"Without the intervention of economic policymakers, interest rates would be naturally higher. That would increase the cost of borrowing for businesses and consumers, but there would be some offsetting economic benefits. Savers are getting screwed by the current monetary policy

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Geithner admits USA bankrupt to US Senate

Geithner admits USA bankrupt to US Senate

"Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States. Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses

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World economies on verge of currency revaluations to deal with debt

World economies on verge of currency revaluations to deal with debt

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford Basically what the world central banks are doing is increasing their money by devaluin

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Is Obama the next Mugabe of Zimbabwe?

Is Obama the next Mugabe of Zimbabwe?

"America, Britain, Japan, Germany, France, Sweden, Holland, Norway, Canada and Australia make up the Fishmongers Group and their meeting on Tuesday will deliberate on the state of the inclusive government, debt relief, public finance administration and the controversial economi

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US raiding foreign countries with dollars, not soldiers

US raiding foreign countries with dollars, not soldiers

""The United States is going to China and saying: we want you to commit economic suicide, just like Japan did. We want you to follow the same thing: we want you to revalue your currency, we want you to squeeze your companies, we want you to go bankrupt,” says Michael Hudson,

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Content By: The Coming Depression Editorial Staff (dates cited below)
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bank bailout ireland

“Allied Irish Banks announced Friday it has lost a staggering euro13 billion ($18 billion), or 17 percent, of its total deposit base since June in the latest evidence of cash flight from Ireland’s debt-crippled banking sect.”

As a result, the bank said it now planned to try to sell euro6.6 billion ($9.05 billion) in new shares next month – an offer likely to have only one buyer, the government. The expected sale would take the government’s stake from 18 percent to more than 90 percent. Source

Ireland’s tax rates are among the lowest in the world; no wonder they’re in trouble. They have to raise them in order to pay for universal education, health care, etc. It is unreal how they can pay their bills when they don’t have the necessary income. No wonder debt levels spiral out of control. Taxes and general revenue must go higher to meet the levels of expectation of service levels. Mired in a recession or not, a corporate tax rate of 12.5% simply isn’t enough, every corporation in the world should be HQ’d in Ireland if that was what mattered most to them.

They have followed the American banking model of using debt as a means to drive the economy. The housing market which has been leveraged to the extreme is the first casualty. Real Estate speculation in Europe has been rampant as home prices are tumbling from prices that a few years ago people thought they would never go down. This debt has been packaged and sold as investments or securities in the hundreds of billions. One person in England was featured on a news program where he had leveraged debt and equity across 60 homes. He was viewed as an example of a typical shrewd player of the “market” — we can only ask how he is doing now.

How does modern banking work?

Under the Fractional Reserve Banking model, banks are only required to keep a certain percentage of all deposits, say 20%, in physical currency, it can relent out the rest, with the net effect of increase the total amount of commercial money without increasing the amount of physical currency in circulation. Under this practice, ~80% of total commercial money available actually does not exist in physical currency, it only exists as a digital representation on a server sitting in some Head Office building. However, this also has the net effect of increase the amount of total commercial money by ~450% of total physical money.

If all of a sudden there was a bank run on all of the banks, all of the banks would immediately go bankrupt, resulting in the disappearance of over 80% of the wealth in the country because there is no physical representation of that 80% in real currency. This means that a major majority people would lose all of their savings because there is only enough physical currency to represent ~20% of the total wealth of the public. It doesn’t matter how much banking insurance is available because only ~20% of total commercial money is available as physical currency. This doesn’t mean that the government will lose the next election, it means civil war.

The PIIGGS as they have come to be known (Portugal, Ireland, Italy, Greece, Great Britain, and Spain) are all broke. The government is broke and the people are broke. The “solution” is to print money. The result of printing money will be inflation. The result of inflation will be higher interest rates. The result of higher interest rates will be more bankruptcies. This is economics 101. The governments know this and are responsible for it. They simply seek to defer, slow, lengthen, and in the end worsen the collapse.

Many other countries, the USA to name a big one, are on the verge of collapse. The solution on an individual basis is an easy one. Pay off your debts, stop borrowing money, and you at least will do very, very well. If, on the other hand, you continue to borrow and live beyond your means you will have a really “unfair” retirement of poverty since the banks will, eventually, consider you too old and too risky to lend more money to.

Related posts:

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  2. Banks Nationalized After Bank RunIt was reported that a week ago Dirk Scheringa Beheer (DSB) bank of Netherlands said they had “a hacker attack” which kept their site down for days. It turns out,...
  3. Banks With 20% Unpaid Loans at 18-Year High Amid Recovery DoubtBy Bloomberg News The number of U.S. lenders that can’t collect on at least 20 percent of their loans hit an 18-year high, signaling that more bank failures and losses...
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