Eur Wedge On De Edge


#1

Met a cousin at a family do yesterday, he as around €100k on deposit split between two Irish banks so he is covered by the existing guarantee. He is now getting worried about thinks (Morgan Kelly freaked him out) anyway he is talking of moving most of it into Rabodirect. I presume he would be covered by the Dutch guarantee which I think is also €100k. How safe are Rabo I gather they are AAA rated and I presume the Dutch goverment is in a much better position than us.Your thoughts


#2

Jaysus… 2008 phoned… It wants its topic back…


#3

This sticky is for all of those who fret about your “Wedge” or “WOE”.

I blame Morgan :angry:


#4

Time moves slowly in Cork ANY other comments


#5

I reckon the issue with Rabo is not credit risk wrt Rabo but the fact that the Rabo deposits are in the Irish jurisdiction and subject to whatever laws Lenihan or his successor dreams up if and when the dam bursts. In Argentina, a lot of people were impoverished because they went to bed with dollar savings and woke up with pesos.

The only surefire defence is capital export; get the money out of Ireland in some shape or form. German bonds, Dutch bonds, gold, foreign shares or a foreign bank account.


#6

So would the opinion be go straight to Bonds or Gold,


#7

My initial impression would be to put cash under the bed. At least until inflation becomes the primary concern.

a. If it comes to the worst, they can’t just automatically convert your euros to punts or whatever. If other countries stay in the euro, then your euros will be good there (once you smuggle it out).

b. If the entire euro block goes back to pre-euro, they will at least be accepting euro for exchange (Yes?). So, you wait and see where would be best to exchange your euro.

I note that ideally, in an age where banks and government are the biggest users of IT, you need to hide your wealth from the sight of banks and government - because they will eventually track it down and demand some of it, ‘going forward’.

This is easier said than done though - the key is to identify incompetence and oversight in their use of databases, IT, and how the various institutions access and share that information.

Later on, as cash starts to lose its value, I would say be into assets like agricultural land and gold where you can find good value - though not be too worried about value - if you come through with half of your wealth intact, you’ll be doing good.


#8

Apologies if this is answered elsewhere.

I was asked recently whether I would think about buying a house soon. Ignoring all of the other arguments like salary multiples, yields, low interest rate environment (which still make sense), my initial response was that I’m very slow to undertake such a big commitment if I’m not even sure what currency this country will have this time next year.

My logic for this is as follows:

If I borrow, say, €300k from AIB, then I assume that AIB themselves source those funds elsewhere in Euro.

If Ireland leaves the Euro, then it strikes me that my mortgage will remain in Euro as AIB still need to meet their external commitment in Euro.

Meanwhile, my salary for the next 30 years is in New IR£ which fluctuate in value against the Euro and initially at least are massively devalued - so my initial borrowings of 3-4 times salary suddenly become, say, 7-8 times borrowings.

If Ireland leave the Euro because the Euro itself collapses, then apply the same argument to, say, the New Deutschmarks or New Francs that AIB need to meet their commitments in. I’ll still be paying a mortgage that is fixed in a strong currency out of a salary that’s paid in a weak fluctuating currency.

Have I got this arseways? Is this what would happen to a mortgage if Ireland left the Euro?


#9

I was meant to have chased a gold investment and also to try to sub-divide my savings into a number of different bank accounts. Illness and Lazyness have kept me from this during the last few months.

OK so here’s Wii’s Plan

  1. Purchase 5% of my savings in American Dollars and move it to my no interest American Account
  2. Purchase 5% of my savings in Gold Bullion and store it underground
  3. Split the remaining 90% accross 4 banks - Norther Rock, Rabo, PTSB and a new German bank account to be opened there the next time I’m in Germany.

AND (here’s the important bit)

I believe that there is no willingness or ability (since they can’t see what they’re fighting) amongs the populace of Europe (i.e. the saving prudent ones) to actually strike back agains the government or banks. With that in mind I see various methods being used to drive Inflation higher in coming years for large purchase items, e.g. land, houses, commercial property, forrestry etc.

I’m on the look out to buy and farm and have one in particular in mind at the moment. I’ll see how that goes as a method to protect me from doom.


#10

Ouch. Mortgage in Euros but paid in worthless Bertie-Bucks…nasty.

Unlikely though. Leaving the Euro means an effective default. Debt will be denominated in new currency. Staying in the Euro will mean some sort of debt restructuring anyway. So either way, the banking system will take a huge hit.

This is why it cannot happen anytime soon. The solution will come when the banks have themselves capitalised to the point where they can cope with the transition. This will take years of raising funds + mergers etc and more years of economic stagnation until it gets sorted.

The EU/ECB is hatching the plan as we speak.


#11

100% Agreed.
How about a foreign currency account - eg swiss francs - with AIB / BOI?

Instead of going to bed with euros and waking up with punts, we should wake up instead with Swiss Francs which could then be converted back into punts? Or would all deposits in AIB etc be reduced regardless of their denomination?

Anyone know what happened in Argentina crisis if you had a US dollar-denominated bank account with an Argentinian bank???


#12

Your Swiss Francs would still be Swiss Francs.


#13

If we leave the euro in a default scenario I`d say it would be similiar to a late night in Sept 08. Money in accounts would be likely automatically changed into a new currency !


#14

Very true, but would it matter if your money was in a different currency at your local AIB / BOI?
I don’t trust any of them


#15

You mean like a late night in Sept '10 after the shit hits the fan in July and August when half the world has to refinance debt and the markets patience for Spain runs out. Then we have to decide, save the banking system or the country. If the people who are allowed to say, “it’s one and the same” have their way, then the Lenny Pennys can’t be too far behind.


#16

Sorry if this has been answered elsewhere, but this seems like the topic to post this query under.

I have meagre (very meagre) savings in Rabodirect, but invested in funds rather than in the simple savings account.

What happens if we pull out of the Euro? Will my holdings be converted into Lenny Penny equivalents? Will I lose any money?

I assume that if I have 5 shares of Fund A at a €1 each, and we leave the euro, I will still have 5 shares, but they will be worth 10, or 100, or a million Lenny Pennies?

Does anyone have any ideas on this?

Also, (standing up on the bus) I don’t know what a tracker mortgage is!


#17

I think the major problem would not be a switch away from the Euro (unless we are forced out or Germany leaves both I think unlikely) rather the problem would be the banks invoking the guarantee causing a sovereign default. Or a sovereign default leaving the banks to run out of capital.

Access to your funds, even if guaranteed, would not be happening for some time - possibly years until the country recovers.
You could find that deposit guarantees promised to be 100,000 could drop to 10,000 euro.


#18

This question has been done to death.

If the Irish government decide to adopt the Lenny Penny, then all financial institutions under the auspices of the Financial Regulator will have their holdings convered to said Lenny Penny’s.

It stands to reason. If a financial institution wants to do business in this country, they’re obliged to use the country’s currency and abide by its laws, not foreign ones.


#19

I believe this is incorrect.

Dollar balances in argentinan banks were swoped (stolen) for pesos.

Even dollar accounts in the argentinian branches of US banks were changed into pesos.

Only those who held their savings completly offshore retained their spending power.

So a swiss franc account at BOI in College Green may be vulnerable.

A Rabobank account in Rotterdam should be ok.


#20

The company I work for is on the brink and I don’t give them until the end of the year before giving us our P45s. So if we go back to the Lenny Penny, my redundancy payment will be in said denomination? That would be some kick in the nuts on the way to the dole office.