Fianna Fail and the bond market

Some people do not understand Fianna Fail’s abject subservience to the bond market. I want to explain why as simply as I can.

FF claim that crooked activities undertaken by Irish Banks must be underwritten to the fullest possible extent by the Irish taxpayer. Foreign risk capital must not, under any circumstances, be subject to risk. Otherwise, they say, funding costs for irish banks and the irish state would rise permanently.

The truth is different.

After the Russian default of 1998, investors were piling back into Russian debt within one year. What happened? What happened was that Yeltsin’s regime collapsed and was replaced by Putin’s. Putin cracked down on the corruption and malpractice of the Yeltsin era and made Russian bonds investable again. Nobody would have continued to lend to Russia under Yeltsin. When the bond market got what it wanted - regime change - Russian debt soared.

Do not believe the FF/Green lie that the bond market lends to the “irish”. It does not. It lends to a specific system of regulation and governance.

FF think that default on, say, anglo senior debt, would lead to a demand by the bond market for regime change here. The bond market is capable of saying “If FF hold power in your fucking country, we will not lend to you.” On the other hand, the bond market opens up again under a new government and new regulatory framework. Following regime change, recovery would be very rapid, a matter of months.

FF know that the bond market has the power to permanently terminate FF’s existence as a viable political entity. This knowledge is behind all actions they take.

Very very plausible. Lenny’s determination to bail out the bondholders has been bewildering really.

+1 *agus *ouch

great post but I disagree with this statement:

“Permanently terminate FF’s existence”? Do you honestly believe FF would have disappeared as a party if it (correctly) hadn’t guaranteed the bank bonds?

I fully agree with your sentiments, but unfortunately I think there is more than just FF involved here. FF and it’s ‘goons at every street corner’ made this bed, no question about it.

We see no evidence that a change of party in government would have the maturity required for the very necessary, painful, short sharp shock of default.

I tend to agree with most of your post Bungaloid but would just say that you cannot discount this shower of gombeens as they will happily let another party make the decision to default and then lie to get themselves back into power while telling the markets that under them default would never have happened, remember they are as corrupt as they come and the current hiding of information surrounding bank, builders etc etc is proof of that.

I agree with much of that but think it’s important to also acknowledge that there is a risk of contagion within Irish industry if we bust senior debt; specifically certain (Irish) Insurance companies who I suspect are over-loaded with the stuff and some Life companies similarly. I still think they should get screwed but these internal risks are important to keep an eye on as well.