I remember seeing Dave Allen doing stand up (or sit down in his case) once talking about countrys and the debt they owe and him asking the question “Who the f*ck do we all owe it all to though?”.
I’ll be corrected quickly if I’m wrong but I’d have thought that it works something like this:
Using the accounting equation:
Assets = Liabilities + Shareholders Funds
Putting it another way : Assets - Liabilities = Shareholders Funds
So for all that debt listed above there are people who own the ‘shareholders funds’.
People own the shareholders funds by having deposited money in banks instead of blowing it on consumption, or they buy shares etc. The banks in turn lend the money out to people who want to buy homes, flat screen tellys and cars.People are then paid to make the cars, tellys, houses etc hence the money multiplier etc etc etc
An important question for a country is how much of the liabilities are owed to its own citizens and how much is owed to foreign citizens. I’d love to know what Ireland’s position is. Is our public and private debt mostly owed to foreign citizens e.g. the Germans?
If most of our debt is currently foreign-owned then it’s gonna have to be one huge “recovery bond” sale to get us into the position of the government owing most of its debt to the people.
So just for argument’s sake, let’s say we had the following scenario last September (for convenience forget IILP etc.):
1)Anglo go running to the Brians looking for the guarantee. Brians say no, we’ll just guarantee deposits to 100k.
2)Anglo goes into liquidation. Staff on the dole.
3)Creditors end up owning shopping centers, offices, hotels and ghost estates all over Ireland. Such assets quickly find their clearing price.
4)AIB and BOI get starved of capital. They go bust too. Creditors get even more shopping centers and hotels as liquidator turfs out the bad loans - private sector carnage.
5)Liquidator sells retail branch network and back office systems to Gubberment who also take on the cleaned up loan book. Gubberment injects capital and ensures their retail and branch operations continue.
6)When things are looking up, Gubberment flogs off AIB and BOI for handsome profit. NTMA finally starts to show a profit.
Private sector screwed. Taxpayer protected. Essence of banking sector intact.
I’d also like to see some evidence to support this. Bearing in mind that most countries can inflate their own currencies, therefore reducing the public debt burden if they owe it in their own currency. Who will borrow in your currency - your own people, right? (unless you’re the worlds reserve currency).
Now consider you don’t control your own currency and cannot gradually inflate away the debt burden which you owe to your own citizens? Who does that sound like?
Therefore I think your statement is better read as:
Successful nations are the ones that owe most of their debt in their own currency - by extension, but of little relevance, probably to their own people.
