David McWilliams on Bank Debt Default, Sovereign Funding & How Safe are Bank Deposits?

23 Feb

Mary Fitzgibbon (Independent Candidate, Kerry North/Limerick West) has participated in two economic webinars with economist David McWilliams .

These online clinics are provided by the People’s Economy network which provides economic advice about realistic solutions to Ireland’s crisis.

Mary Fitzgibbon says that the international financiers who recklessly gambled their money on runaway banks must bear their own losses. We must act immediately to separate the private bank debt from the sovereign debt of Ireland. We can then start the economic recovery and create jobs and better public services.

A Stark Choice: Bank Default or Sovereign Default?

David McWilliams explained at last Friday’s webinar that “the sovereign default is a disaster but the bank default is simply reinstating the rules of capitalism. If the ECB were to behave like good Europeans what they would realise is that there is a long game here and you shouldn’t penalise the Irish people for the gambling debts of Deutsche Bank and some of the other German banks who lent to the Irish banks.”

Replay the People’s Economy Webinar Here:

Would a Banking Debt Default Leave us with No Money?

Mary Fitzgibbon: Both Fianna Fail and Fine Gael repeat the mantra that we ran out of money and that a banking debt default would leave us with no money to pay public servants such as teachers, nurses and gardai. How can we counter this propaganda?

David McWilliams: This is complete and utter nonsense. If we separated the bank debt from the sovereign debt our debt to GDP ratio falls to 73%. This is the debt to GDP ratio which is the crucial figure because it’s your ability to pay which is lower than France, Spain, Italy, Germany, Austria, Belgium and of course Greece and Portugal.

So we could go back to the markets very quickly. You would organise a bridging loan with the IMF because that’s what the IMF does and I think the IMF is actually more on our side than the EU or the the ECB seem to be at the moment. You organise a bridging loan with the IMF and that ties you over for three or four months and you then go back to the markets with a much cleaner balance sheet and get ready to raise money.

Then, obviously you have to have a fiscal adjustment that is credible and you have to have a policy that says that over the next we are going to do this and this and the markets have to believe you…so it is propaganda Mary and we would get financed elsewhere but we have to go out and actively seek it.

Are Deposits Safe in an Irish Bank?

Liam Denn: Considering the carnage of the last few years and how quickly things changed, what’s to say our deposits will be safe? Is it not the case in Argentina that deposits were ruined?

David McWilliams: I don’t trust the Irish banks with anything and as a consequence of that I don’t believe that my deposits would be safe in an Irish bank so I don’t believe that your deposits are completely safe in an Irish bank.

The reason I don’t believe it is because it’s hard to take seriously the utterances and the promises of these guys who have lied to us about everything.

You’re right that in Argentina the depositers were ruined and of course I will get completely attacked now for even discussing this but it’s a bit like do you remember during the house price scam when people like me said that house prices were far too high and they’d fall – we were accused of talking down the economy and the very utterance of actually suggesting there was a problem meant that the house prices would become self fulfilling.

I think that ultimately the truth is much more important than the spin and it’s hard to trust the Irish banks at this stage.

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