Why Ireland should join dollar or sterling currency now
Euro is set to self-destruct in the very near future
“On Thursday 18th November 2010 The IMF arrived in the Emerald Isle. What a sad sad day that was for the proud people of Ireland. Following 300 years of armed struggle the then resident Fianna Fail government replaced English masters with the Continental variety. However the method of usurpation this time was not guns and bullets and starvation but economic and financial prowess. To the victor will go the spoils.”
The above was written at the end of 2010. It is now nearly five months on and the crisis which brought the IMF to Ireland shows no signs of abating. As we speak the full extent of the problem has not been fully comprehended.
As mentioned previously there are now in effect seven levels to Ireland’s financial fiasco: insolvent property development lending; unsustainable annual government deficits; sovereign debt credit rating collapse; insolvent consumer debt lending; insolvent mortgage debt lending; “off balance sheet: mark to market” derivative debt; 140 billion short-term ECB/ Irish Central Bank lending facility to national banks which cannot be secured long term.
All the above “problems” need a solution but instead of a comprehensive resolution being implemented each element is being “handled” in a shoddy, short-term manner.
Accordingly, not surprisingly, the Euro continues to lurch towards implosion and we are still only half way through recognising the totality of the crisis, never mind solving it.
As more and more countries become affected the options open to the mandarins at the ECB/IMF are fewer and fewer. Eventually it must be recognised that the only way to resolutely end the banking crisis is for each country to find a way to restore growth.
When the implications of the austerity cul-de-sac is fully understood it will finally be accepted that the only real option left will be currency devaluation. This measure would save the tourist industries in Spain, Greece and Portugal and return competitiveness to Irish manufacturing, tourism and agriculture.
Thus Ireland needs to take action similar to that taken by Argentina in 2002. In that year the former South America tiger faithfully managed to “humble” American banks and dollar bondholders.
She de-coupled her currency from a disastrous one-to-one parity with the Dollar and so saved her economy and the social contract with her citizens.
In addition she forced American mortgage holders to accept “pari-pasu” payment in the new devalued currency rather than in old dollars. Thus Argentinean homeowners did not suffer the fate currently being experienced by Latvians and Lithuanians where hard Euro mortgages must be repaid in sinking national currencies.
Ireland needs to get support from her Euro zone partners which will enable her to significantly cut her debt exposure to private bank bondholders. If this action is not allowed Ireland should let it be known that she will consider joining the Sterling Area or possibly merging with the dollar.
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