It almost goes without saying, but you have to read Michael Lewis’s tour de force on Ireland in Vanity Fair. It’s long — over 13,000 words — and it’s beautifully written, giving both a big-picture perspective on the Irish economic boom and bust, and a credible account of the fateful meeting at which the Irish government decided that it should go ahead and guarantee the debts of all Irish banks. That move was the single worst decision among all the policymaker actions over the course of the global financial crisis, and Lewis is right to be astonished at how meekly the Irish population has accepted its devastating consequences.
Does the Ireland crisis bespeak a major weakness in the Basel capital-adequacy regime? Simon Nixon thinks so: the fact that investors won’t lend to Bank of Ireland, he says, “highlights a major weakness of the Basel capital rules that European banks operate under.”
Color me underwhelmed by the Irish bailout. By all accounts it’s going to be less than €100 billion — probably in the €80 billion to €90 billion range — and that sum has to cover the country’s entire borrowing needs for the next three years. The NYT has a breakdown:
Mohamed El-Erian weighs in on Ireland today, and is blunt:
What is most desirable is not feasible given the path Europe is embarked on; and, to make things even more complicated, what appears feasible to Europe is not necessarily desirable. As a result, Ireland finds itself stuck in an unstable muddled-middle.
I love the way that the WSJ today covers the collapse of Ireland’s banking system, and with it the country’s fiscal leadership. There’s little if any actual news here, but that’s a feature, not a bug: it frees up the WSJ‘s writers and editors to present the big-picture narrative in as clear and compelling a manner as possible, without having to overemphasize some small factoid which they happen to be breaking.
There are anonymous commenters on blogs like mine, and then there are the elite and sophisticated investors invited to join a conference call with Ireland’s finance minister. Which group would you think is better behaved? Silly question, really. It’s not even close: