Sunday, September 16, 2012

16/9/2012: Who pays for the Banks Guarantee? Irish Mortgage Holders

Another interesting snippet from the IMF report on Ireland's performance:

"The already low net interest margin fell by 40 basis points in Q1, to 0.8 percent of average assets. Though funding costs fell by 35 percent from Q4 2011 reflecting the actions of a leading bank to lower deposit rates, this was not enough to compensate for weakening interest income due to higher loan impairments and the drag from low yielding tracker mortgages. The ELG fee remained high, at 110 basis points in Q1, absorbing some 40 percent of the net interest margin (up from 28 percent in Q4 2011)."

What does this mean?
1) Banks are suffering from lower margins due to declines in ECB rate having an adverse impact on their tracker mortgages book. They compensate by soaking savers (deposit rates down) and ARMs (adjustable rate mortgages are up).
2) Instead of allowing banks more funds to cover mortgages losses, the (1) above - soaking of savers and ARMs - goes primarily to fund Mr Noonan and the State (via ELG fees paid by the banks for the Guarantee cover to the Exchequer).

Great. As a holder of an adjustable rate mortgage, I get taxed by Mr Noonan once on household charge (soon to be replaced by a property tax) and  via ELG. Well done, 'low tax Government'. Of course, I am also being used to subsidize tracker mortgages, including buy-to-lets.


Anonymous said...

Dr. Gurdgiev -
Ref. final paragraph .. that's as may be.

With the utmost respect,and touching on another topic ....I dare to state that I'm disappointed at your use of vulgar language in your tweets.

You are a highly educated and a cultured man (yes?) so there's no need, none at all.

B. (with respect)

TrueEconomics said...

Thanks for the comment. And fair comment it is, so no offense taken at all.

I have a certain philosophy with respect to language. Perhaps not the best one, nor the most suited either, but I did acquire it along the way in the process of my own maturity and education.

It is as follows: English vocabulary - as any other language vocabulary - covers the full range of words that carry specific meaning. All are suited to be used in any discourse, as long as their meaning fully corresponds to the objective of communicating clearly that which the author of communication intends to say.

I tend to use the full range of vocabulary as known to me. Some words convey academic or 'sophisticated' or technical or 'learned' meaning. Others convey emotive meaning. Few of the former type can be taken out of context and convey secondary meaning that can be found offensive. Many of the latter type can. But the intensity of feeling they convey, to me, overrides the consideration of 'propriety'. Sometimes, what the powers over us are doing to us cannot be described as, say, being 'hurtful and intentional' - it has to be described by the derivative of that 4-letters word that is, perhaps, rude, but perfectly descriptive, co-mesurable with the gravity of hurt and damage inflicted by the physical acts.

In a way, I guess, violating the nexus between meaning of the thought and the propriety of communication is the whole point of speech.

The issue, of course, is - am I using 'vulgar language' excessively and inconsistently with the above principle. On that, I have no answer. Good point, as raised by you, would be to start watching and paying attention. Which I shall try.

Anonymous said...