In previous two posts (here and here) I looked at the IMF's assessment of Irish banks. Now, lets take a quick look at the state of Irish households' balance sheets… Note: I covered outstanding credit to Irish households here.
Again, per IMF: "Household savings remain elevated, with three-quarters of savings devoted to debt reduction since 2010." Which practically means that savings and investment are now decoupled completely: we 'save' loads, we 'save' primarily to pay down debts. We, subsequently, invest nearly nada.
And savings rate has declined: in last 4 quarters on record below 10%, back toward the levels last seen at the end of 2008. Which should mean that consumption should be rising (as savings down)? Not really. Burden of debt is trending down still, from 2012 local peak, but this is still not enough to trigger increased consumption. Hence, the only conclusion is that savings down + consumption flat = income down. Might ask Minister Noon if his policies on indirect taxation have anything to do with this…
More ominously, for all this repayment of debts reflected in our 'savings' rates, the debt pile is not declining significantly:
What is going on? Especially since the recent 18 months should have registered significant debt reductions due to insolvencies and mortgages arrears resolutions acceleration? Ah, of course, that is what is driving the aggregate debt figures (although in many cases the debts are actually rising due to mortgages arrears resolutions, plus sales of debt to agencies outside the cover of Irish Central Bank, like IBRC mortgages sales).
Plus, for all the talk about mortgages arrears resolutions, the problem is barely being tackled when it comes to actual figures:
Oh, and the banks are continuing to squeeze depositors and fleece borrowers:
It's Happy Hour in the banking rip-off (sorry, CBI, profit margins rebuilding) saloon... All along, households are still under immense pressure on the side of their debt overhang.
Next Post: Economic Forecasts from the IMF
