Stop whinning and go sell some CDS then.

On what comparitve basis would the so called “informed” trader conclude that Ireland has a healthy stable economy?

The truth is the neo classical equalibrium based inflation targeting forget about debt level economist are in the tar pit Minksy/Fisher have returned form the deep freeze to shovel the BS over their heads

Personally I was shocked by what I read in the Times online about the Green Jersey Agenda. Basically the Irish regulators appear to have sanctioned the kiting of monies between Anglo Irish Bank and ILP to create a potemkin village of solvency. That information alone calls into question both the competence and solvency of the Irish government.
http://www.timesonline.co.uk/tol/news/world/ireland/article5733823.ece

Once my initial shock wore off, I realized that the US government had done something very similar with JP Morgan and tried to do it with Citibank.

As Warren Buffet put it, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

Now the oligarchs fear that the peasants are waking to the situation, will they rise or be distracted by some new bauble? Or will it take a war or pogroms to protect the elite?

The Dublin financial sector is not the economy.

Ireland led out the gate with a variation of “our currency, your problem” statement in guaranteeing banks.– Our problem your currency. So, an EU accomodated solution will be enabled. Iceland is not an EU member.
Ireland is also impacted in its major export market, the UK,with the Sterling moving down. With a corporate tax rate of about 12% there is still scope.
Brussels is terrified of seccession and unravelling and all peripherals know this. To paraphrase Bernanke ” the mere threat of of doing this”-managing perceptions and expectations.
If offered a “Cromwellian” (to Hell or Connaught) by vested parties there is always the geostrategic ploy–A Russian naval base. This would upset the UK tremendously, as well as the EU and USA. Or the mere threat of such like. This is just tongue in cheek to demonstrate to the myopic financial cliques that there is more than one way to skin a cat. Nations don’t have friends they have interests. By the way the Soviet Union was the first to recognise the Free State.

Simon Johnnson makes exactly your point

http://www.pbs.org/moyers/journal/02132009/watch.html

Asset prices are now in a downward death spiral in Ireland as unemployment increases, perpetuating the spiral to the bottom. This is going to get a lot uglier, so if the banks are insolvent now, they definitely will be in the years to come. The debt just got way too big in Ireland.

Ireland can’t deal with this debt politically because the banks own the politicians, dictating policy decisions. AngloIrish advising Lenihan to screw over the school kids and the pensioners to save money so that the banks could be saved. Increased pension levy to save AngloIrish (which was not only incompetent, but its directors acted in a criminal manner). Are the directors fired let alone in prison? Fitzpatrick has stepped down. That’s it.

Outsiders will view the spinelessness of its political class with aversion.

Asset prices are now in a downward death spiral in Ireland as unemployment increases, perpetuating the spiral to the bottom. This is going to get a lot uglier, so if the banks are insolvent now, they definitely will be in the years to come. The debt just got way too big in Ireland.

Ireland can’t deal with this debt politically because the banks own the politicians, dictating policy decisions. AngloIrish advising Lenihan to screw over the school kids and the pensioners to save money so that the banks could be saved. Increased pension levy to save AngloIrish (which was not only incompetent, but its directors acted in a criminal manner). Are the directors fired let alone in prison? Fitzpatrick has stepped down. That’s it.

Outsiders will view the spinelessness of its political class with aversion.

Private Irish debt to income is x3 US and x2 UK your suggesting its a geopolitical psychological problem ? The world simply needs therapy, nothing to fear but fear itself :)

As Mr. Lane points out above (and as I also did before), the CDS market is a very illiquid market, and as such a very, very, very poor indicator.

Just to give an indication, the current spread between 5-year Irish and German bonds is 258bps; in comparison, the Irish CDS was 377bps on Friday evening — and most of the difference was created in just two days (Thu.-Fri.). Clearly, the much larger and much more liquid bond market is not as concerned as some people are.

Meanwhile, 5-year CDS on US Treasuries currently trade at 87bps (and have been creeping up almost continuously over the past 12 months). In other terms, the CDS market sees a 1-in-115 chance (per annum) that the US government could default in the next five years — something which should probably send tremors down the spine of all the Finance professors who have been teaching for decades that US Treasuries are the world’s risk-free asset.
Or should they? Because if the US were to default, the systemic damage to the system would be so huge that we can assume that no counterparty would be able to deliver on these US CDS. So these CDS should be worthless…

I would be interested in learning what Mr. Johnson thinks of it. Are CDS prices poor indicators, in which case we should all try to sound a bit less catastrophic (and too bad for all these journalists looking for dramatic soundbites)? Or are they decent indicators, in which case we should all start buying gold and stockpiling food cans in our basements?

Thank you for this.