http://www.davidmcwilliams.ie/2012/02/27/the-land-of-the-financially-blindPrem has nerves of steel to buy with this mortgage loan book. Experience says Prem right, McWilliams wrong.
Is the plan to borrow at 1% from the ECB and lend to Irish government at 7%, leverage and repeat? Sounds good but the policy drains cash from the non-bank private sector to the banks and government. The drain of cash from the non-bank private sector will cause the real estate prices to fall further and increase the default rate further.
Prem, an advocate of "the bigger the boom, the bigger the bust" probably expects default so he must think there will be a resolution which doesn't wipe out his equity. I can't think of any short of Ireland following Newfoundland's example and becoming the next Canadian Province which will bring in immigrants. The alternative is for the Irish youth to emigrate to Canada which leaves the debt behind with no one to pay it. The bankers' weakness is that the wealth of a country is largely the minds of the educated youth. The offices, shops and mansions may look valuable but when the youth leave they are liabilities. When the youth realize this the bankers are screwed.
