Daniel Sullivan - he’s a little political

The impact of Sterling on NAMA’s UK assets

// September 30th, 2009 // 3 Comments » // Uncategorized

A good proportion of the assets that NAMA is going to be acquiring are based overseas, the largest location being the UK. Now some commentators are talking up the positive news that the UK housing market has shown signs in the last few months of stabilising. The not so slight problem with this angle is that Sterling has declined against the Euro. So those assets will need to gain back the drop in Sterling versus the Euro before they would even start on the road to breaking for us.

Sad but true.

Why did we guarantee the bond holders?

// September 17th, 2009 // 6 Comments » // Uncategorized

It occurs to me in reading the broader commentary about NAMA that we, as members of the public, might be missing a trick or two. Which is easy when we’re compelled to look in the wrong direction.

One of the reasons (possible) for the issuing of the guarantee that all would be under written by the Irish state was to ensure that the bond market is not so annoyed with the Irish government. But why you ask would hard headed people across the entirety of the bond market be annoyed at the losses of others in what were privately owned and operated commercial organisations for which we the Irish state had no responsibility?

One reason that occurs to me is that it reduces the likelihood that there will be too much kicking over of the traces on the very light regulatory environment that existed here, “the Wild West” as the Germans termed it, which the state was directly responsible for. And a light regulatory framework is one thing, not even policing and enforcing that framework is another problem that falls at the lap of the Irish government. And it would be for that reason that the bond market might be less than inclined to lend to Ireland Inc. if the feeling was that we as state couldn’t be trusted to run things properly.

NAMA is to some extent the Irish Chewbacca solution; it makes no sense. Except when you invert it all and think of it as a massive Derren Brown scale effort at distraction. (And No Derren Brown did not use the wisdom of crowds or the precision of eejits as it is otherwise known to guess the lottery numbers. He simply put it up there to distract you from other possible solutions). So the operations of NAMA doesn’t have to make sense, because it is the mere existence of NAMA that makes sense for the government as a topic of distraction.

So NAMA is not the only possible solution to our problems but it does appear to make sense for the government, if not for us, when you consider that we talk now about the workings of NAMA but not about what led to it, or what other things might be happening right now that we’re not looking at. After all with NAMA to talk about we’ve less time to talk about unemployment hitting half a million by the end of the year. Or that recruitment of school leavers and graduates has all but ground to a halt.