Ireland Wronged, Pure and Simple – Billions Destroyed by Central Bank

The ongoing cancellation of the IBRC Promissory Note bonds and subsequent destruction of the money raised is a three-part process:

1) The National Treasury Management Agency (NTMA) issues sovereign bonds from which it raises billions of euro – this becomes part of the national debt, interest paid on the bonds from the date of sale, the principal to be repaid when those bonds mature;

2) In increments (so far) of €500m, the NTMA uses some of those billions to buy the IBRC Promissory Note bonds held by the Central Bank of Ireland;

3) The Central Bank of Ireland destroys the hundreds of millions received from the NTMA and that portion of the €31bn Promissory Note debt is declared ‘cancelled’, thus satisfying the ECB. This is the most critical of the three elements, in fact the raison d’être for the entire exercise – Quantitative Squeezing is what MEP Luke Ming Flanagan has titled it, the ECB-ordained destruction of the entire €31bn used to bail out the failed creditors of two failed Irish banks, Anglo Irish and INBS.

In 2014 the Central Bank of Ireland destroyed €1bn, two bonds of €500m each purchased by NTMA; in 2015, another four bonds of €500m each, an additional €2bn destroyed.

In any of our national media that actually bothered to report the above the third element, the destruction of the billions, was omitted. Why? Because it’s all too complex for us simple plebs to understand? I don’t think so.

The actual Promissory Note bonds are themselves also easily explained and understood:
What happens to a house built on dodgy foundations, a house missing many critical support pillars and beams?

When the banking crisis hit Ireland the ECB still had no structures in place to deal with troubled banks (from January 1st 2016 the new banking Single Resolution Mechanism kicks in, eight years too late for us).

It did however have a policy – no bank would be allowed fail. So in 2009/10 when Anglo and INBS were already (to anyone with even half a brain) obviously insolvent, a fudge was concocted between the Central Bank of Ireland, the Irish government and the ECB to save those banks. This involved the issuance of Promissory Notes by the Irish government, accepted as collateral by the Central Bank of Ireland/ECB, and funding eventually amounting to €31bn was issued to the two insolvent banks from the Emergency Liquidity Assistance (ELA) fund.

Despite the fact that this was done principally to save bigger banks across the eurozone, in Germany and France particularly (Anglo and INBS were non-systemic to the Irish banking system); despite the fact the ECB colluded in the circumventing of its own rules on use of the ELA; despite the fact all involved knew that Anglo/INBS (later combined to become IBRC) would never be able to repay those billions, the same ECB now insists that Ireland must take that entire €31bn back out of circulation.

We don’t have it (we’re broke, up to our necks in debt), so we borrow it and tranche by €500m tranches, our Central Bank destroys it – the three-part system described above.

Is all this too complex to understand? Why are we not being told what’s happening? We in the Ballyhea Says No understand, we know what’s happening, down to the last sordid detail.
We are determined that all in Ireland should also know, that all our friends in Europe (and we have many) should know.

And we are determined that however long it takes, this wrong will be righted. Water under the bridge? The Central Bank of Ireland still holds €25bn in Promissory Note bonds, awaiting sale, money then destroyed. That’s a lot of water yet to flow…

This Sunday, January 3rd 2016 at 10.30am, the Charleville Library Plaza, week 253. You’re welcome to join us.
Regards and thanks,
Diarmuid O’Flynn.