Promissory Notes: The Movie

The text below is a secret draft of the opening scene of an upcoming Hollywood movie. The movie opens at some date in the near future with a conversation between a finance minister, let’s call him Baldini, and a European bureaucrat of Scandanavian origin, let’s call him Wally. (Any resemblance between the characters below and real individuals is purely intentional.)

Wally: Greetings Mr. Minister.

Baldini: Ahh, tis yourself Wally.

Wally: Mr. Minister, I bring a proposal from your European partners.

Baldini: Pray tell, Waldo, what’s the deal?

Wally: Well, as you know, our Greek sovereign debt restructuring has gone fantastically. Combined with the sale of Macedonia to the Former Yugoslav Republic of Macedonia, we’ve practically solved all our problems there. So we’re thinking it’s your turn. We’re proposing that you lengthen maturities on your debt and cut back on some of the principal to reduce your debt burden by over €30 billion. And, to be honest, you’re not getting another red cent from us unless you agree.

Baldini: Is that so? Well you know what Waldo, we’ve got a different plan, one that also reduces our debt by €30 billion but doesn’t involve defaulting on our sovereign bonds.

Wally: Really Minister, this isn’t a time for gallows humour.

Baldini: Indeed, there’s nothing funny about it. No, I’ve been talking with the brains trust here at the Ministry and they’ve explained to me that apparently we’re going to be writing a cheque every year for €3.1 billion until two twenty three and then a bit more after that. Now I’ve been trying to get my head around this business, but I’m just a simple fella, and I can’t figure out for the life of me what we’re getting in return for this money. So, I’ve decided to cancel it. I hear your Eurostat boffins have been counting all of these payments as part of our national debt, so we’ll give them a call in the morning to let them know they can forget about that.

Wally: Really Mr. Minister, this isn’t a time for jokes. I’m sure you’re well aware that the, ahem, promissory note payments are the main asset of a certain Anglo Irish Bank and, its terrible twin, the Bank of Fingers. And I’m sure you’re also aware our beloved ECB is owed a fortune by those two institutions. You can’t really expect to endanger the ECB in this fashion.

Baldini: Hold your horses Wally! Sure aren’t the ECB’s loans to these banks fully collateralised, over-collateralised in fact. Sure I’ve met those ECB eggheads many’s the time and there’s no flies on them lads. I’m sure that’s lovely collateral they have, so no need to worry.

Wally: But, Mr. Minister, don’t you know that the promissory notes have been used as collateral for the loans from the Irish Central Bank to Anglo and the Bank of Fingers?

Baldini: Is that so? Ah well, sure that’s Paddy Honohan’s problem.

Wally: Ah now Mr. Minister, come off it. You know well that without the promissory notes, these banks can’t pay back the emergency liquidity loans they got from the Irish Central Bank and your predecessor has guaranteed that state funds would be used to pay these loans back if necessary.

Baldini: Really? Ye think? I’ve wondered about that. Wouldn’t you imagine there was a major debate in the Dail about that guarantee? But you know what, I couldn’t find anything in the records. And we’ve had the lads here in Merrion Street scouring the place for that guarantee and still nothing’s come up. Sure ye can’t find anything anymore since we introduced that new PPARS2 IT system … No, I’m afraid me mind’s made up. No more promissory thingybobs anymore.

Wally: But this will mean that Anglo and INBS’s debts will have been monetised!

Baldini: I dunno Wally, you’re a quare fella. What’s monetised mean?

Wally: I’m going to have to talk to Mr. Drago about this. I suspect he won’t want to keep lending all that money to your other banks.

Baldini: Well sure we’ll see about that won’t we?

[Baldini raises one eyebrow at the camera. Fade to black].

The question is what happens next?

Suggestions for the casting of Baldini and Wally are welcome. Leonardo di Caprio has expressed an interest in playing the minor but crucial role of Lorenzo Beeni Silly.

33 thoughts on “Promissory Notes: The Movie”

  1. I dont have any casting suggestions, but the producers should think about hiring the guyw who made this

  2. Karl , I don’t think you would have posted this unless you knew this shit just got very real.
    It would be great to see our representives growing a couple of liathordi – it might even make us eejits proud again.

    Anyway the ECB can get out of this if they hit the red button – they are just waiting for a forceful response.

    fofoa.blogspot.com/2010/02/greece-is-word.htm

  3. @ KW,

    I think it will have to be a kind of Che Guevara kind of part one and part two arrangement. The first part, the overwhelmingly successful and triumphant march in havana, up to Sept 29th 2008. The second part, on the atrociously unsuccessful and final fall of Baldini somewhere in the jungles of Bolivia, as the campaign moved into November 2010. I can visualize the poster right now. BOH.

  4. Are ECB deposits outside the eligible liabilities guarantee scheme? Is it available for 2 week money?

  5. The Aesthetic Turn in Irish Economics gathers pace, and plot, and storyline. The Dominant Narrative is deconstructed, superbly deconstructed, with Econometrics downgraded to an option in the (MA Econ.) as Heidegger’s Hammer, Wittgenstein’s Poker, the I Ching, and the Tao Te Ching become required texts and readings in attempts to reconstruct Nietzsche’s eternally reconstructing concept of ill-eegit-i-mate debt, which the Aesthetic Turn, in a brilliant strategic sleight of hand, succeeds in totally wiping out.

    A first Nobel in Aesthetic Economics beckons … (-;

  6. The ECB’s Financial Integration Report for 2010 is available since yesterday at http://www.ecb.europa.eu/press/pr/date/2011/html/pr110502.en.html.

    A special (and intriguing) chapter on crisis management and resolution concludes that:

    … the absence of adequate crisis management and resolution arrangements has resulted in a loss of financial integration (sic), and that this points to a need for solutions which are more European.

    I suppose that is one way of putting it.

  7. At last, a bit of levity. The expressions of outrage about the way poor lil ole Ireland is being treated by those nasty Europeans were getting a tad shrill and synthetic. Does anyone seriously believe that the senior officials in the EU institutions and senior politicians and their advisers throughout the rest of the EU are not aware that they are dealing with a crisis that is seriously damaging the EU project – and could eventually scupper it? With the ECB is the front-line (as the only institution with some pre-crisis legal capability) the rest of the EU has been forced to adopt a ulitarian position – the least pain for the greatest number. A fire-break has been constructed, but, unfortunately, the smaller peripherals are on the wrong side. They will have to brought back in as the lack of an exit strategy for them is not sustainable. But, again, does anyone seriously think that officials and politicians in the rest of the EU are not seriously focused on achieving this?

    It might be amusing having Wally, the Scandinavian bureaucrat, as an object of pillory, but what strikes me is the lack of understanding that the suspension of disbelief and the false narratives sustained by peripheral governments are viewed by voters brought up in a Lutheran or Calvinist tradition and culture as akin to the lying that destroys trust and invites punishment. Their politicians and appointed officials may be as devious, cunning and crafty as any we produce, but that reality among many of their voters is something these politicians and officials must confront.

    And there is a huge and revealing contrast between this demand in Ireland for such, oh so high, standards of behaviour and expressions of solidarity from our EU partners and the EU institutions while pointing furiously at their failings and the unwillingness to consider serious policy and regulatory dysfunction in Ireland that is largely within the government’s control to remedy.

    For example, we’ve had the report of the Review Group on State Assets. This is a significant, landmark report. But all we had here is a post with a link and no assessment or review by the principal contributors. It was just thrown open to the commenting contingent. And the equally significant (imo) ESRI review of Irish energy policy didn’t even merit such a post and link. And there are other areas and sectors equally deserving of atteention by Irish economists with an interest in public policy.

    But it’s probably too easy to indulge in this displacement activity and attack EU institutions and politicians.

    I will probably to told to clear off and seek out what I’m looking for elsewhere. But that would rather prove my point, wouldn’t it? 🙂

  8. Incidentally it it me or has anybody else noticed a different kind of great moderation descend on the workings of this blog recently?

  9. The ECB’s Financial Integration Report for 2010 is available since yesterday at

    http://www.ecb.europa.eu/press/pr/date/2011/html/pr110502.en.html.

    A special (and intriguing) chapter on crisis management and resolution concludes that:

    … the absence of adequate crisis management and resolution arrangements has resulted in a loss of financial integration (sic), and that this points to a need for solutions which are more European.

    I suppose that is one way of putting it.

  10. I’m finding it hard to understand the joke due to having lost track of the overall position.

    Can somebody clarify for me
    (i) what proportion of the ECB deposits are secured/repo operations (all?)?
    (ii) what proportion is secured against NAMA bonds?
    (iii) what proportion is secured against promissory notes?
    (iv) what proportion is secured by direct guarantee through the eligible liabilities guarantee scheme?

    Better still, can somebody tell me if and where such data is available?

  11. I note that the withering satirical wit is going down a treat in these parts.

    I am trying to distill the new “serious” point. It seems to be that the ICB is a private institution quite separate from the Irish people and its taxpayers.

    If that is Baldini’s idee fixe, can I suggest that Jack Nicholson of “One Flew over the Cuckoo’s Nest” is ideally suited to the role.

  12. It would have to be Rowan Atkinson’s Blackadder wearing a coat of arms with the letters IMF (Irish Minister for Finance) as Baldini who is disguised as a former Irish Minister for Finance

    Baldini played by Tony Robinson of Baldrick fame dressed as Santa Clause or Shepherd moving Baldini into a raindear penn with the others

    Perhaps a love interest Miranda Richardson as Queen Elizabeth of Ireland CT

    @grumpy

    “different kind of great moderation descend on the workings of this blog recently?”

    Thought it was just me, all my posts get moderated. I tend to be direct at times, more Washington than Berlin, even though I’m a pacifist who frowns on Deatheater leadership expressed in the form of death squads and Guantanamo:(

    Is it my imagination or is democracy and jurisprudence beginning to slowly disappear from the vocabulary of banks/government. Nuf said.

  13. @ PH: “… the lack of understanding that the suspension of disbelief and the false narratives … … are viewed by voters brought up in a Lutheran or Calvinist tradition and culture as akin to the lying that destroys trust and invites punishment. ”

    Meanings => understandings => behaviours. Katz! Nice one.

    BpW

  14. Frank Drebbin as the Great Baldini.
    Inspector Louis as Waldo…

    One thing that has never really been clear to me is how a sovereign default will not also mean a default on government bank promises – at the very least the promissory notes, but surely also the ELG and the deposit guarantee?

  15. @Jaqdip Singh

    Thanks for link above:

    Article 17 (2) Dáil Éireann shall not pass any vote or resolution, and no law shall be enacted, for the appropriation of revenue or other public moneys unless the purpose of the appropriation shall have been recommended to Dáil Éireann by a message from the Government signed by the Taoiseach.

    A real report on the banks should surely start with notice of Article 17 (2) What we had was a stitch up led by the banks and complicit with the aid of Lenihan and his advisors probably in Department of Finance. Lenihan went it alone even ignoring the EU. McAleese not only in the above matter but also in subsequent machiavellian legislation enacted to deal with the banks attempting to avoid Dail scrutiny, should have as a matter of course referred the matter to the Supreme Court if not the DPP.

    The idea of promissory notes from a government with junk status on the bond market, is indeed hilarious.

  16. and we would have gotten away with it too…if it wasn’t for those pesky kids deficits.
    As long as we need to borrow from the EU bank debts = corpo tax rate.

    JC

  17. @Paul Hunt

    Morality tales just don’t cut it with me.
    The truth of the matter is that all commercial actors follow the money.
    Actions in the physical world come after.

    The key reason why the planet is breaking down is the lack of understanding (maybe not) of goverment debt/money and its function.

    The Euro is the most extreme example but also the larger scale of the Eurodollar (which are not now necessarily dollars held in Europe) and the holding of US treasuries outside the states.
    When a commercial bank in its home country (if it has a home country) holds its goverment debt/money it regulates demand there and prevents malinvestment as that bank cannot engage in loaning to citizens when there is no demand due to the servicing of debt via tax , also if a citizen holds goverment bonds he defers expenditure.

    But what if a bank holds goverment debt or what we now know is proxy goverment debt via bank bonds outside its home country ?
    These 2 forms of debt only become related when bank bonds have a equality with goverment debt in the event of debt restructuring ( I guess the 3 % fiscal rules are a joke now but nobody’s laughing except the holders of this bank debt).
    The bank may not hold much domestic goverment debt – the economy explodes into action based on this false signal – credit spews out of the home bank to cater for this almost unexplained demand and then we get huge malinvestment.
    That is the story of America when mercantile states were holding treasuries and also that is the story of the euro when various banks held widely disproportional amounts of goverment and bank bond debt on their books while the receiving banks held little goverment debt / money and gave out credit / deposits based on this false signal.

    The euro masters demands that we must not increase goverment debt via monetization or otherwise does not make sense unless you see they must extract wealth from us to recapitalise their systems at our expense.

  18. @Paul Hunt

    Ah “the Cylons have a plan” excuse

    Applying Ocamm’s Razor maybe the EU and ECB dont have a plan? All the evidence points to constant attempts to pass the blame+responsibility around and kick the can down the road.

  19. @ Paul Hunt,

    You’ve a serious case of Stockholm syndrome there:)

    Re “But, again, does anyone seriously think that officials and politicians in the rest of the EU are not seriously focused on achieving this?”

    Neither serious, nor focused? That’s true enough, I believe it!

    The only plan there is is to try to keep the genie in the bottle until Trichet gives it to Draghi. Although I’d say they would rather we default and spare them the embarrassment of doing nothing:)

    The consensus is probably our default don’t matter any more because our contagion has spread already to Portugal and Greece …

  20. @The D of C (and Pongo),

    I’m not disputing that considerably more heavy-lifting is required to make the Euro project fit-fo-purpose – or, more widely, to bring the forces of financial capitalism to heel, but it is happening, even if grindingly slowly through the process of democratic governance – and probably not quickly enough for those who require immediate relief. But it is happening.

  21. @grumpy

    … the great moderation …. the super_upper-echelon’s_injunctions … and the ensuing great depressions for the mere masses … and potential fodder for the tribunal_briefs on the blogs!

  22. @Paul
    I don’t suppose you got a chance to look at the latest corner turned blog with Klaus and the lads.
    This is a rewilding project of the periphery – pure and simple.

    The aim of the core banks is to extract as much wealth here before collapse.
    If the petty elite here comply they will keep on sucking until the victim becomes the undead.

    I know the Pale lads had a special relationship with the BOE and all but if yee try this with your new pals you will be truely taking the piss.

    You might think us animals out in the Gaelic Hinterland can take this again but even animals have rights of some sort.

  23. @The Dork of Cork

    ‘The aim of the core banks is to extract as much wealth here before collapse.’

    Precisely.

  24. Danny de Vito – either role.

    @The Dork of Cork

    ‘The aim of the core banks is to extract as much wealth here before collapse.’

    I’m sure you are right. A very similar situation occurs when people start to struggle to repay their personal debts/mortgages. The banks bleed them dry of everything they have then when it all goes belly up they take whatever was offered by way of security. “Ah sure Mr O’Debt, you can maybe miss giving the kids dinner tonight and let the bank have that money instead to try and keep a roof over yer head while you’re looking for work. And would you mind just cashing in that endowment policy over there a bit early and let us have it. That’s a shiny nice looking car yer have there….. and did yer say yer missus had a real diamond engagement ring?”

    This is just the same thing on a bigger scale.

  25. @Joseph

    They have about €60 billion extracted at the mo …. and pulling away at another €60 billion before collapse … and the leading leuder_amadans elected by the fools around here are ‘gifting’ it to them …

    Methinks they should simply receive a ‘Promissory Note’ datemarked the ‘Fullness of Time’ ….

  26. @ KW

    Re “Suggestions for the casting of Baldini and Wally are welcome. Leonardo di Caprio has expressed an interest in playing the minor but crucial role of Lorenzo Beeni Silly.”

    Nope, suggest additional episode with script given to Blackadder team.

    Baldini played by The Baldrick(Tony Robinson) “underscrogsman” (apprentice dogsbody) to Mr. E. Blackadder (Wally) Rowan Atkinson

    As for what happens next. On the one hand, the ‘cunning plan’ of Baldrick is presented as take it or leave it. The German Bundestag are delighted to hear of the plan and vote immediately to expel Ireland from the EMU; to everyone’s relief.

    But what is likely to happen is Blackadder invites Baldrick to some technical negotiations that prove to be somewhat complicated as follows. Lol

    http://www.offbalance.com/art4.html

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