Tuesday, January 25, 2011

Klaus Regling nicking my ideas!

In an interesting column in today’s Irish Times, Economics Editor Dan O’Brien reports that Klaus Regling, head of the European Financial Stability Fund (the EUs bailout fund which is lending money, along with the IMF, to Ireland) is proposing that EU governments buy back their own bonds in the secondary market where those bonds are trading at a discount to their face value.


I sent the following letter to the Irish Times on Nov. 11th 2010. Needless to say it wasn’t published. “The inane ramblings of a crank” was probably the reason.

“Irish government bonds trading at over 9% on the secondary market means that they are being sold at a significant discount to their original issue price. The government should now instruct the NPRF to buy these bonds at their current discounted levels.

There are a number of benefits to this approach: it will, in real terms, improve our National Debt:GDP ratio, it will send a signal to the markets that we have confidence in our ability to manage our way out of this crisis and, last but not least, it will remove these headline-grabbing rates, for relatively small amounts of stock, from the domestic and international media with their confidence-sapping headlines and editorials.”

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