How safe is your money in Irish banks or abroad?

Dan Morgan examines why Ireland's national credit rating has fallen so spectacularly

Back in the bad old times which apparently now have become the good old times, people who didn’t realise they were living in the good old times and had a fear that the Irish economy, or the British economy or whatever wonderful economy they lived in might collapse started to buy sovereigns and kruggerands and any other gold they thought might give them security. These foolish people were so scared they didn’t realise what good times they were living in, little things like 18% mortgage interest rates had them feeling a little uneasy.

For the citizens of Ireland and many other countries the EEC happened and such fears as currency collapse became a thing of the past never to enter our consciousness again. Sell the gold and put your money on deposit, equities, property or whatever.

Worldwide trade boomed and caution and insecurity were thrown out the window unprecedented growth occurred, with relatively few glitches along the way, until the horrors of unprecedented excesses of world policy’s came home to roost. America in spite of extraordinary deficits continued to involve itself in wars it simply could not afford and which it would have been wiser to avoid started to come apart at the seams as its financial institutions began to collapse on a grand scale.

In Ireland we failed to recognise that with galloping inflation we should not have continued to stimulate the economy. We had virtually full employment, galloping inflation and the means to control this situation by increasing interest rates was now outside of our control. The government should have increased income tax but was more interested in sanctioning partnership agreements which were choking the county to death.

The deteriorating signs in 2007 were ignored and then became the disasters of 2009 when the construction industry and many others came apart.
Virtually all our banks became vulnerable and the national economy became a basket case. Let’s face it if we were a private company we would have been declared bankrupt. In truth the only thing saving us was our membership of the EU.

We were not alone most other countries went into recession but we were in worse shape because of the government inability to recognise the problems and by the failure of the regulator The economy had fallen to a state of national jeopardy in three or four years.. Rating agencies as Moody’s, Fitch and S&P downgraded our national standing.

Why has our rating fallen so spectacularly? The U.K which had similar woes to us still has an AAA rating with most of these rating agencies. You might question whether the U.K. is in a sounder financial state then we are in Ireland . The evidence would not seem to indicate that this is the case.

The probable truth rests in the fact that the U.S., Germany and France etc., are not likely to stand by and let the U.K. go to the wall where as they are not going to give too much concern to Irelands woes. Look at some of the statements about the difficulties of Greece.

Many people think that if the currency of the EU does not collapse then their best bet in these difficult economic times is to find a safe haven for their deposit. If they manage to preserve their nest egg and the EU decide to let Ireland go to the wall as an example to those who do not exercise prudence in the management of their economy then their nest egg could still be used in other EU countries. Depositors will feel more secure with their savings in a high safety rating E.U. Bank.

There are several German, French, Spanish banks within the Global Finance top 50 worlds safest banks to attract Irish depositors.

If however you don’t have such fears you will look at the rates on offer. All of these will be covered by a guarantee of some kind. In the case of Irish Banks registered under the Irish guarantee scheme the full deposit is guaranteed as is in the case of British bank Northern Rock.

Other guarantees are usually for deposits up to €100,000. All are subject to amendment. Don’t just throw your money into a deposit account and forget it. Guarantees expire, circumstances change so don’t be caught napping when they do. For instance Northern Rock is going through a process of restructuring under nationalisation to facilitate a take over of its operation. Rumour has it that an Australian Bank will buy it.

If you are happy with the Irish or British deposit guarantees the best rates currently available are from Irish Nationwide 3.75%, Halifax 3.75%, Nationwide UK(Ireland) 3.30%.
With the price of gold hitting over $1100 an ounce and some indication that there is some form of limited recovery on the way one suspects that gold may have peaked at that price.