Money Problems For The Emerald Isle

I've written before and continue to believe that what could tip this entire situation into chaos would be a string of Icelandic type failures among some of the more developed countries. The banking system can be controlled, I'm not sure that the same holds true in the event of some significant defaults by industrialized countries.

The Republic of Ireland is the case in point today. Credit Writedowns has a good post today on problems of a very fundamental nature that seem to be encircling the country. Things like beef prices collapsing, policemen not getting paid and rumors of cash shortages. The sort of things that shouldn't be happening in a country such as Ireland.

The government of Ireland has guaranteed all of its bank deposits, in fact it was one of the first Eurozone countries to do so. The problem is that it does not have the capacity to honor that guarantee in the event of a run on its banks. To compound the issue, Ireland is a member of the EEC and does not have the liberty of printing its own currency. Therefore, any crisis would not be just an Irish problem but one that would involve the entire community. Quite frankly, it could test the union itself.

In the U.S. the press has paid too little attention to the issue of country defaults. I hope we continue to have the luxury of avoiding paying it more heed, but I am fearful that it may come to occupy us a great deal more.

Tom Lindmark