Does high carbohydrate diet cause cataracts?

"Carbohydrate intake and glycemic index in relation to the odds of
early cortical and nuclear lens opacities"

Quote:

Results: After multivariate adjustment, the odds of cortical opacities (LOCSIII ">=" 1.0) among women in the highest tertile of carbohydrate intake (">=" 200 g/d) was 2.46 times (95% CI: 1.30, 4.64; P for trend = 0.005) that among women in the lowest tertile ( "<"185 g/d).
(thanks JC)

"Lipid Levels in Patients Hospitalized with CAD"

"Lipid Levels in Patients Hospitalized with CAD: An Analysis of 136,905 Hospitalizations in GWTG-CAD"

(link posted by Ricardo, on Hyperlipid blog. Thanks!)

Corrupt Irish government cheating their citizens on pay cuts!

Interesting story.

After several months of negotiations with trade unions, the private and public sector workers agreed to cut their salaries by 10%. The private sector promptly implemented the cuts. Now, it turns out that the Irish government did indeed cut wages by 10%, but also moved 340,000 of their civil servants (probably a majority of the employed) up the pay scale ladder on the basis of time served. Not only it cancelled out the pay cuts but resulted in the overall payroll increase by 250million eu or ~735 eu MORE per employee!

Letter to Mr. Anti-Nuclear Environmentalist

Dear Mr. "Anti-Nuclear Environmentalist",

Your article in the Peterborough Examiner of 6-May-2009 ("Darlington Nuclear Plan...") seems highly biased. You seemed to have picked up and quoted only the anti-nuclear voices while totally missing other views.

People who state opinions such as quote: "I'm against nuclear. I'm trying to think ahead seven generations,..." are misled, mistaken and most often incompetent on the subject they speak about! Not only they may be jeopardizing their own future "seven" generations through their misguided anti-nuclear energy politics, but they may be closer to a personal disaster even within their own life time due to the imminent shortage of oil and natural gas and their inevitable skyrocketing prices, the example of which we have just witnessed last year! This will happen sooner than Ms Langley or you may think. I can picture people like her sitting in unheated houses unable to travel except on foot and unable to find work due to business failures.

If you advocate turning the society back into 18-th century life style, you may have to face some tough choices. If the rampant anti-technology anti-science environmentalism takes an even bigger hold on people's mind driving our politics to the dead end, then the same enthusiasts of wildlife protection at any cost may eventually have to resort to hunt those animal for food and furs just to survive!

Sincerely,
Stan (Heretic)
 
URANIUM POWER - POWER TO THE PEOPLE!
 

Vitamin A,D3,K2 - toxicity levels

This is a short comment to summarize the situation, based on information gathered from the most recent nutrition studies as well as some of the most useful nutrition blogs (Stephan's, Peter's and Chris Masterjohn's - see the links on the left margin).

The issue of supposed toxicity level of D3 is being slowly unraveled in recent research. It turns out that A,D3 and (probably) K2 must come together in balanced proportions, thus some studies that were increasing D3 alone without A reported toxicity of D3 at a lower level than other studies where D3 may have come from natural produce (like fish oil) thus came together with vitamin A! A and D3 always seem to come together in animal food (any exceptions?). The same story repeats with studies analyzing toxicity of vitamin A. Again, the toxic A levels come out lower when only A is being increased on it's own, versus if it comes with natural fats like fish oil, butter, liver, yolks etc. Also, it appears that the body's synthesis of A out of carrotenoids from vegetables (or absorption) is impaired without sufficient level of fat in food. Subsequently, the sunlight-induced synthesis of D3 out of cholesterol, or the utilization of D3 seem to be deficient when not enough vitamin A is present in the system.

All of the above is absolutely consistent and may explain why do low fat vegetarians, even in sunny places like Arizona or Florida may and often do get deficient in both A and D3.

Merck paid Elsevier to publish a fake "peer review" medical journal

Australasian Journal of Bone and Joint Medicine

Read the story on this blog

New accounting-"What would you like it to be, sir?"

Banks Won Concessions on Tests, Fed Cut Billions Off Some Initial Capital-Shortfall Estimates

I used to think that accounting were just some boring arithmetics. Not anymore, I am really impressed by the approach taken by Mr. US President.

On his other notable achievement in just his first 100 days in the office, I would like to congratulate him on the first in US history successful transfer of wealth from the poor population (see examples like this or that ) who most likely voted him, to the wealthy financial elite who most likely did not!

Strange thing about Marshall Protocol

About MP

One aspect is particularly interesting:

It causes some initial side effects in the first few months, occurring in occasional bursts, such as tachycardia, hypo-tension, hyper-adrenal episodes, among others.

Marshall claims says these are caused by unblocking of the VDR (Vitamin D Receptor) and other receptor sites that used to be previously blocked by bacteria for the purpose of paralyzing and disabling the human immune system.

Those were the same symptoms that I had in the first 3 months of the high fat low carb Optimal Diet, in 1999/2000!

Sudden release of the immune blockage and unblocking of various hormonal receptors, may lead to various often dangerous side effects and symptoms, the more so the more colonized was the body by bacterial parasites and thus the bigger the change. This is also what Dr. J. Kwasniewski and Dr. W. Lutz wrote! The initial side effects of the high fat low carb nutrition are proportional to the degree of prior body damage. Lutz specifically says that the problem is caused by the overactive immune system that "kicks in" the moment one goes high fat and low carb.

Kwasniewski says that when a chronically sick patient starts high fat low carb nutrition, a disease may starts fighting back as if it were a wild animal fighting for it's own survival. It may occur in fits and occasional bursts every few weeks, then months, weaker and weaker and rarer and rarer.

I think Dr. Kwasniewski was probably more right about it in a factual (not figurative) way, than I originally thought!

Stan (Heretic)

Playing the almost expired put options

Did anyone notice how cheap are some put options a few days from expiry? I don't think their price truly reflects the volatility, which makes them a viable game.

For example, 10$ strike put options against GE could have been bought for 0.14$ last week, at the time when GE stock price was 10.5-11$.

Interestingly, GE stock went down to 9.3$ on the day of expiry (last Friday) which made this a very lucrative play. This is not the first time that I noticed this phenomenon: in almost every case of my last 12 months option trading, the underlying stock almost always seemed to have experienced an unusually steep drop on the option expiry date (third Friday of a months, every third months for a given stock). Accidental?

As my friend Dozent says: every single conspiracy theory that we discussed in the past (except reptilian aliens 8-:) ) proved to be correct! I am curious!

US TBonds crashing?

What makes me think of that possibility?

Fekete's article:

... U.S. debt [1T$ in TBonds] in Chinese hands has no definable value: any time the Chinese want to sell a sizeable amount, all bids are withdrawn. The Chinese are stuck with it. They have to wait for their money until maturity. But who knows what the purchasing power of the dollar will then be? The best the Chinese can do is to “grin and bear it.” They can’t even say “ouch”, because this would further hasten the deterioration of marketability of their paper. The periodic warnings from China that the U.S. government should display greater fiscal responsibility and it should follow a stricter monetary regimen sound like whistling in the dark. ...

And this:

Fed to buy up to $300B long-term Treasury bonds

WASHINGTON (AP) -- The Federal Reserve announced Wednesday it will spend up to $300 billion over the next six months to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt. ...

Let me review some of the relevant events of the last months, chronologically:

1) Chinese gov is declaring a 600B$ stimulus for Chinese infrastructure

2) Chinese central bank is (probably) trying to sell some of their US TBonds discovering (probably) that they either cannot sell or that they have to discount them.

3) Chinese government officials complain to the US government and criticize US in public on the subject of the integrity of the foreign held paper assets issued by the US Treasury.

4) For the first time since the financial crisis begun, Federal Reserve is printing very large amount of cash (300B$) to buy TBonds on the market.

Why do I have a nagging suspicion that the events 2 and 4 may be somehow related? Is the Federal Reserve buying up the US TBonds that the Chinese bank was trying to sell on the market but couldn't? Note that buying TBond by Fed is equivalent of printing cash! 300B$ is probably 20-30% of the existing money (M1) in circulation.

Conclusions:

- this is highly inflationary, and is likely to counteract the current bank-bailout engineered deflationary credit squeeze.

- the old rule that the pre-mature resale value of the long bonds (but not short term bills) is supposed to be inversely proportional to the yield, no longer seems to apply or requires a large correction factor in the zero yield limit.

I suspect that the long term fixed income assets become illiquid or may even lose value once the yield goes below about 3% or so (at present). It's a case of a theory stretched and extrapolated beyond it's proven domain. Everyone assumed that since lowering the yields from 12% to 6% increased the money velocity in the past and increased credit supply, then lowering it from 3% down to 1.5% or from 0.5% to 0.25% is going to have a similar effect. I think what the present events have demonstrated is that the system is non-linear and that the money supply versus yield curve reverses below a certain yield threshold such as 6% (not sure of the exact figure, read also this - scroll down to the entry on Wed 2 July 2003 titled "What exactly is the relation between interest rates and inflation?" ). The result seems to be the opposite to the expected: forcing the Treasury yields below 3% seemed to have REDUCED the credit supply on the market and led to deflation!

Since everybody loves predictions, I have to finish on this note:

- if China could not easely sell their TBonds so will the US gov not be able to do so either, in the nearest future, forcing the US gov to print even more money than today's 300B$, counteracting deflation and eventually (probably) causing inflation.

- falling TBond resale prices on the open market will increase inflationary expectations and will force all the other new bonds to carry higher yields - despite the government's central banks declarations.

- large players, such as sovereign funds are likely to question the role of the dollar as the universal currency, to renumerate their assets in. The death of the US TBonds (if that happens) means also a death of the dollar!

P.S. (21/03)

I wrote it in the morning, later it was announced that the total sum is 1.2T$: 300B$ of new cash to buy US TBonds on the market and the rest to buy some other dodgy paper assets. That move is effectively doubling the money supply. I have seen that kind of economics in the People's Republic of Poland in the 1970-ties. I have seen the "future" and it did not work! Ask any Pole who lived through this period what a "virtual coal" was. 8-)

Market moves in such a way as to render the assets of the biggest players worth less!

Some of my thoughts, opinions and beliefs on where we are heading to.

Last 200 years of Western economy were split into stages in the following order:

- Land owners' oligarchy.

- Industrial oligarchy based on manufacturing and natural resources.

- Service based economy.

The current cycle that has just ended, was characterized by:

- Explosion of credit and debt backed by property and service sector stock used as backing assets (mostly the non-manufacturing and non-resource sectors).

Next stage that has just begun is characterized by:

- Implosion of credit and debt.

Similar as in the previous cycles, this unwinding will have to result in the wipeout of the assets of the most privileged class - the banking and financial elite! They have resisted it and will resist by various measures, most likely by:

- Propping up the collateral by supporting property values thought mortgage insurance corporation bailouts and by supporting the service sector stock, probably through various covert "plunge protection" schemes.

- Enacting mutual guarantees and support schemes for the financial assets; see for example the recent US government guaranteeing liabilities of various corporations.

- Direct recapitalization of financial institutions by government. This requires maintaining (an illusion of) low bonds yields to facilitate the debt issue. Note that this process does not eliminate the financial "nuclear bomb in the basement"! It only moves it from one "basement" to another. Obama's bailout for Wall Street bankers belongs in this category.

- Maintaining the currency value to protect the real assets' value. Note that this requires a disciplined approach that permits issuing of bonds to cover new debt but prohibits expanding the monetary supply (i.e. it precludes government or central bank from buying back their own bonds or bills for cash).

The above measures are characterized by the desire to protect the assets of the Elite but they do not address the real cause - debt! The problem is that although the value of the assets declined and was often marked-down, the nominal contractual value of debt was not declining and generally cannot be easily marked-down to market. If - when the above measures fail and the assets continue to fall, the next steps will probably be an attempt at neutralizing the debt to stave off the mass corporate bankruptcies. It may happen in the following order:

- Shifting of remaining liquidity (by elites) into hard assets such precious metals, land, natural resources, some save heaven countries and others that I cannot yet think of.

- Devaluation of Western currencies.

- Controlled inflation implemented by governments and central banks through buying back bonds with newly printed cash.

- Uncontrolled inflation by governments having to print cash to cover their operating costs, pay for the inevitable gigantic emergency social welfare and debt servicing expenses.

I am concerned that the above depicted scenario may be aggravated by certain common corporate-cultural issues, such as:

- Rewarding top executives for accomplishing some short term accounting goals to the detriment of the long term strategic planning.

- Over-reliance on dumbed-down hierarchy of hired management with only business degrees.

- Lack of accomplishment-based rewarding practices and too much tolerance towards an inactivity among the management ("job for life" disease).

- Tendency to expel skilled people from the workplaces through the top-down negative selection ("fish rotting from the head" syndrome).

Recommended relevant readings:
1) "Atlas Shrugged", Ayn Rand
2) "Social Collapse Best Practices", Dmitry Orlov

oh and a must watch:

3) "Clark Winter's interview, Bloomberg 10/03/2009" (scroll to minute 4 and after)

- one might also consider this (watch the last scene):

4) "Fight Club"
(before you watch the film, make sure you have a good anti-virus and pest patrol, do not click anything else) Update - I disabled the link (unsafe!), instead it is better to get a torrent from mininova.org (search for "Fight Club" title) and then download the full movie with a BitTorrent. Good luck.

A crash has just begun in Ireland!

Fasten your belts and brace for a crash landing!

Today's Irish Independent article :

The publication of the two reports coincide with the news that at least €10bn has been withdrawn from Ireland in the past week as the impact on Ireland's financial reputation emerges.

If the outflow of funds has begun as I wrote in my blog 3 months ago, if that is 10Beu/week then it is a matter of a few weeks before all Irish banks will run out of cash and the gov will have to either fork out that cash (if it has got any left), renege on the promise or let them all fail! In my back of the envelope estimate there is only 20-40Beu of cash reserves left with the Irish banks, perhaps even less!

Updated 19/04/2009

I was off by 2 weeks. The banks ran out of cash after 6 weeks instead of 4 as I thought. Irish government managed to save their bacon, for the time being by injecting 90B eu of fresh money into their system, in the first week of April. Irish banks ONE : Irish taxpayers ZERO, everybody happy, all love! This should last them about 3 more months assuming that the cash bleed rate stays the same. We should expect some more interesting news in the middle of the summer. So far so good, go to a pub, drink beer...

It's the glucose, stupid!

The subject line is borrowed from Barry Groves' blog, a must-read. He is pointing out an important paper, published recently:

"Systemic Correlates of Angiographic Coronary Artery Disease" by José Pedro L. Nunes, João Carlos Silva

It is worth pointing out, not surprising to most of us heretics, that they found no correlation whatsoever of coronary arterial disease with the lipids:

Quote:

Lipids accumulate in arterial walls in atherosclerosis. In the present study, we could find no evidence of an association between lipid fractions and CADB. Most patients were treated with lipid-lowering drugs, and this may be one of the reasons behind these negative findings, particularly in what concerns LDL cholesterol. In the present study, HDL cholesterol levels were also not correlated to CADB, although previous studies have been shown HDL to be negatively associated with the importance of coronary artery disease, whereas no such relation was noted involving LDL cholesterol [16]–[17].

What shouldn't be surprising either, is that high glucose and high insulin (presumed) were significantly correlated, quote:

In the context of the present investigation, one may speculate that higher plasma glucose, probably in the presence of elevated plasma insulin, could be associated to a growth-stimulating effect on atherosclerotic lesions, perhaps involving magnesium as a cofactor for insulin-stimulated growth.

Stan (Heretic)

P.S.

[geek warning level = high]

What also caught my attention is the reference #23:

FEBS Lett. 1997 Nov 17;417(3):283-6. "Inhibition of MAP kinase blocks insulin-mediated DNA synthesis and transcriptional activation of c-fos by Elk-1 in vascular smooth muscle cells.",
Xi XP, Graf K, Goetze S, Hsueh WA, Law RE.

After a brief look, it seems to tie with Dr. Kwasniewski's postulated Pentose Phosphate Pathway (Pentose Shunt). If that's the case it would be the first confirmation. It requires some more digging, might come back to it.

Update (24-May-09)

Adding some references for the record:

R.W. Stout, The Lancet, 1968,1969
Paper 1 and 2





.

Alzheimer's 'is brain diabetes'

c a r b o h y d r a t e s c a r b o h y d r a t e s c a r b o h y d r a t e s c a r b o h y d r a t e s

BBC Health article

Quotes:

Treating Alzheimer's with the hormone insulin, or with drugs to boost its effect, may help patients, they claim.
...

The latest study, joint research between Northwestern University in the US and the University of Rio de Janeiro in Brazil, looked at the effects of insulin on proteins called ADDLs, which build up in the brains of Alzheimer's patients and cause damage. They took neurons - brain cells - from the hippocampus, a part of the brain with a pivotal role in memory formation. These were treated with insulin and a drug called rosiglitazone, given to type II diabetics to increase the effect of the hormone on cells. After this, the cells were far less susceptible to damage when exposed to ADDLs, suggesting that insulin was capable of blocking their effects.

Surely it must be all that fat, lack of exercizing and "bad" genes...

c a r b o h y d r a t e s c a r b o h y d r a t e s c a r b o h y d r a t e s c a r b o h y d r a t e s

Can a High-Fat Diet Beat Cancer?

An article appeared in "Time" magazine in 2007 (thanks JC).

This is supposed to be a small-scale pilot study preceeding a full scientific investigation. I am not holding my breath.

Some terminally ill cancer patients in womens' hospital (University of Wurzburg) selected from among the hopeless cases, did get better, that is those who did not opt out due to sugar cravings. Strict ketogenic diet with no carbohydrates, using specially selected vegetable oils such as hempseed and linseed (flaxseed) oils. I wonder why did these medics not just use some common animal fat. Makes me wonder what else they might have done wrong. Still it seemed to have worked! Drs. McDougall, Ornish - any comments?
.

High carb vs. high fat diet

Two recent papers appeared (posted by JC on webmd 1 and 2 ):

"Dietary carbohydrates, fiber, and breast cancer risk in Chinese women"

and

"Long-term consumption of a carbohydrate-restricted diet does not induce deleterious metabolic effects".

The first paper found that pre-menopausal women in the highest quintile of carbohydrate consumption had a twice as high risk of breast cancer. No surprize here (except for vegan fundamentalists). The association held for the total carbohydrates intake as well as for the glycemic load but not for glycemic index, which seems to be putting a small spanner in the works of a popular theory that low glycemic index food (i.e. vegetables and fruit) are supposedly more healthy than some higher glycemic index produce (rice, potatoes etc).

The second paper looked interesting on the first sight but was somewhat disappointing on the closer inspection due to a lack of depth. They checked 17 women and 14 men in their 50-ties, most of whom adhered to Dr.Kwasniewski's Optimal Diet for over 3 years. The paper concluded on the basis of patients' blood cholesterol, glucose and insulin profile, quote:

"These results indicate that long-term (greater than 1 year) compliance with a low-CHO high-fat 'optimal diet' does not induce deleterious metabolic effects and does not increase the risk for cardiovascular disease,..."

Duh...

I Wish Everybody Less Toxic Year or (at least) More Fun in 2009!

Leptin - more surprizes!

Diabetes type 1 "cured" by leptin without insulin!? See:

"Scientists discover leptin can also aid type 1 diabetics"

Dr. Rosedale's article:

"Insulin, Leptin, Diabetes, and Aging: Not So Strange Bedfellows"

Stephan's blog:

"Leptin Resistance and Sugar"

Important article: "Red Alert: Gold Backwardation!!?"

Red Alert: Gold Backwardation!!! By Antal Fekete

(Wiki: "backwardation")

Is this the beginning of the end for the us dollar? Could this all take place as soon as this December? Tighten your seat belt, batten the hatches, whatever...

Some numbers (from a different source):

... Now, the World Gold Council has confirmed the trend with hard numbers for the third quarter of this year. In a page-and-a-half press release summarizing 3Q2008 activity, the WGC had to use the word “record” ten times. Some highlights:

* Dollar demand for gold in Q3 was a record US$32 billion, 45% higher than the previous record, set in 2Q2008.

* Identifiable investment demand, which incorporates demand for gold through exchange-traded funds (ETFs), bars and coins, rose to $10.7 billion (12.3 million ounces), double year-earlier levels.

* Retail investment demand rose 121% to 7.5 million ounces, with strong bar and coin buying in the Swiss, German, and U.S. markets. Europe as a whole saw an all-time record 1.64 million ounces of bar and coin buying. France became a net investor in gold for the first time since the early 1980s.

* Gold ETFs posted a record quarterly inflow of 4.8 million ounces in Q3. After the collapse of Lehman Brothers in late September, ETF inflows shot higher by an unprecedented 3.6 million ounces in only five days.

* Demand for gold jewelry hit a record $18 billion. Leading the way was India, which witnessed a rise of 65% in dollar value (1.3 million ounces) compared with 3Q2007. The Middle East, Indonesia, and China all experienced increases of more than 40% in value or 10% in weight, year over year.

At the same time that demand is setting records, supply has been unable to keep pace, falling 9.7% from year-earlier levels, the WGC reported. The drop was largely due to inaction on the part of central banks, which have increasingly shut their vault doors.

Celtic Tiger - danger zone!

(image from Wikipedia)

I am very concerned on behalf of my friends and my wife's family living there. I think that a deep financial crash with almost all cash running away off-shore and assets prices such as property and commercial paper plunging down in a localized deflationary implosion to near zero (by nine-tenth or so) - is quite probable!

Several factors are critical:

- Euro currency: that was the main positive factor that attracted so much foreign capital in the first place, the excess of which has caused the assets bubble. However the Euro would now make it impossible to prevent the capital (foreign and domestic) from fleeing the economy, making a deflationary collapse more severe than under a national currency system. Once that happens, leaving the Euro zone may be the only option short of reverting to barter.

- Irish economy is one of the most leveraged to the property market in the world (12% GDP, for comparison UK 11%, US 6%) and house ownership is one of the highest in the world. Current property boom last the longest in history, since 1986. The only other strong economic sector is agriculture but that can only sustain a minority of the population.

- Irish banks have potential liabilities equal or exceeding five times the GDP. Such massive amount of deposits since 1980-ties originated from abroad by foreign and multinational corporations seeking tax haven and a convenient corporate base in Europe.

- Irish government guaranteed all banking liabilities for the local banks to the maximum of 400Beu (594B$). More recently it reaffirmed it's intentions to inject some funds. I think that this is a very unwise decision since the government cannot possibly deliver on the promise, yet it creates a politically binding international commitment similar to the one that brought down Iceland. It is one thing to have all national banks declaring bankruptcy and another to renege on the national debt. The country can easily survive without private banks; new banks would spring up and simply take over the market from the failed ones. Surviving a national debt crisis is another story. For those interested please ask Argentinians, Poles or more recently - Icelanders. My personal opinion - let those banks die but don't let some politician sell your country to a pawn shop, or you may loose everything!

I don't know what the time frame might be but I suspect it could be several months. I will try to get a better estimate but I would watch the moment when foreigners start leaving, that is bound to trigger the rental market collapse.


--- Updated 14-Jan-2009 ---

Chuck Butler wrote

There's a rumor going round, that's someone's underground, no wait, there's a rumor going around that Ireland had requested aid from the IMF... Whoa there, partner! I know that things in Ireland have turned around on a dime from boom to bust, but I wasn't aware of a problem that would run that deep... The rumors were denied, of course, but you know me... Where there's smoke, there's fire... I'm reminded of an email I received 2 weeks ago from a reader in Ireland, that talked of a major slowdown in the economy. The writer was very adamant about how bad things had gotten that he compared Ireland to a banana republic! I responded to him and said, no... That can't be, because we've got a corner on being a banana republic right here in the U.S.A.!

You should have seen the sell-off in euros when this rumor hit the streets! It was scary how fast a currency could lose a handle! But after the rumors were denied, the single unit rallied back nearly as fast as it fell and is now trading, as I write, at 1.3225. The dollar is swinging a mighty hammer once again...


--- Updated 31-Jan-2009 ---

"A leading Irish economist has called on Dublin to withdraw from the euro unless..."

Comment:

Irish debt (gov bonds) CDS'es reached 262 basic points (2.6%). Second highest in Europe, after Iceland (995). Former official at the Irish central bank, UBS director and broadcaster claims that withdrawal from Euro is the only option. My opinion is that nothing can really prevent a banking default regardless of the currency, because all Irish banks are already technically insolvent and their liabilities are external and cannot be re-denominated.

The only relevant choice of action is in:

1) preserving as much of the economic activity and jobs as possible and maintain exports (4/5 of the GDP),

and

2) preventing banking default from spreading to Irish government and creating a political crisis.

The choice in #1 is either (a) abandoning euro and then gradually devaluing the local currency, or (b) devaluing the wages. I think (a) is easier to implement internally but more difficult externally; while (b) is the opposite. Currently, Irish gov is implementing option (b) but 10% devaluation of wages is not going to make much of a difference, in my opinion. At the end, this gigantic mistake of Irish politicians in the last 15 years, to allow property bubble hijack the local economy cannot be undone by any of the standard financial tricks and will have to run it's full (painful) course! I suspect that both sides - the European Central Bank and Ireland would be or will be better off with the country opting out of euro!

There is practically no choice regarding #2 - retraction of the banking guarantees is probably the only sane option and that includes refraining from nationalization of the remaining Irish banks to avoid the entire country catching the bankers' disease! Basically, I think that bankrupting of all these failed financial institutions is the least harmful option for everybody and probably the least harmful for the rest of the economy. You can run economy using flexible barter, silver, gold and private bonds or whatever surrogate currency available, but not when every business would have to pay average blue or white collar worker a 40k eu/yr salary to support 300k+ mortgages. High wages resulted from bubble-inflated property prices that resulted in killing-off most of every form of business other than builders and bankers.

Otherwise it would require finding an external guarantor big enough to matter. 0.4Teu would do the trick, however I do not envisage any European or any other player rushing to do that.

Currently, Irish gov has already guaranteed all banking liabilities up to 0.4Teu. They will probably have to retract it. The moment that decision is announced, the other "shoe" will drop, i.e. it will trigger a banking collapse of all Irish banks, probably within hours! Anyone who has some euros there, I would recommend to consider alternatives, as soon as possible. It could be months but it could also be a matter of days. Its hard to predict the timing.

If the retraction won't happen then the default of the Irish state is inevitable with very dire consequences such as flight of the capital out of the country, impounding of some Irish holdings abroad, hoarding of the remaining cash, necessity of imposing capital transfer restriction to preserve whatever is left, and eventually - the abandonment of euro to unfreeze the economy (see #1).

Stan

--- Update 11-Feb-2009 ---

Irish Times

Quote:

"The €6 billion to €7 billion in deposits from Irish Life & Permanent at September 30th comprised 8 per cent to 10 per cent of Anglo Irish's year-end deposits from customers and other banks."

That means, most likely that their real cash reserves were only ~1% fraction of the deposits. To make them reach the statutory (Basel) rule of 11% they needed to add 10% more, that is 7Beu "bed and breakfast" cash deposit. That means that the banks' true cash is 1% or less by now! Now if 7B eu is 10% of all deposits then the total liabilities are 70B eu! That's how much the Irish state is on hook for, right now!

We shall keep in mind that Anglo-Irish was the smallest of all 5 Irish banks! This makes me question whether the original 400B eu figure published in September for the total liabilities of all Irish banks may not have been underestimated!

I understand that not all deposits may disappear under normal circumstances but these are not normal circumstances. If there is a doubt about the solvency of Ireland as the state then ALL foreign depositors will rush to the exit!

Last but not least - how much confidence have we that similar window dressing isn't being practiced in other, larger banks like AIB or BOI? What is the true level of total cash reserves across all Irish banks? 400B eu of liabilities would require holding of at least 44B eu total in cash! Have they really got enough cash or is it just the same old tired 7B eu being passed around? Other interesting issue is how politically likely is now, that the European Union would support the Irish banking system?