Ireland's Tragic Mistake

The word is going out from economists, folks, that Ireland has made a serious mistake when it comes to its debt issues.

How serious, you ask? Simple--current projections say that, now, Ireland will have its own Greece-style disaster by 2012.

The biggest word on this comes from Ireland's own Morgan Kelly, who believes that, while Ireland definitely did the right thing in renovating its entire banking system, it also made one serious miscalculation. Ireland, you see, established a government agency to absorb bad debt--mortgages and the like--into itself, effectively turning every underwater home loan and skipped-out-upon car loan into a government instrument, EXACTLY like a bond.

Kelly further believes that this misstep was so tragic and so pronounced that Ireland will achieve a debt-to-GDP ratio of a hundred and fifteen percent, which is exactly the situation Greece is in right this very second. Because it's not just the pulling of the poison dagger into their chests that's the problem; the whole problem is exacerbated by declining tax receipts (when people are unemployed, and the employed are making less due to pay cuts and the like) and a dependence on international lending (that's likely to dry up in the coming months).

And what does this mean for you? It means a couple things, actually--it'd likely be worth your time to keep an eye on the Irish economy. Remember what happened in Greece--its bond yield went through the roof, backed up by the European Central Bank. So if Ireland goes the way of Greece, lightning just might strike twice. I wouldn't buy any Irish bonds today, but in a couple years? Opportunity may be knocking.