Cash is king but when will it be a case of 'as safe as houses' again, asks Isabel Morton
THERE WAS a time, not so long ago, when my bedtime reading material mainly consisted of anything related to property.
Nowadays, the pile of newspapers has doubled, as I add finance, business and economic reports to the usual pile of property supplements.
They were the days, before I had ever heard of Freddie and Fannie, nor the American sub-prime mortgage market, let alone realised how much their success or failure would affect our own economy.
Daily, over the last week, there have been dramatic changes to the state of the world economy and our own. Last Friday, one (currently employed) blocklayer said to me, whilst munching his home-made sandwich (expensive breakfast rolls are now a thing of the past) "we'd all lost the complete run of ourselves anyway, so how did we ever think it could last? Tis a far cry from all that we were reared. Playing golf in sunny Spain and Christmas shopping in New York.
"I can't sell my home here, and the apartment in Spain is worth nothing at the moment and it's lying empty, so we might as well stay there and play golf, as there are damn all blocks being laid here. And their weather is better, and their pint is cheaper."
He then went on to tell me, in graphic detail and colourful language, how he didn't trust any bank, particularly not the Irish ones, and that he was moving his account to the Bank of Santander, as in his view it was the best of a bad lot.
Friday afternoon, talking to an Irish banker, he suggested that it would be in the national interest if AIB and Bank of Ireland were to join forces rather than be bought out by a foreign bank. He mentioned that a likely contender would be a Chinese or Japanese bank.
He also said that the Irish banks are putting extreme pressure on small and medium-sized developers to sell their product at whatever the cost. They are not interested in whether or not the developers make any profit whatsoever. Banks just want their money back and they want it back now.
On Saturday morning, an Irish friend, living in London, phoned for a chat. She had successfully sold her London home almost a year ago, but was now worried that the entire proceeds would be lost in a bank crash.
On Saturday evening, I met some friends who had just closed the sale of their home. Concerned about where they should bank the proceeds of the sale, they pointed out that Brian Cowen's generous offer of guaranteeing €100,000 would be of absolutely no use to them. They would lose their entire life's savings and their family would be without a home. Having been initially fearful that they may not sell their house, they were now fearful because they had.
Fast forward to this weekend and the shock revelations kept coming. On Monday, an estate agent told me of a client of theirs who had sold his property a few months ago, and now wanted to buy another house immediately. So what if house prices were falling. He preferred to take a hit on the value of the property than risk losing considerably more via a bank crash. Monday evening: the Americans voted no to the bailout plan. Stock markets worldwide plummeted and Irish bank shares dropped to an all time low.
Tuesday morning and all has changed yet again. The Government has announced that it will guarantee all savings and deposit accounts, whatever the value. It will also provide liquidity to the banks. By 10am Irish bank share prices had already shot up in response.
As Tuesday evening and Wednesday the Jews celebrate Rosh Hashanah (Jewish New Year) - observed as a day of rest in the US - the Americans will therefore not resume their bailout debate until today. What a relief, we all needed a day's rest. It's been a long week.
But, if you are lucky enough to have money lodged in an Irish bank, you can now start using the expression "cash is king" again. Now, we just have to wait to see when we can resume the use of the expression "safe as houses".
