Jill Kerby

MT writes from Dublin: Have bank depositors ever lost their money due to a bank collapse in the developed world? Or have the government always seen to it that deposit holders got their money back? (eg. Northern Rock, the first bank run in 150 years in the UK and deposit holders still got their money back). I understand all Irish deposit holders have up to €100,000 guaranteed but is there any chance the Irish government could run out of all money supplies and be unable to pay everyone’s deposit back?

Nearly 150 banks have already failed in the United States this year, up from 140 last year; their bank deposit guarantee only covers the first $250,000.  Any sum over that amount would has been lost by depositors foolish enough to leave the extra sums in those failed banks.  If an Irish bank, or any other bank in the eurozone failed, only the amount covered by the relevant bank deposit protection scheme would be repaid. It is unlikely that a failed Irish bank would have sufficient supplies of cash on hand to repay the €100,000 to every eligible saver under the deposit protection scheme.  However, if you have faith in this guarantee, you presumably, will also believe that your €100,000 will be ultimately refunded as quickly as possible with the assistance of the EU, ECB and IMF, all of whom have just extended an €85 billion loan facility to capitalise the banks and the state.

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BW writes from Cork:  I do feel that the Irish banks will fail and that the euro may not survive. Last Sunday you suggested Norway as a safe bet for savings, but what about changing my savings to a sterling cheque and putting that into a British Government controlled bank/society e.g. Nationwide U.K.?

There are any number of non-euro currencies into which some of your euro savings can be transferred.  Ask your bank about its terms and conditions for setting up a foreign currency account - they may not pay any interest, for example. Under UK building society regulations, you cannot open a Nationwide UK building society account unless you are a resident of the UK, but you can open an account with their international operation in the Channel Islands.  Nationwide UK Ireland does not open sterling accounts here. One way to shift some of your money out of euro and into a wider basket of currencies is to buy into a currency investment fund. Check out the Insight Alder Capital fund see www.brokerfirst.friendsfirst.ie/ole/investments/documents/Weekly%20Fund%20Performance.pdf) which is available from Friends First. In the year to December 3, 2010 this fund has recorded a 13.07% return; over five years it has produced an annual return of 7.69%.

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LM writes from Cork:  In reply to SG from Dublin you mentioned that readers could "subscribe to financial newsletters". Could you suggest which newsletters might be worth subscribing to? Also, one of your correspondents raised an issue in a letter that I noticed you did not answer, ie what would happen to mortgage debt if Ireland leaves the euro?  I think euro mortgages taken out since joining the single European currency would increase proportionately if we adopt a new devalued currency, but my husband thinks that mortgages would be re-calibrated on a one-to-one basis into the new currency.  As savings would devalue automatically if we leave the euro and default on our debts, this is an important point to clarify; there is little point in saving at all if we should be trying frantically to pay off as much of our mortgages as possible.  Can you shed any light on this issue? In the same letter, the correspondent asked what would happen to one's mortgage contract if AIB is acquired by an outside agency.  Can you answer this as well, please?
 
I personally subscribe to a number of specialist newsletters from the international Agora Financial stable – Capital & Crisis, Special Situations, International Living (whose office is based in Waterford) and the excellent free, DailyReckoning.com as well as their weekly financial magazine MoneyWeek. I subscribe to the 12% Letter and S&A Digest from Stansberry and Associates, US newsletter publishers.  I also subscribe to one of the oldest UK financial newsletters, the Fleet Street Letter which is now owned by MoneyWeek. All of these publications can be ccessed on-line and they send daily and weekly e-mail prompts and updates.

As for what would happen to Irish mortgage debt if we left the euro and assumed a new, devalued Irish punt, the consensus view is that you would have to repay your euro denominated mortgage with the devalued new currency.  If, say, you had a €200,000 mortgage debt and the new punt was worth 50% of the old euro, then you would now have an equivalent new debt of 300,000 new punts. Only outright debt forgiveness for personal debt holders – or very high inflation – will reduce the value of your debts. Finally, any purchaser of AIB Bank would expect you to keep paying your mortgage, as per its original terms, in euro, punts or any other currency that became the new ‘coin of the realm’.

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SG writes from Kerry:  I’m considering opening a GoldSaver account with Goldcore.com and invest on a monthly basis but I’m a little sceptical about buying certificates as opposed to physical gold as I have heard lots of bad stories from people online about not being able to obtain their gold when they requested it. Do you have any advice regarding same?

Goldcore director Mark O’Byrne told me, “There is no truth in this. 
During the financial crisis in 2008 there were delays of some two weeks for clients who decided to convert to allocated gold or who wanted to take delivery of their gold. There has never been a delay in liquidating Perth Mint certificates for cash or in receiving payment as it encashes certificates and transfer cash immediately.”  If you are anxious about buying gold in certificate form, or in the form of an Exchange Traded Fund, another ‘paper’ backed version, I suggest that you buy coins or bullion and store them securely.