Dublin's ISEQ index of Irish shares has closed today at its lowest level since November 2003, losing more than 4% of its total value. Especially Irish bank shares continued to take a severe beating and were the main cause for the massive fall.
By the close of business ISEQ was down 199 points at 4660, wiping a total of € 2.5 billion off the value of Irish shares.
The drastic decline in values was centred on financial stocks and follows concerns that US banks will reveal further significant losses in the near future.
Bank of Ireland shares lost 11% today, falling to € 4.51, after warning shareholders that the current economic slowdown would hurt its profits this year. It also said there was "too much uncertainty" to give a profits forecast at the moment.
The bank's chairman Richard Burrows conceded that "share performance has been abysmal", but insisted that the bank had been run "prudently".
Irish Life & Permanent, owner of the permanent tsb bank and Irish Life insurance, were recently hit by downgrades from credit rating agencies. Today their shares tumbled more than 13% to € 4.65.
Allied Irish Bank (AIB) shares also fell sharply, ending the day down almost 10% at € 8.10.
Thus Bank of Ireland shares have now lost more than 75% of its value since they reached their peak last year, while Irish Life & Permanent has dropped almost 80%.Even for people with little or no experience in the financial markets it is quite obvious now that our amazing economic boom is over. And not only that. It is over with a heavy crush, a fall from great height.
One cannot but wonder why hardly anyone saw this coming over the past two years, and why it seems that no-one is prepared for it.
The banks, who for the past ten to twelve years were handing out money to almost everyone, as if there were an endless supply of it somewhere, have to carry the main responsibility for our overblown and out-of-control spending spree during the good years, with no provisions made for possible bad years to come.
During the boom not one Irish bank offered any decent interest rates on their savings accounts, so even people who wished to save money - and some actually did - had absolutely no incentive to do so. In fact, saving money was punished by ridiculously low interest rates that did hardly deserve the name.
In most other European countries banks have always encouraged saving, but not so in Ireland. Here the banks - most of them in foreign (and predominantly British) ownership - prefer to have people in debt to them.
It does not make much commercial or economical sense, and I often wonder if there is a deeper political and philosophical reason behind it. We did achieve national independence in 1922, but so far we are still not really independent financially and treated by international banks like serfs.
In times of major growth and economic boom the banks have made huge profits. Now, that they are in trouble - and most of it due to their own doing - they are crying out for help from various governments. Well, you cannot have it both ways! So if there is any government intervention to bail out the banks, the only logical and sensible consequence has to be nationalisation of the bank (or banks) in question.
On days like today it is visible and must be clear to everyone that uncontrolled capitalism of the western kind does not work! What we need is a proper alternative, and there are several models we could adopt. However, our politicians - in hock to big finance and not the sharpest minds even on good days - will not find a solution on their own. Once again it will be down to the people - to the likes of you and me - to come up with new ideas. So start thinking, don't be afraid of having a brainwave, and when you do, talk to your local politicians!
The Emerald Islander