There is one argument in the current bank bail-out debate that is getting tiresome. It goes like this:
‘If we do something the ECB doesn’t like they will cut off loans to our banks and the ATMs will dry up by the morning. Therefore, we have no alternative but to do what we are doing.’
This broken-ATM argument comes from the ‘frighten the children’ stable. It is used to counter any alternative to the current Fianna Fail/Fine Gael/Labour strategy. We can’t do a or x or z because the ECB will cut us adrift. This argument limits options and debate, requiring nothing more than assertion. Ultimately, it justifies political inertia.
At its core, this broken-ATM argument requires us to assume that the ECB is irrational. We are told the ECB won’t tolerate anything that would result in cutting even one strand of bondholder hair for fear of the contagion it would cause throughout European finance. Then, in the next breath we are told that if we do alternative x, then the ECB will cut off our bank funding.
Imagine what would happen if they did this? Of course, our banks would meltdown but there would be more losers than just us. The first loser would be the ECB itself. It would have to write off billions it loaned to the banks (yes, those assets are backed up by ‘assets’ – what chance those assets would compensate for the losses). So the ECB loans billions to our banks and then pulls out the rug ensuring that it can never be repaid. Sound rational?
Frightening The Children With Broken ATM Argument (Michael Taft, Notes From The Front)