David McWilliams writes for the Irish Independent of cases currently going through the Irish Court system and points out that this is a sign of mass defaults that are to come. As David sat in court observing so big names including being pursued by the banks for millions what of the millions of struggling taxpayers saddled with huge personal debt.

And this is the point of it all, down at the courts we see a huge amount of effort and huff and puff much of which is pointless because so many people and companies are bust.

And it is only the tip of the iceberg. The next phase of the Irish economy’s story won’t be the recovery but the mass default phase and it will imply the banks will need yet more capital. When that capital is unforthcoming, we will have another bank crisis.

The banks don’t have the capital necessary to foreclose on thousands of defaulters. If they foreclosed now, they’d simply go bust. However, by not actively foreclosing they will just go bust passively, slowly, zombie-like.

The charade replayed every day at the Four Courts is the canary in Ireland’s default coalmine. The people yesterday in the courts are those who can still afford the theatre of defence. For most debtors, this is a luxury that only the “soon-to-be-poor” can still indulge.

This is only the beginning.

Far from the majesty of the Four Courts, lies the County Registrar’s Court. Here we see what’s going on further down the food chain. This is where the small fry — those thousands who borrowed too much to finance the first-time houses — are being pursued by banks.

The banks, which have been bailed out by the State, are not down here yet because of the implicit “moratorium” against foreclosing given in exchange for state money. But this won’t go on indefinitely because the longer the banks remain zombies, the more the real productive part of the economy grinds to a halt for the want of credit.

Finally a great realistic sumation of the economy by McWilliams.

It might have escaped you with all the talk of China and referendums and promissory notes, but Ireland slumped back into recession last week. House prices fell more in February than ever before and unemployment and emigration continue to rise. As basic economics suggests, too much debt combined with asset price deflation and an overvalued currency without the ability to print our own currency tend to strangle the economy.

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