Bailout bond is a hostage to fortune

APPARENTLY, some people already have euro signs flickering in their eyes. Your front page (April 30) thundered: ‘Bond to bail out state offers 50% return in 10 years’.

Let’s try to put that into arithmetical perspective.

The promised return is based on a compound interest rate of just slightly over 4% per annum. When the appropriate tax is deducted, the return will drop to just very slightly under 4% per annum.

Who can forecast if the rate of inflation will average more than 4% over the course of the next 10 years? If that average does exceed 4%, then, in 10 years’ time, investments in the bailout bonds will be worth less in real terms than what they are worth in their starting values.

Then, to paraphrase Robert Browning, “they, with the gold to give, dole us out silver; so much is theirs who so little allow”.

Still, I suppose, any yield at all is better than doing nothing with our money, if we can do without it for 10 years.

We should have learned by now it is unwise for people to gamble beyond their means. That’s what got us into this fine mega-mess in the first place.

Did your headline gild the NAMA-esque financial lily? Toss me a spare billion or two and pass me a tonne of salt, please.

Michael Mernagh



Co Cork

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