Keenan argues, rightly, that the €54bn we're paying for the banks' bad property loans cannot be lost entirely because short of a complete economic collapse "those loans are worth something." True.
He then asks
will the loans be worth €54bn in 10 years' time? If they are, there is no cost to the taxpayer. If they are not, there will be a cost. If they should turn out to be worth more, the taxpayer will gain.Well ...
Won't this €54bn cost us something? I mean, we have to borrow this money, don't we? Doesn't that mean the loans have to be worth €54bn PLUS the cost of borrowing the money?
If I borrow $100 at 5% per annum and lend it to someone who pays the $100 back in 10 years I'm out $62.89 (I hope I remember my compound interest formula correctly).
We taxpayers will have to borrow the €54bn to buy these wonderful property loans from the banks. I know this is a rough calculation, but ten years at 4% interest on €54bn will be about €26bn. Don't we have a right to expect to get that back too?
