Making Sense of Anglo Debt, Promissory Notes and Burning Money in the Central Bank

For years, I thought my bank had a stock of anti-money in its vaults, and when my few shillings came into contact with the stuff, they were instantly annihilated.  They had to build a special cash-machine just for me, an ATM that reached out and gave me a manly hug because it couldn’t bear to watch a grown man crying.

Come here, ya big lug.

It was the only way to explain the fact that I was always broke.  The bank must be destroying my money, but guess what?  It’s not just me any more.  The whole country is at it.

You see, when the government borrows the next €3.1 billion and hands it over to Anglo, it won’t be going to the bondholders, like we thought, because they’ve already been paid off.  The Anglo bondholders are delighted, or at least, the ones who held onto their IOUs are delighted.  The ones who sold off their Anglo paper are slightly less happy but not to worry.  Every scam has a silver lining, because this cheap paper was snapped up by the likes of Roman Abramovich, who got paid full face value for something he bought for peanuts.

Great news for Chelsea and for Roman’s future ex-wives.  A yacht for everyone in the audience.

But wait, I hear you thinking.  If all the Anglo bondholders were paid off, where did the money come from?  Isn’t the government borrowing three billion a year for the next ten years to pay them?

The answer is no.  They’ve been paid.  It’s over.

What?  Then who is this money going to?


But they’ve already paid off the bondholders.

That’s right.

So, what are they doing with the money?

They’re paying it back to the people they borrowed it from.


The Irish Central Bank, that’s who.

But don’t we own the Central Bank?

We do.

And don’t we own Anglo?

Yes.  We do.

So are you telling me that Anglo borrowed thirty-odd billion from the Central Bank?

Well, I ran this past a well-known academic and he told me I was making a minor error.  According to this learned character, Anglo didn’t exactly borrow the money from the Central Bank.  Instead, they stopped the promissory note.  All the same, I think that means the same thing.

But I thought we were broke.  Where did the central bank get the money?

They made it up.


They magicked it out of thin air, which they were able to do because Anglo was holding the promissory note from the government saying I promise to pay the bearer a megazillion denarii on demand.

They can’t do that!

Oh yes they can, if they’re a central bank.  Remember the opening lines of the Latin Vulgate bible?


dixitque Deus fiat lux et lux facta est .

What does that mean?

It means And God said let there be light, and light was made.  Fiat lux.  Let there be light.

Let me get this straight.  Dixit Argentaria Prima fiat pecunia et pecunia facta est .  Is that right?

You got it.  Pro-Consul Holohanius snapped his elegant, erudite fingers, adjusted his laurel wreath, and called a Nubian slave.  Peel me a grape, he murmured, adjusting his toga.  Oh, and fiat lux while you’re at it. That’s it..  Turn on the shaggin light.

That’s why they call the euro and the dollar fiat currencies.  Fiat means let there be. They’re no longer backed by gold, but solely by an act of will and a corresponding act of faith.  A central bank can say Look!  Here’s thirty billion euros, just like that.

Ok.  So if we own Anglo and we also own the Central Bank, we’re just paying ourselves, right?


That means the interest rate doesn’t matter.

Correct.  It matters not a jot.  We’re paying it to ourselves.

We could stop paying ourselves, couldn’t we?  We could default on ourselves.

Eh, that’s where it gets complicated.

Looks plain enough to me.

Not really.  You see, the Central Bank had to get approval from the ECB before magicking up the new money.  Which means that when the Anglo guys arrive with a truckload of money, Pro-Consul Honohanius gets out his fiddle while the slaves make a big heap of money in the middle of the atrium and as the flames leap into the night sky –

He fiddles while the cash burns?

Yes indeed.

But why in the name of Zeus would he do a thing like that?

Because, my fine plebeian friend, it’s all about the money supply. It doesn’t matter how much money you create as long as you destroy it later.  The nett amount of euros remains the same.

But why can’t we just, you know, not burn the money?  Wouldn’t that sort us out?

It would, but you see, the Germans have this thing in their heads and Thatcher had it as well.  They reckon that the money supply is what drives inflation.

There’s a bit more to it than that surely?

Indeed there is, but the Germans still remember the hyper-inflation during the last days of the Weimar Republic and they don’t ever want to be bringing their wages home in wheelbarrows again.  So it’s all very well for Paddy to create thirty billion, but what if Luigi decides to create a trillion or two?  What is Stavros dreams up the odd hundred billion? What if Fernando decides he likes the look of an extra four trillion?

What?  We all pay our bills?

That’s what you think, but according to Merkel, before you know it, here comes Josephine Baker wearing only a ring of bananas, here come Brecht and Weill being as decadent as you like, and then we have  have beer-hall putsches, Nuremberg rallies  and Jesus knows what else.

So instead of burning bondholders, we’re burning money?


That’s mad, Ted.

It certainly is.  Now, off to sleep with you.


4 thoughts on “Making Sense of Anglo Debt, Promissory Notes and Burning Money in the Central Bank

  1. Bock , you have now given me an article to ponder over . I predict it will take me months to get my head around it . That said I am grateful to you for challenging my brain cells . I am so angry at my ignorance . At lest I will know what has happened in Ireland .

  2. “So instead of burning bondholders, we’re burning money?”
    I don’t quite get how money is being ‘burned’.
    Seems more like a redistribution of wealth to me.

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