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Ireland has officially been bailed out and will likely agree to several more years of depression and austerity. Bankers win again and Main Street loses. The Bernanke put has now gone global. Central banks will never let anyone lose ever again. Now it’s only a matter of time before Portugal needs some aid – they might as well just start packaging the bailout tomorrow. Naturally, markets are rallying around the globe on this news. If no one ever loses then why would anyone ever be risk averse ever again? (via Danske Bank):

“If Ireland seeks help (Scenario B) we expect Portugal to follow, either immediately or following a short period of market tension. The answer to everyone’s question – “who is next” – is without doubt “Portugal”. Therefore, everyone may find themselves running for the door (once again) if Portugal tries to avoid this fate. In that case it will eventually have to follow. Portugal has already faced two rehearsals so they are likely to have learnt their lesson and try to end the pain sooner rather than later. The biggest risk is that the debt crisis will spread to Spain and Italy. Spain is affordable – at least in theory. Its funding requirement is approximately twice that of Greece.

It is debatable how much lending is really available from the EFSF. Given that Greece, Ireland and others being helped will not contribute and also that the guarantee must be 120% of lending and that it is the guarantee that adds up to the EUR440bn in the EFSF, there is only around EUR350bn available for lending by the EFSF. In addition there is EUR60bn in the stabilization mechanism and EUR30bn + EUR175bn (50% of EUR350bn) from the IMF. Consequently, around EUR600bn should be on the table, enough to help Ireland, Portugal and Spain (Greece has its own EUR110bn package). But Italy is not affordable. Italy’s funding requirement is five times that of Greece, and there are fewer countries left to help out the bad apples (Italy and Spain are the 3rd and 4th largest economies in the euro area). If Italy needs to be bailed out we will need to consider scenarios including less orderly defaults and the possible exit from the euro area for one or more countries.

We think that the likelihood that Portugal will eventually need (and get) help if Ireland receives support from the EFSF is very high. For Spain and Italy the likelihood that they will need help is much lower.”

What a mess. Capitalism without losers is like Catholicism without hell. Unfortunately, central banks around the world are creating a nice version of hell on earth for many of the citizens they are supposed to protect. And who knows what kind of market disaster is looming in the future as investors become conditioned to the fact that no one can ever lose again.

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