Zero Hedge, just released: Is This The Canary Of Australia's Collapsing Housing Coalmine? http://www.zerohedge.com/news/canary-australias-collapsing-housing-coalmine <snip>
How about the fact that 5yr bank bond spreads have gone from about 100bps over 5yr government bonds to 225bps in the past year. I trade bank bonds, and talk to large investors every day - and the opinion is unanimous.. they will keep going wider as the confidence in the property market dries up. So if mortgages are perceived to be riskier, banks will have to raise their mortgage rates.
I hate to rain on the parade, but Australia doesn't even have fractional reserve banking. We have capital reserve banking. All those sensational US centric videos don't apply.
As far as I know it isn't FRB anymore (ie, there is no fractional reserves anymore), but the credit expansion works fundamentally the same way as FRB except it probably allows for greater credit expansion than FRB does.
See: www.mcca.com.au For those interested, the Ijarah Muntahia Bittamleek structure is an Islamic equivalent of a Western hire purchase agreement and it can be used to purchase residential real estate. Personally, I love the "no bullshit" factor - the financier ( the bank) owns the house until you finish paying for it. Western banks like to pretend that you own the house but we all know who really owns it when you've got a mortgage. Seriously, if you believe the Western financial system is fucked, start making inquiries about Sharia finance. And forget everything you think you know about "Sharia law" because it covers a lot more than just burqas.
Is that the best you can do? "My mates said so" Even the RBA this week said, "bank funding costs had dropped ''significantly'' since the start of the year" and "Long-term debt was 50 basis points cheaper, helping ''alleviate the pressure of higher funding costs in coming months.''" So I call BS, they are just protecting their profits. Who wants to bet that their profits will go down this year? No-one? What a surprise.
This seemed like the perfect thread to insert the following link: WHAT A GOVERNMENT CAN DO WITH ITS OWN BANK: THE REMARKABLE MODEL OF THE COMMONWEALTH BANK OF AUSTRALIA
He posted a link to an audio where the accusation was made that Australia was coerced into selling it.
I don't know what everyone is complaining about. The banks setting their own rates would be a step towards a free market. If you don't like the rates, join a credit union
Do better than ?? Currently all the interest on our 'deficit' (ie our deficit) goes to 'international investors' (!) If the country created its own currency and lent its own currency to its citizens the citizens would gain the advantage. It's a bit like the pokie machines. In NSW most of the profits go to the local club that has a charter to support local sports etc. which they signed to get the pokies in the first place. In Victoria most of the profits go to a company that was awarded the rights to install them and who pay lip service to local community support and spend more to lobby the government about changes to the Poker machine laws to increase their profits. I have no problem with pokies - a tax on the stupid if you ask me, but I'm much happier when those stupid people get some of their losses back with cheap meals and new basketball uniforms. I have the same view of banking. If the moneychangers are going to charge interest, better it returns to the community than disappears overseas to god knows where. We are talking billions and billions here. Enough to build superfast trains across the country. Get decent roads linking the capitals. Halt suburban sprawl and start putting in services. An endless list of things. Perhaps eliminate a few of those private public partnership projects. Like freeways that send a couple of billion profit overseas each year. Instead government works (there's a novel concept) could be reintroduced to the concept of government.
Except pokie machine manufacturers take very little risk with their investment - they sell the machine to the club and the cashflow is basically guaranteed.. whereas if a bank lends any entity money, they (and their shareholders - which includes everyone who has their super in a fund) take a risk that the money isn't paid back.. thats the whole point of interest - compensation for risk. As a bank shareholder, you do get paid for the risk your bank takes.. CBA dividends are currently at 9.14% (incl franking credits) - what you do with your dividend income is up to you. Sure.. lending money at 1% to projects of 'national interest' is a noble idea... but A) What qualifies? (given the endemic corruption among politicians, i could see a lot of this money being siphoned away to 'personal interests') B) If the govt can't even borrow at 1% (currently Aus gov bonds yield 3.7% on avg), they would be running a loss.. Leadind to a Greek-like situation eventually. C) If money is guaranteed to be availableble for 'national significance projects', where is the incentive for efficiency? (Just look at the east European commie economies of the 50s-80s) D) If they just print money for infrastructure projects, the very soon we will be a Zimbabwe basket case... to quote Robet Mugabe: "If money can't be found for national projects.. We will print it!"
ANZ chief denies gouging. http://www.smh.com.au/business/anz-chief-denies-claims-of-gouging-on-rates-20120422-1xf4j.html ANZ to reveal reduced margins. http://www.smh.com.au/business/revealed-why-the-big-banks-lifted-interest-rates-20120422-1xf79.html