The latest mailout from the CEC .... I don't agree with everything they write, but some good stuff this time around. Panic breaks out over Aussie banksabout time! Media Release 2nd of February 2012 Craig Isherwood National Secretary IMF warning The International Monetary Fund (IMF) last week practically ordered the Australian banks to squirrel away billions of dollars in extra capital reserves, to prepare for what one U.S. analyst called an impending "bloodbath" in the Australian property market. The IMF was acknowledging two things: that Australia's banks are dangerously exposed to property values; and those property values are wildly overvalued, i.e. the market is a bubble. In other words, Australia's financial system is in exactly the same mess as those of Ireland and Spain before their banks blew out under their debt burdens. Petrified bankers An even more telling insight into the state of the banks came from a chorus of bankers themselves this week, in the lead-up to the monthly Reserve Bank meeting on interest rates. "Bank bashers 'risk economy'" accused a headline in The Australian on 30th January, summing up the message of bankers such as former NAB CEO Don Argus, current NAB chairman Michael Chaney, and Future Fund chairman and former CBA boss David Murray. The bankers are anticipating that the Big Four banks will almost definitely not pass on in full any RBA interest rate cuts for the foreseeable future, and are hyperventilating to pre-emptively defend them, in a backhanded admission that if the banks behave as nicely as the public might expect, they will go bust. In the current monetarist financial system, that is absolutely true. The reason why is that the government-guaranteed loans taken by Australia's panicked banks (including the very desperate Macquarie Bank) at the height of the "GFC" in late 2008, without which they would have been "insolvent sooner rather than later", had maturities of three, four and five years. The first of those, the three-year loans, fall due this year; by 2014 at least $65 billion in government-guaranteed loans must be repaid or refinanced. Because the banks must refinance these loans without the government guarantee, which expired (the government must now wish they hadn't believed their own propaganda about the crisis being over), the refinancing on the banks' own double-A credit rating, rather than the government's triple-A rating, is much more expensive. In fact, the interest rate they'll have to pay to roll over is almost double what they paid under government guarantee. For that reason, the banks are determined not to pass on any RBA rate cuts in full. Weighing in to also lobby for the banks under the headline "Bashing the banks could end up bashing you", Murdoch finance spruiker Terry McCrann revealed in Melbourne's 31st January Herald Sun that the CBA owes $631 billion. Roughly half of that is in the form of low-interest customer deposits, but the balance is in higher-interest loans, including from foreign investors, and it completely dwarfs the bank's capital base of $37 billion.
... it either slowly depresses and economy goes backwards.. or they just explode like a balloon and instead of people wanting a cut on the interest rate on their house loan, they'll be asking why their savings has been PZZZZZZZZZZZZZZZZZZT!! *vapourized*!! No one is going to come out unscathed.. you either hurt a bit or you're going to be bleeding from the ears and eyes. Materialism really doesn't pay. Might get some cool stuff built and new tech to keep things ticking along, but its all pretty temporary.
Not true... CBA paid 4.5% to borrow Gov Guaranted money for 5yrs in 2009. Today the 4 majors could easily borrow 5yr at ~6% without the gov guarantee... doesnt quite seem even close to double.
http://www.smh.com.au/business/nab-westpac-tapped-fed-20101202-18i58.html NAB, Westpac tapped Fed December 3, 2010 NATIONAL Australia Bank and Westpac were among global banks to borrow billions of dollars in emergency funds from the US Federal Reserve at the height of financial crisis. The Reserve Bank also tapped the US central bank for than $US53 billion over six months after the financial crisis caused a global shortage of keenly traded US dollars. Documents released yesterday by the US Federal Reserve offer some insight into more than 21,000 emergency loans that the Fed provided to investment banks, foreign central banks and other institutions. Most of the funds were released at the peak of the crisis as banks scrambled to secure crucial day-to-day funding. Only two Australian banks took advantage of the funding window opened by the Fed as the US bank tried stabilise financial markets, the documents show. European banks and several Japanese banks also took advantage of the facility. NAB was the biggest user of the emergency facility among local banks, borrowing $US4.5 billion from the US central bank. NAB, which operates a small US bank, turned to the Fed three times as the crisis intensified. A New York-based entity owned by Westpac borrowed $US1 billion from the Fed, at the time pledging more than $US3.3 billion in collateral to back the loan. The Westpac borrowings are unusual, as it barely has a North American presence, operating only a US representative office. The Reserve Bank also made available billions of dollars of additional funds for local banks during the financial crisis. But it does not break out individual banks. During 2008-09 the Reserve's overnight lending averaged almost $4 billion a day, compared with about $750 million a day in the five years before the financial crisis. The Reserve was also one of 10 central banks to use currency swap lines offered by the Fed, the documents show. Others include Britain, Japan, South Korea and Switzerland, while the European Central Bank was the biggest user of the currency swap facility to support US dollar-backed markets. The disclosures also show the extent to which day-to-day US businesses were forced to rely on the Fed to raise funds to pay suppliers and pay workers. While Australia has a relatively small corporate debt market, many US companies tap short-term money markets to manage their cash flow. The documents show issuers such as Caterpillar, General Electric, McDonald's and Toyota turned to the Fed after the market for short-term notes dried up. The Australian borrowings pale in comparison with the big US banks, with players such as Bank of America, JPMorgan and Citibank borrowing $US15 billion at a time. A separate US Fed facility set up for investment banks showed Citigroup drew on $US1.8 trillion in loans during the crisis, followed by Merrill Lynch, which used $US1.5 trillion. Goldman Sachs borrowed money through an overnight loan program 52 times in amounts as high as $US18 billion.
so let me get this straight - if the banks are in trouble - the banks get bailed out - if the customer is in trouble - the banks seize the assets by force - is that basically how it works? seems all that is needed is a printing press and a retractable skydome to raise the debt ceiling ....
Will the property prices particularly In syd get a 10% correction given RBA still got plenty of ammo to stimulate our economy? I rewlly wonder. So far Syd housing drops like 1%.
Well... All i was implying is that the best way for the banks to increase their capital holding is to keep rates on loans they have issued at their current level. People constantly whinging they are too high. If they reduce the rates to please customers, they become even more exposed to a meltdown. The banks seize accounts or worse case scenario, people lose their money...what happens when you invest in shares of a company when they go into liquidation? You lose your money. Thus, savings held in a banking institution become a distant memory.
Have you ever gone into a bank over the past few years and requested to make a large withdrawal. You get laughed at and refused. Hard to withdraw decent amount's at 2 gorillas a day from ATM's. I reckon a lot of people will realise when it is to late.
We all need to realise that the gov., the RE agents, the banks AND rich Chinese investors ALL contributed to this bubble..... And the chart is proof.....How can ANYONE look at that chart and say it is 'normal'..... It's just ludicrus.....I'm sooo mad at what they've done Also, Can anyone tell me if this really is the time to be taking ALL of my money out of my bank (NAB)...... I've worked very hard for it.....The only hard part is trying to convince my partner that it's the sanest thing to do???
My opinion is... If you only have bills that you are able to pay cash with, take as much as you want out. If not... Then don't be silly and take it out if you haveq direct debits coming out. You also have the security risk of having cash around. The point is, just don't be silly with making rash decisions. Maybe having a bit of cash spare isn't such a bad idea.
the question is how much to leave in the "savings" account - or in other words the bank's debt statement to you
Let's not panic.. If you have over 20k in the bank... Start getting a bit out IMO. If it's more like under 5k not such a time pressure on you. But remember... The banks ainte going to give you warning either... Start buying gold ounces and keep the rest under your mattress hahah.
Yes, there's no reason to panic. It's handy to have some cash stashed somewhere just in case banks shutdown for awhile or something similar. I have 1k on hand personally. But remember, people haven't lost their money in the bank in Ireland or Spain (afaik). So I think it's unlikely to happen here. If a bank does go bankrupt depositors get paid first and the govt will make up at least some of the difference. I wouldn't recommend having all your money in one bank if you have a sizable amount of savings though. And of course have some gold and silver. The govt is likely to attempt to inflate the problem away. Gotta love these hysterical articles...
