Out on the limb again, wondering which side of the branch is being sawn through.

Generally, I have confidence in publishing any post that it is sound. Sometimes the question is asked, “is this really happening?” In this particular case I copy this CEC Media Release because it is absolutely frightening, but it is also feasible. The more our government tells us that our banks are sound, the more I wonder, given that their propensity to lie and do the wrong thing exceeds their commonsense and attention to duty of care of our country and citizens.  (Nasty, but if the cap fits!).

With this warning – I cannot know if it is correct – I copy the Media Release :

A perfect storm of financial disasters has slammed into Australia’s banking system this week, pushing it to the precipice of total collapse, and forcing a panicked Reserve Bank to cut interest rates.

Responding to the emergency, Citizens Electoral Council leader Craig Isherwood today demanded the immediate enactment of the CEC’s policies of Glass-Steagall bankruptcy reorganisation and the establishment of a new, government-owned national bank.

The perfect storm that has struck the Australian banks includes:

• A European-centred “credit crunch”, which cuts off the foreign “carry trade” that lends into Australia chasing higher interest rates. Australia’s big banks and miners rely heavily on this carry trade for foreign capital. The last time this happened, in October 2008, all of Australia’s major banks, including Macquarie Bank, were flattened, and only the Rudd-Gillard guarantee on their foreign borrowing kept them trading.
• The China “sneeze” that gives Australia pneumonia: China is suffering its most severe manufacturing collapse since the depths of the GFC in January 2009, a flow-on from the crisis wracking its major consumers in Europe and the U.S. Back in 2009, China’s crisis brought world shipping to a standstill; its factories stopped importing resources from Australia; and coal export-dependent Queensland’s budget revenues collapsed. Australia was then saved from total collapse only when the Chinese accelerated their massive internal infrastructure development program, which kick-started Australian resource imports again.
• A sharp increase in mortgage stress, coinciding with falling auction clearance rates and house prices across the country. Australia’s banks are heavily exposed to the property market, but at inflated, bubble values; a collapse of the bubble will wipe them out. Until now, heavy foreign investment via the carry trade has propped up the mortgage market, combined with the habit of longsuffering Australians to prioritise their mortgage payments over other living expenses. However, rising mortgage stress is driving a sharp increase in foreclosures, which, combined with falling sales, will drive down the property market even more, spelling doom for the banks. This likely forced the RBA’s hand on interest rates; however, lower interest rates undermine the carry trade even more, on which the banks are also reliant.
• Australia’s supposedly great, strong, sound banks all suffered credit rating downgrades this week, as financial observers could no longer ignore the trouble they were facing.

Isherwood questioned whether the government was already acting behind the scenes to prop up the banks.

“Why are the major banks risking more public hatred by foot-dragging on passing on the rate cut?” he asked. “What is being discussed right now between the government and the banks, so the banks can stay afloat? We found out later that in these circumstances three years ago, Macquarie Bank was begging hysterically in a flurry of emails to its friends in the government for the bank guarantee, and the major banks all met with Rudd, Gillard, Swan and Tanner and said if the government didn’t step in, they would collapse ‘sooner rather than later’. All the while the government kept babbling that the banks are ‘sound’.

“It would be criminal if Gillard and Swan attempted to pull the same bailout they did in 2008, instead of solving the problem.”

Isherwood emphasised that today is the 100^th anniversary of the passage of the Commonwealth Bank Actthrough the federal parliament:

“The anniversary of King O’Malley’s victory in achieving a national bank for Australia is a timely reminder of the only solution to this mess”, he said.

“The banking system must be reorganised, and put back under the control of a government-owned national bank that can direct Australia’s credit into investments in infrastructure, manufacturing and agriculture, to revive Australia’s actual physical economy.”

I don’t expect anyone to take too much notice of this, but it would be interesting to have been involved in adding to the public exposure if it is true. As usual, I would hope that if this issue is being misconstrued here, some kind reader will comment and set me straight.

What I do strongly agree with is the need for there to be a National, government controlled bank to provide citizens with their banking needs, and to separate them from the dire behaviour and performances of the private and industrial banking systems. This includes protection of the general public from any responsibility for bail-out financing not caused by them.

Source:  http://www.cecaust.com.au