Are the Aussie Banks Secure?


English: dark green - IMF members; light green...

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This article from the CEC (Australia) media release 2nd Feb this year suggests not.

I am no financial expert, except that I can recognise bankruptcy when I see liabilities exceeding assets. Borrowing more money to provide cash-flow only exacerbates this, delays the inevitable crash, unless debts are forgiven. That is another story, unfortunately being played out world-wide under the name of Global Financial Crisis.

Here we have an opinion. It is offered in the hope it is wrong, but with the suspicion that it is not.

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 30thJanuary, 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 notpass 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 billionin 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 Sunthat 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.

Glass-Steagall

Citizens Electoral Council leader Craig Isherwood today noted that the panic about Australia’s banks is long overdue:

“For years the authorities have either been lying about our ‘sound’ banks, or in denial, but now reality is sinking in,” Isherwood said.

Now we come to their proposed solution. Again, I cannot do other than include it here in good faith. Lyndon La Rouche is the only financial expert I have read who predicted the financial crash, years in advance.

His explanation of how this debacle has come about makes absolute sense. His ideas on solving the situation are, as he says, probably the only way forward.

For your consideration:

“The question is, what do we do about it? The Australian people must not allow the bankers and their agents in the major parties to dictate the response, or else the people will be slammed with austerity budget cuts to prop up the banks’ bad debts, just like we are witnessing in Europe.

“The only solution to the world banking crisis is Lyndon LaRouche’s call for a global Glass-Steagall: separate commercial banking from investment banking, and write off the trillions of dollars in gambling debt and derivatives obligations that are sinking the world economy.”

Read all the information here.

Given that our banks are raising interest rates against the RBA guidelines, shedding staff, investing in overseas labour, yet listing exorbitant profits, conclusions are difficult to arrive at. If all was well the former moves could not be justified. The latter, profit taking, is probably simply pure greed and may even signify lack of confidence in the future.

About Ken McMurtrie

Retired Electronics Engineer, most recently installing and maintaining medical X-Ray equipment. A mature age "student" of Life and Nature, an advocate of Truth, Justice and Humanity, promoting awareness of the injustices in the world.
This entry was posted in australian, Corruption, Financial Crisis, Human Behaviour, Human Folly, Politics, World Issues and tagged , , , , , , , . Bookmark the permalink.

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