tip off

Why we’re all complicit in the banks’ gouging

Angry that ANZ can record an interim profit of $2.97 billion while refusing to pass on the RBA’s rate cut? Annoyed that banks continue to exploit the lack of competition to belt consumers and business with higher interest rates and fees?

The problem is, we’re all hypocrites. The complaints have considerable justification, but most of us are silent, greedy accomplices in what the banks are doing.

At some stage in the financial cycle, most Australians benefit from strong, profitable banks, either as depositors or shareholders. And by swallowing some of the RBA rate cuts, the banks are merely trying to do the right thing by their owners. And who are the bank shareholders, and who are the biggest group of bank shareholders? Why, ordinary Australians via their superannuation funds (retail, industry, self-managed).

The banks underpin much of our super funds’ investment in shares. Even industry super funds, which typically have a wider spread of alternative and property investments, will have 5-6% of their entire holdings in the big four banks. Their big dividends are much loved by fund managers, investors, advisers and shareholders. They are rivers of gold which this year will be around $18 billion.

We also want to have it both ways on rates. If you want a full pass-through of rate cuts by the RBA, then you have to be prepared to accept lower profits and deposit rates. But they in turn mean the banks lift their borrowings in wholesale markets here and offshore, increasing their costs and exposing themselves to greater risks in the event of another financial crisis. Go to Spain, France, the UK or Ireland to find out what weak, financially crippled banks do for confidence, the economy and consumers. Consumers, business and others in those countries have real justifications to moan and groan about their banks.

There’s a problem though for all the banks (and for retirees and others with bank deposits), in that after yesterday’s rate cut, nearly all the term deposits on issue are now half a per cent or so too expensive, but that expense won’t improve for months for the banks until the deposits expire and get rolled over at lower rates. Just how much lower will be the problem. So the banks face more pressure on their margins, possibly until the end of 2012, especially if there’s another rate cut from the RBA. As the RBA has found, while the cost of funds has fallen, the fall in bank deposit rates has been much smaller, as intense competition for deposits forces the banks to keep offer rates (especially teaser rates) higher than they would have expected.

In fact it’s not the cost of wholesale funding here or offshore that’s the problem for the banks who want to maintain their profits, it’s the intense competition for local deposits. That in turn makes every depositor part of the problem for the banks. While Australians moan and groan about the behaviour of the banks (in many cases with justification), they blithely demand higher rates of interest on their bank deposits (especially term deposits), which in turn pushes up bank funding costs which in turn has seen them keep some of the rate cuts from the RBA (and add a bit more). Bank depositors are part of the bank’s funding cost pressures, but we won’t admit it.

Don’t expect any sympathy at the RBA for the banks. It’s of the view the banks have contributed to their problems, and hurt the wider economy by keeping part of the last couple of rate cuts (and a bit more) thereby damaging consumer sentiment. This is what RBA chief Glenn Stevens said in yesterday’s statement about the banks:

As a result of changes to monetary policy late last year, interest rates for borrowers have been close to their medium-term averages over recent months, albeit tending to increase a little as lenders passed on the higher costs of funding their books. Credit growth remains modest overall …

In considering the appropriate size of adjustment to the cash rate at today’s meeting, the Board judged it desirable that financial conditions now be easier than those which had prevailed in December. A reduction of 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliver the appropriate level of borrowing rates.”

That is, the RBA knows the banks won’t pass on the full cut so it went for a larger cut. It’s as much a bit of bank bashing (shorn of the rhetoric from Wayne Swan and other critics) as we have seen from the central bank for some time. And if we get another rate cut next month or in July, then that will be aimed at bashing bank lending rates even lower to a level where they are seen by the RBA as stimulative for the economy, not constricting. The first bank to pass on the next rate cut full will be a sign that the RBA has succeeded in bring the banks back into line.

A few other points need to be made. The rate cut (and those to come) won’t help retailing. There’s too much capacity and the structural change underway is now unstoppable and will see more outlets close, employment fall and perhaps one or two big chains crunched badly. The RBA knows, via the latest household expenditure survey, that just over half of all mortgage holders are repaying their mortgages at a rate above the minimum needed. In other words, they are building up their equity. There is no reason to believe that they won’t change this after the 0.50% cut yesterday. It just increases their level of saving.

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  • 1
    Suzanne Blake
    Posted Wednesday, 2 May 2012 at 1:34 pm | Permalink

    Swan can take credit for the rate cut. He and Gillards policy of crueling business and consumer confidence has led to this.

    Swan says that the interest rates are lower now that at any time that Howard was PM. He is right. We have had a GFC since then and we now have a Government who has blowed many many billions and we will take a generation to pay it back. Hopefully.

  • 2
    ianjohnno1
    Posted Wednesday, 2 May 2012 at 1:42 pm | Permalink

    Yes, that is one downside of superannuation; many now find that greed is almost compulsory. More and more little capiltalists.
    Yes, I suppose I am one…

  • 3
    David Allen
    Posted Wednesday, 2 May 2012 at 1:45 pm | Permalink

    Where does this, ‘lack of competition’, idea come from?

    In my small town of about 15,000 souls, apart from the big 4 alleged cartel, we have Suncorp, Bank of Qld, Bendigo and numerous building societies and credit unions.

    Competition for deposits is ferocious and generally led by internet only banks, most of whom appear to also offer home loans.

    Got me beat?

    Disclaimer. I have no connection whatsoever to any bank other than as a depositor and via superannuation.

  • 4
    Wallace Scott
    Posted Wednesday, 2 May 2012 at 1:54 pm | Permalink

    Given the level of security (government backed) the big 4 banks enjoy it is not necessary for them to try keeping that margin profit which they gained since the GFC. They’ve only been passing rate cuts to mortgage holders without passing to business and that’s one of the main things that is hurting business and holding down the economy.

    Anyway, if they don’t pass rate in full then it keeps inflation low then there can be one further rate cut from the RBA which will help holding down the AUD from bolting towards $1.10USD and kill our industri,es. The dollar was resuming its upwards trend lucky we got 50 basis points cut to stall it. The 100 week average is reaching $1.01USD now it’s getting dangerous, too large volume of long positions have built up eventhough a drop of more than 20% of long positions occurred since the RBA indicated last month that it will cut rate pending inflation data, and it will be very hard for the dollar to go back below parity. Hopefully commoditi,es prices and China growth stay moderate and US accelerate growth that may help keeping our dollar staying between 95cents to 1.05 cents.

  • 5
    Wallace Scott
    Posted Wednesday, 2 May 2012 at 1:56 pm | Permalink

    God, moderation again.what’s wrong with Crikey???

  • 6
    Wallace Scott
    Posted Wednesday, 2 May 2012 at 2:00 pm | Permalink

    Given the level of security (government backed) the big 4 banks enjoy it is not necessary for them to try keeping that margin profit which they gained since the GFC. They’ve only been passing rate cuts to mortgage holders without passing to business and that’s one of the main things that is hurting business and holding down the economy.

    Anyway, if they don’t pass rate in full then it keeps inflation low then there can be one further rate cut from the RBA which will help holding down the AUD from bolting towards $1.10USD and kill our industr,i,es. The dollar was resuming its upwards trend lucky we got 50 basis points cut to stall it. The 100 week average is reaching $1.01USD now it’s getting dangerous, too large volume of long positions carry trades have built up eventhough a drop of more than 20% of long positions occurred since the RBA indicated last month that it will cut rate pending inflation data, and it will be very hard for the dollar to go back below parity. Hopefully commoditi,es prices and China growth stay moderate and US accelerate growth that may help keeping our dollar stay,ing between 95cents to 1.05 cents.

  • 7
    Wallace Scott
    Posted Wednesday, 2 May 2012 at 2:01 pm | Permalink

    aaargfghhhhh

  • 8
    Apollo
    Posted Wednesday, 2 May 2012 at 2:32 pm | Permalink

    Too true we’re all greedy hypocrites!

    Oh, SB is at it again. I remember she told Jimmy or someone that the Labor government spend too much and caused inflation and the Reserve Bank has keep interest high consequently hurting borrowers. Now she says that the rate cut and low interest is due to Labor’s overspending.

  • 9
    carolinestorm@iinet.net.au
    Posted Wednesday, 2 May 2012 at 2:38 pm | Permalink

    I do use the banks to further my interests as much as possible. My ANZ savings accounts give monthly interest payments and offer a higher rate than ANZ term deposit accounts.

    I’m also aware that ANZ uses me to further their interests. Recently I deposited my US pension cheque from the Bank of America to be exchanged for Australian dollars. Four weeks later this was done and my account charged A$89.90 for the privilege [this did not include exchange rates…not only the miners are less than amused by the high A$!]. After speaking with various levels of ANZ staff for some time, I finally used the words I should have introduced earlier ‘banking ombudsman’. The full amount was refunded to my account in a few minutes.
    Always remember the magic words…’banking ombudsman’…or, of course any substitue ombudsman.

  • 10
    Wallace Scott
    Posted Wednesday, 2 May 2012 at 3:05 pm | Permalink

    Still has not let my comment through? Banks have not been passing rate cuts to business that’s why business and the economy is hurt, they only passed to mortgage holders.

  • 11
    Observation
    Posted Wednesday, 2 May 2012 at 3:14 pm | Permalink

    Banks hey. Boy are they hard pressed! No really I feel sorry for them. Through superannuation they are guaranteed cash investments flowing in. They can now dictate the interest rates despite record profits and what the RBA recommends, so much to the point the RBA reduces interest rates to accommodate the lesser drop the banks will give.

    If interest rates drop it becomes more viable for businesses to borrow to invest back into their companies, or for developers to invest, or for contractors to expand their caopabilities. Eventually the increase in cash flow helps all. The problem is all this investment in financial institutes where money is invested for money’s sake. And there it sits floating around apparently making more of itself. This money needs to be channeled back into real projects for the betterment of the social infrastructure of the country.

    The banks are virtually locking up our money and they have the power to turn the tap on or off. They have the power to say if you can borrow and how much cash deposit you will need to do so. And at the end of the day they will make these adjustments for their profit, not for any benefit of the country. After all when it suited them they were irresponsibly throwing money at the public.

    Yes I know we the public were frugal and spent, spent, spent and we have to take responsibility for that, however with the holier than thou stance of the banks and the way they now dictate terms, it seems to me they are beginning to have more control over our money than us or the government.

  • 12
    Stephen Morgan
    Posted Wednesday, 2 May 2012 at 3:16 pm | Permalink

    The whole article is misleading. Given that that Australian banking sector operates using Fraction Reserve Banking ( http://en.wikipedia.org/wiki/Fractional_reserve_banking ) and our reserve ratio in Australia is 10%, the banks are generating interest on up to ten time the amount of deposits. They are ‘highly geared’ in business parlance. This is why the whole financial sector is so unstable and Global Financial Crises are inevitable. The resultant inflation is effectively a form of tax / theft levied on the ignorant / powerless. Given that creating money (through loans) is illegal (as fraud) but for the banking act 1959, the government has the power to compel the banks to do do anything by amending the act, even altering the reserve ratio. This includes forcing the banks to pass on full reserve rate cuts, crude instrument though it is.

    Whilst I am aware of the inherent consequences that would occur if this was were to be done without complimentary measures, it clearly demonstrates that the banking sector controls the Government, not the converse. By extension since the opposition has not addressed this issue either, it is clear that government in Australia is like the orchestra on the Titanic.

    Failure to reign in the bankers, and deal with the fundamental flaws of a fiat money system, will leave our country and our economy in a permanently unhealthy state, like a organism unable to shake its parasites.

    The solution to these issues are not complex or difficult to understand, they just require great courage and commitment. This is as much a moral as an economic issue. The vested interests are so entrenched and so powerful, that change will have to come from grassroots to make it a bipartisan issue.

    For more info Google : Fractional Reserve Banking, and discover the second biggest fraud ever foisted or committed on mankind.

    Warm Regards

    Stephen

  • 13
    Andybob
    Posted Wednesday, 2 May 2012 at 3:55 pm | Permalink

    Trying to affect market rates charged to borrowers by banks by reducing the rate paid by the RBA on overnight cash is like pushing a piece of string.

  • 14
    drsmithy
    Posted Wednesday, 2 May 2012 at 4:01 pm | Permalink

    He is right. We have had a GFC since then and we now have a Government who has blowed many many billions and we will take a generation to pay it back.

    Australia has the lowest government debt in the OECD. It is in no way unsustainable, unreasonable, or problematic. The real elephant in the room is the issue of private debt (mostly mortgages), which is largely the result of the Howard/Costello years.

    Of course, when our Government (whoever is in at the time, it won’t matter, unless it’s the Greens) bails out the banks, just like all the other OECD Governments did, the private debt will become public. *Then* we’ll be in the kind of serious trouble you seem to think we are now (ie: the kind of trouble America, Ireland, et al, are in).

  • 15
    Vanker
    Posted Wednesday, 2 May 2012 at 4:06 pm | Permalink

    A reasonable observation, Observation. Lending money at interest is the most insulting thing you can do to someone. Taking security for a loan is fine, except of course if it’s ones house. Taking somebodies house or somebodies garment as a pledge for security of a loan is equally detestable as lending at interest.

    When I was 14 years old, I got a job in a Woolstore. My role was called a “spotter”. As a spotter, I used to go ahead of the gangs and locate the bales of wool that had become separated from the main stacks. I would mark them on a location sheet and hand it to the Leading Hand Ganger and then they would pick them up with the hook & barrow and take the bales to the drop shute and on to the back of a truck.

    Getting to the point - working at the woolstore we had a saying..” why bank on the Wales ( Bank of NSW ) when you can wank on the bales.”

  • 16
    Observation
    Posted Wednesday, 2 May 2012 at 4:09 pm | Permalink

    Dr Smithy - the result of the Howard/Costello years.

    Yes, the first home owners scheme put young people into houses they could not really afford…and where did that government handout cash deposit go?….straight into the banks!

  • 17
    drsmithy
    Posted Wednesday, 2 May 2012 at 4:15 pm | Permalink

    Yes, the first home owners scheme put young people into houses they could not really afford[…]

    The various first home owners bribes certainly had an impact, but the real catalyst for our massive real-estate speculation bubble was Costello’s halving of CGT. They also kept the tax rort of negative gearing (which is going to turn into Australia’s equivalent of America’s sub-prime catastrophe) in place.

  • 18
    Observation
    Posted Wednesday, 2 May 2012 at 4:23 pm | Permalink

    Vanker - Lending money at interest is the most insulting thing you can do

    Apparently in the Torah, it is forbidden to lend money to your brother and collect interest. This of course was side stepped many years ago by the fraternity by indicating that anyone not of the certain blood line was not a brother. That is anyone not of Jewish decadency. Thus the first banks developed untarnished.

    I’m not having a go at any specific race here, its just I think the banks propaganda machines are still painting themselves as saintly today.

  • 19
    Observation
    Posted Wednesday, 2 May 2012 at 4:26 pm | Permalink

    Dr Smithy - They also kept the tax rort of negative gearing (which is going to turn into Australia’s equivalent of America’s sub-prime catastrophe) in place.

    Agree, but the Australian public have swallowed this hook, line and sinker. Would be hard to pull it back now! There are no politicians out there which would have the know-how or the intestinal fortitude.

  • 20
    Suzanne Blake
    Posted Wednesday, 2 May 2012 at 4:42 pm | Permalink

    @ Observation

    Negative gearing and franking credits was a Labor initiative. They will never be able to wind that back, without a fire storm

  • 21
    Liz45
    Posted Wednesday, 2 May 2012 at 5:04 pm | Permalink

    I’m on a pension and have been a member of a Credit Union ONLY since the 70’s? Am I still to blame. No super, no investments no???Just the pension!

  • 22
    Liz45
    Posted Wednesday, 2 May 2012 at 5:13 pm | Permalink

    @APOLLO - According to SB, Labor is responsible for the common cold, warts, cancers, the drought, the wet summer, the impending winter, freckles, measles and any other inconvenience or illness or bad luck or???Anything really! You name it….

    @SB - Who started paying the fossil fuel industry Billions? Now they get about $10 billion per year. If Wayne Swan stopped that, he’d have no problem with finding a surplus? Superannuation surcharge on the rich? Another 2.3 Billion. The Military, $85 MILLION per day! Not bad eh? All to do with priorities? The rich vs the rest of us! These I can recall without thinking about it too much?

    Oh yes, there’s the millions or billions to the Superannuation INDUSTRY? Haven’t even built one more hospital bed yet? Amazing! You’d have more credibility if you just once pointed to some of these things? More millions to wealthy schools? And so on…..

  • 23
    shepherdmarilyn
    Posted Wednesday, 2 May 2012 at 5:43 pm | Permalink

    I don’[t have credit cards and don’t borrow from banks.

  • 24
    c d
    Posted Wednesday, 2 May 2012 at 7:54 pm | Permalink

    Any chance we can get Steve Keen’s article of today over on Crikey? We seem to have to suffer most of Chris Joye’s musings, while Keen doesn’t get much of a run. Today he has a significantly important piece and one that is beginning to illustrate his claims of a couple of years ago on house prices weren’t alarmist.

  • 25
    shepherdmarilyn
    Posted Wednesday, 2 May 2012 at 7:57 pm | Permalink

    That’s because Keen got it so wrong before he had to eat his hat.

  • 26
    Posted Thursday, 3 May 2012 at 3:35 am | Permalink

    At what point would it be fair to question the relevancy of the RBA?

  • 27
    drsmithy
    Posted Thursday, 3 May 2012 at 7:48 am | Permalink

    That’s because Keen got it so wrong before he had to eat his hat.

    Keen was perfectly correct. He merely misjudged the willingness of the Government to sell out future generations to prop up the baby boomers for another few years.

  • 28
    Wallace Scott
    Posted Thursday, 3 May 2012 at 8:27 am | Permalink

    Sorry, 95-105 US cents. Wow it takes them about 18 hours to print my comment, even the ABC is faster than that. I’m going to the Conversation.

  • 29
    Karen
    Posted Thursday, 3 May 2012 at 10:32 am | Permalink

    @ SB 2.5.12 at 1.32 - err, we are going to have a surplus on 8 May 2012, so, so much for waiting for a generation…. If anything, the intelligent critique would be to criticise Swan for this strategy because its at the wrong part of the economic cycle.

  • 30
    Suzanne Blake
    Posted Thursday, 3 May 2012 at 10:53 am | Permalink

    @ Karen

    A surplus is this years statement of revenue and expenditure, we will still have the Labor Debt to pay back for a generation???

    Remember Keating $100m approx debt, that took the best pay of 10 years to repay.

    This debt will be much longer.

  • 31
    Peter Ormonde
    Posted Thursday, 3 May 2012 at 11:12 am | Permalink

    Ah yes we’re all capitalists now… well those with super, those able to build up their equity, those with savings … we’re all going to be rich rich rich I tell you!

    Investing our retirement nest egg in a bank - which then feels emboldened to gouge the kids - homebuyers, small business, borrowers … even us - acting as they do in our interests - it’s a social duty to look after our interests, get us that bigger Winnebago, the extra large extenda-chair from which to watch day time soapies on the plasma.

    Thanks kids.

  • 32
    Lord Barry Bonkton
    Posted Thursday, 3 May 2012 at 11:51 am | Permalink

    OK , i am guilty. Just rolled another $4000.00 into a fixed interest for 180 days at 5.90 % in my Australian Superfund. Doing better than COSTello and the clowns at the Future fund have done in the last 5 years. Also bought some shares in a Australian Company building Ceramic Fuels cells (CFU ) to heat , cool and produce power in the home and export power back in the grid. Using Natural Gas ( at 85% ) so very efficient with power usage. Coal fired power loses so much power before we get to turn our lights on.

    SB , still flogging the dead donkey ? Howard payed off the $97 million by selling off $300 million dollars of OUR assets and the $350 Mining Boom and costello giving away our Gold stock for peanuts .

  • 33
    Karen
    Posted Thursday, 3 May 2012 at 11:55 am | Permalink

    @ SB - what debt are you talking about? Are you talking about govt debt, which apparently will have been paid off come budget night, or are you talking about private debt and the current account deficit?

    This is a completely different situation compared to the Australian economy coming out of RECESSION back in 1994/95. Anyway, Keating’s “debt” was based on bodgy forward estimates that kept changing as the economy literally flew out of recession. No debt and no cut backs on spending under Howard/Costello who lay in the hammock for 11 lazy, squandered years….

    Name one policy of social benefit that the Howard’s stupid govt achieved in that time, other than gun control, the independence of the reserve bank, and the future fund? I bet you can’t…

    @ Pete - nice to hear from you….

  • 34
    Suzanne Blake
    Posted Thursday, 3 May 2012 at 11:56 am | Permalink

    @ Lord Bonkers

    The inflow of all forms of Federal revenue to incompetent Swan is now 37% higher that at any stage of Howard / Costello, yet the incompenent Treasuer, still blows it and more and has racked up a huge debt.

    The $97 million in 1996, is dwarfed by the BILLIONS that incompetent Swan has racked up, through sheer waste.

    Looks at how Labor runs thinks, NSW, Queensland, Federal, HSU, you name it, it is all incompetence.

  • 35
    Suzanne Blake
    Posted Thursday, 3 May 2012 at 11:59 am | Permalink

    @ Karen

    I am talking 100% incompetent Swan Federal Debt - you know Australia debt

    You dont understand the budget do you.

    A surplus = more revenue than expenditure in a given year

    A deficit = more expenditure than revenue in a given year.

    The debt is capitalised and sits they incurring interest and replayments. In this case that could take a generation to repay.

    The NBN debt is off the books, sneaky to that is on top.

  • 36
    drsmithy
    Posted Thursday, 3 May 2012 at 12:18 pm | Permalink

    Since I haven’t had a good laugh for a few days, I, for one, would like to hear SB explain why Government debt is implicitly bad.

  • 37
    Peter Ormonde
    Posted Thursday, 3 May 2012 at 12:23 pm | Permalink

    You obviously have a cruel streak Dr Smithy.

  • 38
    Suzanne Blake
    Posted Thursday, 3 May 2012 at 12:31 pm | Permalink

    @ Peter Ormonde

    Is back!!

    where have you been, on a trek around Tasmania?

  • 39
    Mike Flanagan
    Posted Thursday, 3 May 2012 at 12:32 pm | Permalink

    While Bernard argues that the profitability of our banks are important to the superannuation returns he ignores the impact the banksters gouging of the of the home owners and business in general.
    The home owner or morgagee has less to contribute to our consumption figures that represent over 70% of our GDP.This must have an overall effect on the profitability of the larger proportion of super investment in industry and assets.
    Small and all business is less profitable and more constrained in its’ dividend flow to the same superannuation accounts
    It also has the effect of diminishing the importance of the independant RBA’s ability to manage the economic cycle much to the public and industries detriment thereby putting the banksters in charge of all matters economic.
    So I would suggest there is more to this than Bernard’s defense of the banksters gouging and manipulation of the market.
    .

  • 40
    Suzanne Blake
    Posted Thursday, 3 May 2012 at 12:33 pm | Permalink

    @ drsmithy

    Minor debt is OK if its one year or max two. But Labor has not produced a surplus for 21 years.

    Swan will trick one and gouge to save his pitiful incompent hide.

  • 41
    drsmithy
    Posted Thursday, 3 May 2012 at 12:44 pm | Permalink

    Minor debt is OK if its one year or max two.

    So something like the Snowy Mountain Scheme shouldn’t have been started if it couldn’t be paid off in 1-2 years ?

    How long is your mortgage ? More than 1-2 years ?

    But Labor has not produced a surplus for 21 years.

    Weren’t you just telling us debt and deficit are not the same thing ?

  • 42
    Mike Flanagan
    Posted Thursday, 3 May 2012 at 12:57 pm | Permalink

    Doc Smithy
    And the Coat Hanger, roads, sewers, water, schools, hospitals, dams, railways, telephones,ports, electricity ad infinitum.
    What absolute drivel some people propagate with their lies.

  • 43
    izatso?
    Posted Thursday, 3 May 2012 at 12:57 pm | Permalink

    When was the last installment paid on the Harbour Bridge ? Pom’s must have built half their Merchant Navy on the proceeds….. WooHooo, Yay fer Govt. Debt…. right I’ll just…

  • 44
    Observation
    Posted Thursday, 3 May 2012 at 1:04 pm | Permalink

    Is it a coincidence that as soon as we begin to investigate bank fees and charges, all of a sudden the banks begin to depart from the RBA rates?

    Also it would be interesting to see where all our superannuation fund managers have invested this guaranteed inflow of cash. I know the average Joe has the opportunity to select from high risk and low risk portfolios but there remains a level of automatic investments. What parameters is there on what super cash can be invested in?

    I am sure the banks are more than just banks and they are share holders in many companies. And when you think that everyone must have their pay placed in the bank and if you have the audacity to try to deposit a cheque you must wait 5 days for it to clear while they earn the interest.

    We have made a system where all money must go through the banks and they play with it as they will. And the golden rule? He who has the gold makes the rules.

  • 45
    Vanker
    Posted Thursday, 3 May 2012 at 2:16 pm | Permalink

    Observation - Apparently in the Torah, it is forbidden to lend money to your brother and collect interest.

    Not just the Torah, but just about every other ancient code of practice too. It seems lending money at interest began in earnest around the 11th and 12th century. The Torah also makes provision for the annulment of all debts after a 7 year period and the restoration of all land to it’s original owners after 50 years known as the Jubilee. These two statutes alone, ensure the free flowing of capital and assets throughout the community and basically outlawing poverty.

    Observation - This of course was side stepped many years ago by the fraternity by indicating that anyone not of the certain blood line was not a brother.

    Correct. The statutes on commerce and money were given to the nation of Israel for them to be a beacon unto the world on how to do it. So that the rest of the world would see and do. The Jews are only one tribe ( Judah ) of the nation of Israel and should never be confused as the sum of the nation of Israel. Today, the nation of Israel is hidden and scattered to the 4 corners of the earth and is far from connection with Judah’s or it’s money policies.

    See Ross Gittins article in the Age about Torah financial precepts..it’s a beauty!

    http://www.theage.com.au/business/an-easter-tale-of-sabbath-economics-20120408-1wjbc.html

  • 46
    Barbara Boyle
    Posted Thursday, 3 May 2012 at 5:28 pm | Permalink

    Here’s a new idea!
    If you don’t have the money, don’t buy it. It’s a concept close to the heart of self-funded retirees.

  • 47
    JamesH
    Posted Tuesday, 8 May 2012 at 10:41 am | Permalink

    Stephen Morgan, you’re totally wrong. Australia doesn’t have a “fractional reserve system” and our banks’ reserve requirement is 0%, count it, zero percent.

  • 48
    Stephen Morgan
    Posted Tuesday, 8 May 2012 at 3:39 pm | Permalink

    Dear JamesH

    You are correct REF: http://en.wikipedia.org/wiki/Reserve_requirement#Other_countries
    Thank you for pointing this out to me, Statutory Reserve Deposits were abolished in 1988 and
    replaced with 1% Non-callable Deposits. This allows even greater money multiplication (and therefore instability) that I had originally stated. Primary analysis at http://paulgrignon.netfirms.com/MoneyasDebt/Analysis_of_Banking.html or if you prefer from the Federal Reserve (US) itself http://en.wikisource.org/wiki/Modern_Money_Mechanics.

    With regard to being ‘totally wrong’ , whilst I had the reserve ratio wrong, Australia most certainly uses fractional reserve banking,

    http://en.wikipedia.org/wiki/Money_supply
    http://www.centralbanksguide.com/reserve+bank+of+australia

    The fact that 1% Non Callable deposits are required, by definition is an admission that you do not possess full reserves (and that your reserves are therefore fractional)

  • 49
    Spamhater
    Posted Tuesday, 8 May 2012 at 6:14 pm | Permalink

    @ DR Smithy I don’t know if SB answered your question fully. Incompetent trickster Swan is going into surplus because minor debt is OK for only one or two years. Therefore, he has to go into surplus this year or it’s not minor debt but major debt that will be around for 21 years, which is what Labor usually does.

    This is of course to be ready for the election so that Incompetent trickster Swan can hand over a surplus to Bumbling Abbott, Hockey etc. as the Libs never run a deficit ever.
    Not sure where the figures are to support this, but I do now have an Aussie flag Avatar, so that gives me huge blog credibility :)

  • 50
    Pinklefty
    Posted Tuesday, 8 May 2012 at 6:56 pm | Permalink

    Gee, I wonder what things would be like if the CBA was still a public asset.

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