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Posts Tagged ‘banks’

Modern People: Can’t save, Won’t save

April 29, 2009 1 comment
... switch off the TV, eat a piece of fruit and go for a walk.

... switch off the TV, eat a piece of fruit and go for a walk.

Have you ever noticed that when you want someone to give you something useful for free (or sometimes even for money), such as the Government, there are pages and pages of forms to fill out, hour-long queues to stand in and innumerable supporting documents to bring with you? But when it comes to paying a bill, it’s just a swipe of a card, a click of a button. It’s because, when something is in your interests, you do all the work. Getting robbed takes very little effort at all.

Two pieces of news came out at almost the same time in Australia regarding the housing market and banking sectors:

  1. House sales are rising sharply (4.2% in March, on the back of a similar trend since January)
  2. Bad debts are eroding the profits of the major banks. The latest, ANZ, reported a 43% fall in its cash profit.

This is on the background of rising unemployment, no evidence of a real turnaround in the global economy, the new threat of Swine Flu (real or imagined) and the Australian Government’s desire to boost military funding (yet some how crawl itself towards a balanced budget over years), which implies that first home buyer grants, gratuitous thousand-dollar cheques in the mail and mortgage relief programs are a thing of the present but not the near future.

If you had no significant savings, an unsteady job, the threat of dying of pneumonia over the next two months and read about all the dire economic news as abounds in the media, would you take out a mortgage on a house? Before you say no, remember that a whole lot of people are saying yes. They are probably saying yes because, in amongst all the negative facts, there are a few ‘experts’ giving glowing opinions of an imminent turnaround in the world economy. Of course they don’t have a vested interest in off-loading their own bad investments, do they?

A good proportion of those people who are buying new homes today must be oblivious to what’s coming to them. Have they got life insurance? Income protection insurance? If not, how are their spouse and children going to manage without them if something should happen? Who will pay the debt? Whereas before, those families entering a mortgage agreement only had to worry about next week’s rent, now they are faced with the next thirty years on the property which, who knows, may be worthless in a short while, because they and many others will be forced to sell. It’s a big risk to take if you have dependents to look after. Even those with insurance can’t depend on the insurer paying out in the long run. Many of those institutions might still be wiped out.

It’s so obvious that it hardly needs saying, that people, in general, cannot save money. Have money, will spend. Offer people a ‘bonus’, and they’ll go and get pregnant, even if they don’t want children. Offer a bonus, and they’ll spend it on Chinese electronic goods, or buy something on-line at a store located outside Australia. Offer a bonus (FHB grant), and people will sign themselves into a thirty year mortgage with a bank (heartless, soulless). Nobody seems to have a sense of danger. Perhaps it’s because they no longer remember fairy tales, with their big bad wolves, village destroying giants, deceiving witches, poverty stricken children, cruel step-mothers, lazy rabbits, poor widows and pestilence. Instead, it’s all Post-man Pat, the Telletubbies, Thomas the Tank Engine and those brain-numbing Wiggles. For the current home-buying generation, though, it was probably Fat Cat and Friends, Playschool and Sesame Street. That stuff wasn’t even well presented, let alone equally content-free.

What hope is there for these first home buyers, when they are so clueless? What about everyone else, who they are unwittingly dragging down with them? Just as it is said, “Thou shalt not tempt the Lord thy God, as thou temptedst him in the place of temptation.”, so we should realize that, if we tempt the Government, it will call our bluff. If everybody throws themselves into ridiculous debt, in the pursuit of the “home ownership” dream, they will break the whole system of property ownership. The Government will turn around and take away everybody’s property and we be left with a very nasty form of socialism, run, not by governments (which at least get embarrassed if you don’t vote for them), but by heartless, soulless banks, who don’t care an iota if you were to die in the gutter tomorrow.

The blame, though, does not really fall upon the heads of the populace. It has been robbed of its culture, tricked out of believing the sound wisdom of its ancestors, brainwashed by a four-cornered electric puppet-box which sits in every lounge room, even the bedrooms of teenagers. People’s heads are filled with illogical, unbalanced rubbish. It is no surprise, then, that their decision making is of similar quality.

Australia’s Economic Storm: If only it were real rain

April 22, 2009 2 comments

Where will the lightning strike?

Where will the lightning strike?

First Drops of Rain

As predicted, the world economic storm has become more than a mere shadow over Australia’s immediate future, as ABC News (Australia) reports:

The International Monetary Fund has drastically downgraded its outlook for the Australian economy, forecasting it will contract by 1.4 per cent this year before growing slightly again next year.

Their estimations are that the US will contract by 4% in 2009, making Australia look good in comparison, but Australia’s situation is not necessarily better. Everything just seems to happen later here.

Tax revenue is falling like a stone, making the indiscriminate Rudd cash stimuli (nicknamed the RuddBank) impossible to fund on anything other than debt. From a Chinese source, as it happens. The problem is that Australia is receiving paper money, but that China will want something more substantial, more tangible in return, such as assets, foreign policy decisions, even domestic policy changes. Such is our patriotism that the idea of a kind of one-child policy for Australia is actually being discussed. Freudian slip, perhaps?

It’s also becoming clearer by the day that the housing market is being propped up by artificial interventions such as the First Homebuyer’s Grant and mortgage relief programs for the unemployed, which are around the corner. The sub-prime mortgages in the US were simply a way of propping up (and worsening) a housing bubble by making the purchase of housing on debt an irresistible prospect for the soon-to-be unemployed. The current Australian Government’s fiddling with the housing market will have the same effect. Sure, it is not causing rises in housing prices, but it is hiding the true bottom of the market, which is falling away silently in the background.

The one big thing missing in Australia so far is to wake up one morning and find that one of the giants of the economic landscape turned out to be a huge fraud, wiping out thousands of investors in one fell swoop. The ANZ Bank was looking like a possibility in this regard late last year. It was said to have the largest international exposure to the economic downturn, when compared with the other three large banks. However, recent reports suggest that the opposite might be true, that the Big Four have come out stronger than ever before, as they buy up assets around the place which have been put up for sale by other struggling banks, including the smaller ones in Australia. There are a lot of unknowns in all of this – many balls in the air, as it were. It smells like the banks are still quite vulnerable, however, with the Government being ever so eager to prop them up, especially in the real estate sector.

As was stated in previous posts, we are experiencing the calm before the storm in Australia. News abounds on just how bad the USA is faring, with ‘tea parties’ all over the place and the possibility of dissolution of the Union getting a mention here and there on the mainstream media. A lot of that is staged and therefore meaningless, but a groundswell of genuine discontent is building rapidly. Yet still the politicians and talking heads pretend that Australia doesn’t have a problem, that the nation will pull through with a few little bumps but not much else. This view is ridiculously optimistic.

Conflicting Interests

The differences in economic opinion between, for example, the IMF and politicians, occur because of differences in points of view. That is, each source has a different aim and will tend to report the things it wants to believe. The IMF stands to gain from the global recession, whereas politicians stand to lose. Therefore, the IMF will choose to ignore the stock market rally in the US and the politicians will try to take credit for it, even though the entire thing way out of their control at this point.

This illustrates one of the difficulties in judging the economic situation in Australia. The useful data is outdated and current information comes from biased sources.

Our prime minister is a bit like a real estate salesman, desperately trying to talk up a barren, rocky wasteland as a development opportunity of a lifetime, with the building materials (rocks) all ready for your dream home, no neighbors or traffic noise (middle of nowhere), and so on. Sure, it’s a rocky wasteland, he says (so you can’t quote him later that he lied) but imagine the possibilities! It’s no surprise that the only customers coming to help Rudd are those who don’t want to be part of the neighborhood (we think) but plan to come in, take the rocks away, and leave the sand behind. A real estate agent does not care what the place gets used for as long as it sells. Neither do politicians, as a general rule.

The IMF, on the other hand, is a bank – hard nosed and greedy. Banks, too, have their sales pitch of walking hand in hand with little battlers, helping them realize their dreams, but in the end they are still banks, out to make money for their shareholders. And when there is more money than can be counted, that money turns to power, influence and control. The IMF has designs to manage the world on every level, through de facto ownership of key infrastructure and government assets. The International Monetary Fund is therefore not an objective source of world economic opinion. It has a vested interest in things being really really bad, as is shown by an eagerness to unify world currencies (under its own banner) and to become an issuer of money to the developed world as well as the developing world. The IMF stands to gain a lot from economic badness. It is also a private organization, let’s not forget, and is unlikely to descend upon the chaotic world as a knight in shining armor, eager to spread democracy and fairness.

Which weatherman do we believe?

We can safely say that neither is to be believed to any great extent. The nose knows.

If we ignore the media and look at what is going on in the street, we can already see people getting irate, complaining of having too little money and feeling some economic strain. People are spending more of their money on groceries and less of it on non edible stuff. This is because the price of groceries is rising, leaving less money for toys, bikes and other discretionary items. The shift in spending habits precedes the eventual fall in total spending, which will come as a result of unemployment and the drying up of stimulus money. Staff in supermarkets are already under pressure, with reduced numbers on the floor and increasing workloads. In other stores, staff are failing to meet sales quotas and are gradually being laid off.

To stretch the weather analogy to its limit, all of this is like a cloud that has passed the brink of precipitation. The droplets of rain now falling are the heralds of a coming economic deluge.

If only it were real rain!

Pollies Need Kick Up Bum for Slap In Face

Dear Politician...

Dear Politician...

With politicians like these, who needs enemies?

ABC News (Australia) reports how our beloved treasurer Wayne Swan was jumping up and down, complaining that banks did not hand on the 0.25% cut on interest rates as offered by the Reserve Bank of Australia. A “Kick up the bum” is what the banks need, he said.

“Certainly it’s not helpful when we’re trying to get everyone in the community working together to deal with this global financial crisis”.

Actually, it’s the politicians who need the kick up the proverbial. It is the politicians who need to wake up to their consciences. They go to such pains to pretend that they are on the side of the public, yet at every turn they make decisions that favor banks and not the people. Guaranteeing bank deposits does nothing more than prop up banks (there are other places to store your cash). Bailing out the unemployed by giving them ‘mortgage relief’ is nothing more than propping up banks (they will be long term unemployed – forever is not long enough for some). The first home buyers’ grant is nothing more than propping up banks (artificially high home prices). All of this at the expense of the tax payer. Poor Mr. Swan is saddened and upset because the banks didn’t give give him the political sweeteners he was hoping for.

It isn’t just banks, of course. The petrochemical industry also has a long history of getting favorable treatment in cunning and shifty ways. Why do we depend on trucking for practically all our land based transportation? Why do people in cities need cars at all? Why is every transportation project a road construction project and not a rail project? The answers to these questions are similar to those about the banking industry.

Australian society is far from being a meritocracy, far from efficient, primarily because of this kind of corruption. Crying poor is utter nonsense. Australia is a nation with a small population sitting atop a veritable gold mine of resources, skills and productivity. It’s only ‘poor’ because, despite how easy it is to do a good job, our politicians are, as always, hell-bent on screwing the people over, failing to manage anything properly, from water resources to money. They would struggle to organize a piss-up in a pub, unless the bankers told them how.

Frankly, it would be in the national interest if the housing market collapsed, because people would finally be able to default on loans which they should never have been given. House prices would finally fall to reasonable values so that those with jobs and families can afford to buy them and own them. It would be in the long term national interest if private debt were all but eliminated, such that banks became places of storing money, not printing money.

There is collusion between government, bankers and the media to make the public believe that everything is okay, that life doesn’t need to change. On the contrary, it is an urgent need for people, especially those living in cities, to think about how much they are dependent on the national infrastructure: electricity, food, water, transportation, education, health. There should be a rush towards independence in this regard, because the current degree of national mismanagement (whether intentional or otherwise) pretty much guarantees that the national infrastructure is destined to fail spectacularly.

Unfair Tax and Usury

February 14, 2009 1 comment

The UsurerWhen Joe Bloggs down the street can’t pay his debts fair-square, but services them with his credit card collection, it’s only a matter of time before the fat men in dark glasses come around to punch his lights out.

Yahoo News carries an opinion piece stating that Banks are responsible for the ongoing woes in the US financial system by their insistance that debtors pay their debts on the terms of the existing contract:

One reason foreclosures are so rampant is that banks and their advocates in Washington have delayed, diluted, and obstructed attempts to address the problem. Industry lobbyists are still at it today, working overtime to whittle down legislation backed by President Obama that would give bankruptcy courts the authority to shrink mortgage debt.

The problem, of course, is that the system is unfair and patching up wounds through a partial debt jubilee won’t work. Banks are usurers. The current credit system is totally immoral and nobody should take any part in it. But government, by borrowing to “bail out” the economy, is placing itself in the same position as the banks. It is usury upon usury.

When a bank issues a loan, it charges a rate of interest roughly proportional to the rate of inflation, but this is usually higher. Inflation causes the value of money to shrink and is a reflection of the diluting power of increasing the supply of money as occurs with the issuing of new loans.

The real interest that one is paying on a loan is therefore much higher than the stated value. When a housing loan is set at 6% annual interest, and inflation is roughly 5%, the real rate of the loan is going to be somewhere between 6 and 11%, depending on whether wages are increased in parity with inflation. It has been the case over the last thirty years that in most established industries, wages do not grow at the rate of inflation. People don’t notice this as their own pay goes up as they rise in seniority and rank, but if they ask what the entry level job is paying, then it becomes clearer.

Any bank that charges more than 5% on a loan, in real terms (taking into account inflation and wages growth), is guilty of usury.

If a government is in debt to a bank that is placing the same burden on the government as occurs to other victims of usury, then it follows that every tax payer is subject to that same usury. Governments should not be allowed to go into debt on these terms. It’s immoral.

So why are people defaulting on their loans?

The value of housing was being inflated because of speculation and the reality of inflation. People ran to property to protect themselves, like people running for a tree to get out of the rain. If everybody chooses the same tree, however, then the tree cannot realistically protect them all. So the property bubble has burst, especially in the US, where people were building houses at such a rate that an oversupply resulted.

At the same time, people’s incomes have failed to rise with inflation and interest. Taxes have been increased in various ways to fund wars and service ever growing debt. Poorer, year by year, people finally collapsed under the heavy burden imposed on them by banks and government.

The solution, then, is to take away this burden, to phase out the system of debt on which economies are currently based and to reduce taxes. Put an end to usury.

Sadly, however, our governments are not talking about usury. The word has been lost from most people’s vocabulary. Instead, governments are bailing out, borrowing, spending, spinning in circles faster and faster, yet none of it is working. The scary thing about it is that a massive loss of life becomes a likely event when governments take such desperate, counter-productive measures.

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