We admit it. Sometimes we don’t give credit where it’s due.
According to Money Morning reader Terry, we haven’t given enough of to Treasurer Wayne Swan:
“Kris
You are right that the RBA, Treasury and so on are a bunch of d********.
What you don’t know is that Wayne Swan has an independent Melbourne based financial and political strategist who pre-warned him way ahead of the international financial collapse and how to protect our banking and payments system and our economy. And he followed those strategies.
What is more they were spot on. Read the article in today’s Age about all the so-called experts that got it wrong. All of them! They celebrate one just picking some economic indicator right.
The strategist is from Melbourne as you would expect and was the same strategist that got Australia out of the 1991 really deep recession that was sending all the banks bust and Australia too. We got out thanks to him by the skin of our teeth.
You have to give Wayne Swan credit for the strategies he chooses to follow and so far he has been spot on. Swan is the one that gets the blame in history if they are wrong. The same applied to Keating in 1991 who was put in as PM at Hawke’s expense, to implement those strategies.
It is okay for people to criticise Keating, but no one else had the balls to do it. The same applies to Swan. Be grateful for what we have! The only economy not in crisis and the only one doing well. look at car sale 103,000 for the month of June. That shows the extent of confidence within Australian business in July 2009. The only problem is the banks, they have no idea what they are doing and are pulling in business facilities when they should be pushing them. They always were a bunch of d********.Cheers!
Terry”
We’re more than happy to admit that without the intervention of Treasurer Wayne Swan, the Australian banking system would have collapsed.
In fact, if we’re not mistaken, we’ve been fairly consistent on that score since the bail-outs (or guarantees as they’re more commonly known) came into effect late last year.
The only thing we haven’t done is labeled it as a positive action.
That’s why we’ve chosen to call it a bail-out rather than follow the mainstream press who have held the line by calling it a guarantee.
But maybe even that attitude is changing. At last the mainstream press seem to have called it for what it is. And – shock, horror – they’ve got themselves a quote from Robert Rennie, chief currency strategist at Westpac. Here’s what the Herald Sun wrote on the matter last Friday:
“NEW figures show how the Government’s funding guarantee shielded big banks and the economy from the brunt of the global financial crisis.
A massive $55 billion of money market funds was withdrawn from the Australian banking system in the six months to the end of March, according to a Westpac analysis of the national accounts.”
Rennie goes on to say:
“Life would have been very uncomfortable without the guarantee… It would have placed enormous pressure on the banking system, most borrowers and the Australian economy as a whole.”
In other words, the foreign banks quickly hot-footed it with their cash into the “safety” of US dollars which meant our local banks had to raise replacement funds provided through the wholesale and retail guarantees (bail-out).
Without the bail-out in place, Australian banks would have either been left exposed to a $55 billion shortfall of funds, or they would have had to jack the interest rate on the funds so high it would have resulted in a huge increase in borrowing costs to them and therefore to those that borrow from the banks – ie. Mortgage customers.
And so, thanks to this intervention, interest rates have been kept low, drawing in borrowers. Well, some borrowers anyway.
According to the Australian Bureau of Statistics (ABS):
“Demand for credit was down $32.0b from the previous quarter, driven by decreased demand by private non-financial corporations (down $33.0b), state and local public non-financial corporations (down $3.5b) and state and local general government (down $2.3b). This was offset by an increase in demand by households and national general government, $3.5b and $3.2b respectively.”
Businesses weren’t borrowing during the first quarter of the year, yet households were.
You can see that from the numbers released by the ABS:
- New housing finance commitments in April 2009 was $16 billion, a 23% increase on the same time last year.
- Revolving credit facilities: credit used at end of April 2009 was $116 billion, a 3.5% increase from the same time last year.
What does this tell us? It tells us that the economic talking heads we see on TV and read in the newspapers have learned nothing.
In one breath they explain the whole downturn was caused by excessive lending and excessive borrowing and artificially low interest rates. And then in the second breath they laud as fantastic the ability of the Australian public to weather the storm by continuing to spend and take advantage of cheap credit.
This should all make for an interesting discussion at the Debt Summit we are organizing for the end of July – stay tuned for more details.
Other Stuff on the Markets
The S&P/ASX200 dropped 1.27% on Friday. Wall Street was closed on Friday.
Meanwhile, in Europe the FTSE100 added 2 points, and the CAC40 gained 3 points.
The price of gold in Australian dollars gained slightly to $1,171.45, while in US Dollars it lost ground to USD$932.80.
The Aussie dollar lost ground to trade at USD$0.7947 and JPY76.55.
Crude oil dropped. It finished trading at USD$65.63.
Biggest movers on the market yesterday were…
On the economic calendar today we have the TD Securities Inflation Gauge and ANZ Job Ads.
{ 5 comments… read them below or add one }
so with the banks making MEGA UNPRECEDENTED record profits over the last 15 years
THEY’RE STRUGGLING ????????????????
NOW I THINK I’M STARTING TO HEAR IT ALL…………
THE BANKS ARE ALWAYS & THE FIRST TO CRY POOR
ohh okay so i read between the lines in above article
“Australian Banking System Would Have Collapsed Without Wayne Swan
by Kris Sayce on July 6, 2009″
and the aussie banks WERE/ARE exposed to USA sub-prime mortagage PONZI SCHEME
which SWAN & co have bailed /guareenteed us out.
only wayout is to “acquire all superannuation & crank up interest rates ( double digets) agin as in 1991 ,,thats where Keating had the balls to do so
“another BUT MORE PROLONGED reccession/depression we will HAVE TO HAVE”
Hi
Love your stuff Kris. Wonder if you will do something on California starting to default on its current liabilities by issuing IOU’s? Good luck being able to cash those! Scary stuff! They are gonna have to default on the muni bonds soon. Will be good for gold one would think. Should trash the USD nicely.
A man after my own heart about Australia’s banks. Better regulated ha! As you say no better regulated than anywhere else. They got lucky with 18 months notice of what was about to happen. So do they learn? Nope, they just go ahead and create a larger debt bubble lending to silly first home buyers buying half million dollar properties all because of the FHG. Unfortunately they can not see what is about to come and I fear that Steve Keen’s prediction in regard to property prices is about to come true. Fortunately me and the missus are cashing up nicely and are ready to pounce.
Me and the missus were looking for investment properties but were being outbid by FHO’s so we opted out rather than competed. Maybe they did us a favour.
Anyway keep up the good work. Sorry I could not join you on the Small Cap (was stuck in Hillgrove Resources, a nice little earner) thing but am very much looking forward to your Melbourne seminar and keenly awaiting details.
Kevin
on 3AW THE ECONOMY HAS BOUNCED BACK big-time
THIS RECESSION JARGON IS ALL over bar the actual pressing of the “flush button”……………………………………………………………..
As almost all of the manufacturing base have been transfered overseas with a
lot cheaper labor, do we as consumers get any savings at all?
Not only that, as more and more people are loosing their jobs, how in any body
right mind can keep spending?b ( where do you get money from to spend?)
Yet house prices keep going up (artificially), one wonders how long this will last!