Could it Be True Not One Single Taxpayer Dollar Ended Up With the Banks?

Some mornings your editor sits at our desk not knowing what to write to you about – could you guess?

Other mornings our story cup is overflowing with, erm, story coffee…

Anyway, today is one of those “Other” mornings.

We’ve got so much to write we’re not sure whether to just fight one of them individually, or attack them all kung-fu style.

So, we might do a bit of both. First up we noticed a couple of funny things in the Commonwealth Bank’s results yesterday.

The most obvious was that Ralph Norris is clearly a graduate of the same university as ANZ Bank’s Mike Smith. They both hail from the Pinocchio University.

Because, like Smith, Norris was able to tell a whacking great tissue of lies yesterday by claiming:

“[Australian] Banks were well managed, with more conservative business models which discouraged high risk lending and widespread exposure to toxic subprime assets. The Australian government introduced guarantees to support the financial system, but it should be noted that not one dollar of taxpayer money has gone to our banks. In fact, the Australian taxpayer will benefit to the tune of $5.5 billion from the wholesale guarantee over its life.”

That’s funny, because we thought the government had handed out $21,000 to first homebuyers over the last year or so.

Could it really be true that not one single dollar of taxpayers’ money ended up with the banks? It doesn’t seem likely, not when you consider how reliant people are on using bank accounts these days.

You see, in order for the banks not to have received “one dollar” from taxpayers, that would involve the vendors to all property sales specifically choosing to not deposit $21,000 of the sales proceeds into their bank account.

All vendors since October 2008 who have sold homes to first homebuyers must be still holding the $21,000 in cash. Maybe they’re keeping it under the mattress, or they’ve dug a hole in the backyard to put it in.

I’m serious. For Norris’s statement to be true, then over $4 billion in bank notes must been hoarded by vendors, refusing to save, invest or spend it.

Because that’s the only way that Australia’s banks would have avoided receiving “one dollar” of taxpayer money.

And we know that just isn’t possible.

Of course most of the mainstream press just laps whatever a bank CEO says without question. Except for Eric Johnston at The Age who reported:

“Mr Norris is correct to point out that unlike the US or across Europe, no taxpayer dollars were spent bailing out an Australian bank… However, Australia’s majors had a substantial boost from the combined efforts of the government providing a blanket guarantee of the nation’s deposits, as well as a backstop funding program to ensure continued access to crucial wholesale funding markets – albeit for a fee.”

But we’ll stop short of tipping our cap to Johnston, because like most in the mainstream he can’t help himself with the claim that “Australian banks were run with substantially lower risk settings than some of their global counterparts.”

Yeah right!

If that’s the case, why the need for the guarantees and the first home buyers bribe? It just doesn’t add up.

Australia’s banks are so low risk, that apparently, according to The Age, “The State government-owned developer that has responsibility for providing affordable housing is selling house and land packages in East Keilor for close to $1 million.”

It’s true, you can see the properties for yourself here.

But what about this idea that the taxpayer will ‘profit’ from the bail outs due to the fee charged by the government to guarantee the bank’s debt?

Of course, that’s not true either.

The obvious point is that the banks just pass the higher funding costs through to the customer by either charging higher interest rates to borrowers or offering lower interest rates to savers.

The bank itself doesn’t pay for it. Ultimately it’s a fee borne by the public. And because credit and bank accounts are so ingrained into the daily lives of individuals, those individuals are unable to avoid those higher costs.

I mean, just say the government provided a guarantee to bakers of white bread which cost the bakers 10 cents per loaf. The bakery would try to pass this cost onto the consumer.

However, the consumer could easily avoid this impost by refusing to buy white bread and instead buy multigrain bread. This effect would mean that white bread bakers would be less inclined to pass on the increased cost for fear of losing customers to bakers who make multigrain.

Of course, even then it wouldn’t necessarily be good news for the consumer, as due to a higher demand for multigrain, those bakers could raise their prices in response to the higher demand until white and multigrain bread are a similar price.

The upshot is, that in whatever form it’s made, government interference in the market is always to the detriment of the individual.

The banking system is completely different. All the banks have used the government wholesale guarantee to some degree, therefore not one bank can advertise that it hasn’t and therefore claim it has lower fees.

Therefore the banks can uniformly raise their prices so that the consumer never gains the benefit of even a temporary drop in price.

In addition, it’s much harder to change banks than it is to change the type of bread you eat. So the banks know there is no chance of losing customers if they pass the costs through to customers.

Besides, what’s with the idea that the government is able to run a profitable enterprise? Taxpayers aren’t going to make money on the deal. Every dollar that goes to the government is a dollar that’s denied to the individual.

The fact is, Governments don’t make profits. They aggressively expropriate money – called taxation – from private citizens. And then they waste it by either spending it on themselves and the wasteful coercive sector, or they hand the cash out to their chums, such as Senator Conroy and his mate.

But take the farce of the Green Loans programme and the $850 million overspend on the solar scheme.

That’s proof that governments are incapable of managing money or running a profitable business. After all, if these dudes were any good at running a business they’d be out doing that rather than leading the life of a parasitic politician or public servant.

But the biggest point to come out of these ‘green’ schemes is that it gives you a preview to how an emissions trading scheme, or any other government sponsored carbon reduction scheme would work.

If the government claims the cost of its programme will be $40 billion, you can guarantee the real cost will be about ten times that amount. And we’re not exaggerating either.

The reasons are simple – the government has no profit motive, therefore it has no level at which it knows when to stop spending money. If it runs out of cash then it just takes more from the taxpayer.

Government obtains all of its money by force – through taxation. Therefore it does not have to justify its spending, and nor does it face competition from others who could provide the service for less – typically because the government prevents competition by law.

And don’t think the so-called cheaper option put forward by the Coalition will be any better. Both will involve an excessive cost burden on the taxpayer and the consumer, and neither plan will have any impact on global warming or cooling whatsoever.

As we’ve written before, the only solution to discovering whether there is Climate Change, and therefore whether to do anything about it, is to leave it to a free market.

You need look no further than the current disaster with green initiatives to see how your future tax dollars will be flushed down the toilet by the loony green lobby.


Kris Sayce
Kris is never one to pull punches when discussing market developments and economic events that can affect your wealth. He’ll take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money. Kris is also the editor of Microcap Trader — where he reveals the best opportunities he’s discovered in the markets. If you’d like to more about Kris’ financial world view and investing philosophy then join him on Google+. It's where he shares investment insight, commentary and ideas that he can't always fit into his regular Money Morning essays.

Kris Sayce is the Publisher and Investment Director of Australia’s biggest circulation daily financial email, Money Morning Australia.Kris is a fully accredited advisor in shares, options, warrants and foreign-exchange investments.

Kris has close to twenty years’ experience in analysing stocks. He began his career in the biggest wasp’s nest in the financial world — the city of London — as a finance broker back in 1995.

It’s there where he got his ‘baptism of fire’ into the financial markets, specialising in small-cap stock analysis on London’s Alternative Investment Market. This covered everything from Kazakhstani gold miners to toy train companies.After moving to Australia, Kris spent several years at a leading Australian wealth-management company. However he began to realise the finance and brokerage industry was more interested in lining its own pockets with fat fees, commissions and perks —rather than genuinely helping out the private investors they were supposed to be ‘working’ for.

So in 2005 Kris started writing for Port Phillip Publishing — a company which was more attuned to his investment outlook.

Initially he began writing for the Daily Reckoning Australia— but eventually, took over Money Morning. It’s now read by over 55,000 subscribers each day.

Kris will take anyone to task — banks, governments, big business — if he thinks they’re trying to pull a fast one with your money! Whether you agree with him or not, you’ll find his common-sense, thought-provoking arguments well worth a read.

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29 Comments on "Could it Be True Not One Single Taxpayer Dollar Ended Up With the Banks?"

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Watch these brief comments by Grayson about Obama’s comments on Wall Street Bank bonuses. Truer words have never been spoken.


The biggest threat to the Australian economy is if the Chinese economy hits the wall then we will see the dominoes fall in our economy. Then we will see if our politicians can make some real tough decisions rather than the “phony” tough decions the Feds have made so far. If China continues on cruise control for years to come everthing will be just fine.

rocket i just posted this on DR – i am not a china bear but i dont believe the china hype – they need to slow growth down I have a few thoughts on the property bubble 1. to buy a property in china requires a deposit between 30% and 50% 2. so chinese savings which could be $100,000 plus is being locked up in the most illiquid asset – property 3. Even Jim Rogers the china perma-bull has said there is a bubble in some cities Therefore you could say that China is transferring the nations wealth into a… Read more »

Rocket – what were the phony tough decisions and what would be the real tough ones?

Richard F
Hi cb, I gathered from Rockets post that ‘phony tough decisions’ meant bailing everyone out and then trying to inflate their way out of their own debt problems. All that’s doing it shifting the problem into the future and onto the tax payer. These so called ‘real tough decisions’ would be to let these entities default. Sure this is tough on Bond and Equity holders, but its called risk for a reason. Short term pain equals long term gain! There my thoughts anyway but Rocket, I’d be interested if you expanded further on what you meant too!! It’s going to… Read more »
Craig S
I haven’t seen anything on the super discussion recently. What was the outcome of the review? Perhaps the Govt should consider reducing the tax paid on our super contributions from 15% to 10% to increase our future saving if they think additional super will help? This may even encourage some to contribute more without being unfairly penalised by our friends in Canberra prescribing what happens to our hard earned money. They could offset the reduced tax by not providing any more insulation payments to dodgy installation contractors who have been installling the unsafe insullation. Good on you Peter Garrett!! Not… Read more »
Thanks Richard. Yes, it has all been stitched up by the banking cartel – that’s for sure. They have managed to make the economies of the world totally addicted to their credit and debt, and now are holding the taxpayers through their governments to ransom, threatening the blow themselves up, and along with themselves the economies of various countries, unless certain amounts of cash a handed over to them from time to time, on demand. This is the game, and this is why Max Keiser is right to call them financial te!!o!ists. If correct, instead giving in to them, they… Read more »
For those who still have faith in that fiat currency and China, here is a good article. As far back as I can remember my father used to say to me that the circumstances of his life’s journey did not allow him to become wealthy or highly educated. So as a result he could not teach me any “academic” wisdom. He would say ” I cant teach you education so I will pay others with my sweat to do that. But what I CAN teach you is something thatI have greater qualifications than most, and that is I will teach… Read more »

happy new century …happy new year ..same bs …wat a joke