Tuesday, November 30, 2010

Lost marbles?

Here's a reader's challenge. If anyone of you can make head or tail of Michael Stutchbury today, I'll guest post you with full attribution.


Atlas said...

Amazing. The final three para's have left me speechless (mostly because I agree with them):

"Stevens may well have added that the underlying complaint that Australians are suffering a lack of ready mortgage finance is really about the politics of household deleveraging.

The bigger post-crisis risk is that Australians have borrowed too much to bid up the price of existing houses. Helped by easy access to housing finance, encouraged by tax breaks, subsidised by first-home buyers grants and egged on by politicians, Australians became too confident they couldn't lose with bricks and mortar.

It may have helped when the crisis hit. But two decades of mounting household debt may have pushed property prices so high that the only way now is down. Canberra's bank scapegoating is a sign that rising interest rates are now unravelling the implicit guarantee against capital loss. This is our bigger moral hazard coming home to roost."

Atlas said...

And I apologise if I missed the point of your post, but isn't Stuchbury simply saying:
a) much of the media has missed the point in that the RBA is saying we need to allow big banks fail without it killing the economy;
b) this flies in the face of much of the bank-bashing that is going on because it says that - far from expanding the overnment support from some players, we should remove it for all (over time); and finally
c) this is all really just a desperate plan to lower mortgage rates a little to help keep the final dying days of the housing bubble alive a little longer.

Anonymous said...

Typical MSM prattle and commentaries which is scary when you are first exposed.
Surely someone can consider that it is the damned tricky business of privileged banking that is the problem? Of course Stevens protects his ilk and house -but worse, when one considers that Economic Theory is so flawed and so beyond repair - nobody, I repeat nobody expects anything bad to arise as the result.
Surely Iceland tells a story, Ireland tells a story, the USA tells a story and the last 2000+ years tell the story that our adopted banking system is the culprit that destroys societies on as regular and normal function of its nature.
The next step which has arrived: bank tightening on lending,
costs are rising dramatically,
unemployment is rising,
bank foreclosures rising.
Such is the curse of embracing "Privileged Banking"
Politicians are dangerous enough but Bankers are deadly!

Anonymous said...

The article is all over the place just like existing government policies. Neither party has the leadership to come out and say that if a bank or credit union fails:
1) whether shareholders lose their money
2) whether o/s investors lose their money
3) whether local depositers lose their money
4) whether the institution will be nationalised, shutdown, or saved via taxpayers bailout money as per the USA.

Stevens is suggesting that as a minimum shareholders should lose their money.

As an aside, we all know these bank executives are taking massive risks to ensure their bonuses. I would like to see all executive bonuses put in Escrow for an extended period of time, or their assets used as collateral. If the bank fails then these reckless clowns lose all their bonuses.

Torchwood1979 said...

Atlas, I agree about the last three paragraphs. The fact that was written by "no bubble here" Stutchbury is testament to how quickly the mainstream is coming to terms with reality.

Actually, I might have some of those quotes printed on t-shirts. Any takers? ;)

Atlas said...

Torchwood - tshirts might be overdoing it but I like the sentiment! I agree it is amazing how quickly mainstream media 'opinion' seems to be jumping onto the house price 'gloom' story. This is exactly what happened in the 06-07 period in the US. The reason - I think - is that so many commentators (and people) merely extrapolate recent information to guide them towards what the future holds. Very pro-cyclical! And good reason to be critical of that mainstream opinion.

Anonymous said...

"Stevens said the Reserve Bank...would never prop up insolvent banks."

Well they would have been insolvent if you hadn't propped them up...

It's like Escher's waterfall.