Houses and Holes

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Son of Wallis Challenge

The bank debate is not going well. Following the lead of our populist political class, the discussion has bogged down in the relative irrelevance of interest rate rises and whether or not banks should be allowed to move their mortgage rates more or less than the Reserve Bank. The obsession with lowest-common denominator politics means

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Tap of the mernin’ to ye

This blogger has a couple of thoughts on the Irish crisis. Fact is, as hinted at recently, prima facie, it’s much more attractive for Ireland to default. It’s write-down now or zombify yourself through more debt and internal deflation. This is pretty obvious and the Irish people may therefore be in a position to force

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Links November 24: Contagion!

Yields up in Spain, Portugal, Greece, Ireland Euro and risk currencies smashed. $US up. BarchartMetals trimmed. BarchartThe Irish rebellion. FTIreland’s TARP. Money GameIreland’s mistakes. FTIMF: Ireland must deflate internally. ITWhat Ireland should do instead: default. Guardian, Bloomberg, NYT, WSJyuan trades against ruble. China DailyUS housing still stuffed. Calculated RiskBlock busted. SMHMiracle commodity up again. BloombergIndian

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Future shock

Bloomberg reported yesterday that: New Zealand’s credit-rating outlook was lowered to negative by Standard & Poor’s, spurring traders to buy protection on the nation’s debt and snapping a three-day rally in its currency. “The main risk to the ratings would be a significant weakening in the credit quality of New Zealand’s banking sector,” S&P said

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The death of Invisopower!

In today’s AFR, Joe Hockey makes a simple and elegant argument for Wallis: The Wallis Inquiry formally rejected government guarantees of private companies (including deposit guarantees) for fear of inducing irreversible “moral hazards”. These risks found in all insurance markets where the availability of such protection has the perverse effect of encouraging beneficiaries to assume

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RSPT anyone?

Via Peter Martin, here’s an outline of Joe Hockey’ terms of reference for a real Wallis Inquiry. They’re a bit tilted towards how do we keep the ‘whole ponzi going’ and the greatest omission is any mention of mortgages but actually they are pretty good. And wide enough that anything missed will get in anyway.

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Links November 23: I said, SHUT IT DOWN!

Joe’s terms for Wallis. Peter MartinFear and loathing of Joe. The AustralianJoe the idiot. Hewitt, BartholomeuszKen Henry embraces Dutch Disease. Peter MartinUS austerity drive. Bloomberg, KrugmanUS bank face $100 billion BaselIII shortfall. FTUS housing shadow inventory. Calculated RiskHow Ireland’s bailout works. ReutersEurope in real trouble now. BloombergThe greatest central banker of our time. RCMThe coming

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The Claytons Inquiry

It’s the Wallis Inquiry you’re having when you’re not having a Wallis Inquiry. And Stephen Bartholomeusz outlines it today: Earlier today Suncorp’s chief executive, Patrick Snowball, made a considered contribution to the debate, noting that since the crisis all the banks had diversified their funding and reduced their dependence on offshore wholesale funding markets. “This

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Come on, Gotti

This morning Robert Gottliebsen attempts something of a backflip with three million twists after his egregious defence of housing bubble interests late last week that was deconstructed nicely by Delusional Economics. Gotti begins: The Australian newspaper followed up by revealing that the manager of Treasury’s Macro Financial Linkages unit, Phil Garton, believes that if financial

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Australia’s crossroads

This blogger began reading Doug Noland during the ‘dot bomb’ bust ten years ago. During that bear market, Noland consistently analysed events through the prism of an underlying credit bubble that was the product of an unholy alliance between the US Fed, US securities markets and the government sponsored entities Fannie Mae and Freddie Mac.

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Links November 22: The global grinder

Arbitrage capitalism. Doug NolandIreland bailed. Calculated RiskStop the bailout blackmail. Jeremy WarnerWeek ahead for DOW. Calculated RiskCopper bubble explosion. WSJRothschild backs Indonesian coal. FTSwan doesn’t mention securitisation guarantees. SMHWorld steel output up. Steel OrbisThe Joye of the RBA. The Australian (h/t The Lorax)

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Australia pwned

If you want to understand just how deluded Australia is strategically then take a look at the above extraordinary chart. Business Insider ran this under the heading “Why China interest rate tightening matters” (h/t The Lorax). And sure, it does. But that’s not what this blogger sees. In 2004 our exports to the US were

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Hope is kindled…

This is music to this bloggers ears, or at least, eyes. From The Australian (h/t the Lorax): A senior Treasury official has sounded the alarm over Australia’s property market. He has warned that the prospect of a sudden and dramatic drop in prices is “the elephant in the room” and should not be ignored by

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Weekend reading

Treasury acknowledges housing bubble. (h/t The Lorax) The AustralianBernanke translated. WSJUS bank stress. AlphavilleUS so captured. RortybombUS manufacturing. Calculated RiskThe rape of Ireland. BloombergPortugal and Spain to follow. BusinessWeekChina’s inflation opportunity. ReutersChina’s coming bust. AlphavilleThe harmonious society. Silence!ReutersSensible Koeans. JADSoros on gold. Precisely.And now for shadow banking. Gillian TettChina/US price divergence. Gavyn DaviesMore MRRT bluster

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RBA confirms death of housing

In a speech this week, RBA Deputy Governor Rick Battelino offered southern Queensland property investors a few crocodile tears before driving this spike home: While there are differences between sectors and between regions, the Australian economy overall is doing well. We expect that the economy will continue to grow at a solid pace over the

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Reviving the dodo

Yesterday Ian Harper, one of the minds behind our failed Wallis Inquiry financial services architecture, wrote in the AFR that “More needs to be done to redress the current imbalance between stability and competition in the Australian banking system. Effective stability has returned, however competition has not revived, in part due to the lingering side

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Links November 19: It’s all good

Risk Oooooaaaawwwn. Metals, GrainsForeclosureGate to roll on. NYTThe Irish boondoggle. NYTMore capital for US banks. WSJUS leading indicators up. EconompicUS retail sales. A trend beckons. Tim DuySlow China. Michael Pettis, FTBoom. SMHTax cuts madness. The AgeWhy don’t we have whingers like this in exports? John DurieOre to become buyers market. MinmetalsBut not yet. Baosteel

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The three-ringed circus

There’s a great piece today by former IMF chief economist, Simon Jonson, in which he argues that: Greece’s EU/IMF program heaps more public debt onto a nation that is already insolvent, and Ireland is now on the same track. Despite massive fiscal cuts and several years of deep recession Greece and Ireland will accumulate 150%

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Links November 18: European resolution

How to resolve Europe. Simon JonsonVersus the growing anger at Germany. FTVersus Europe’s doom. Ambrose Evans-PritchardUS, UK houses falling again. Independent, Calculated RiskUS construction down and out. Steel OrbisThe way out. Martin WolfChina to buy gold. Zero HedgeEven as it buys more Treasurys. WSJUnleash QEIII-X. EconompicMore bank irrelevance. SMHQuarterly contracts here to stay. BaosteelChanos reiterates

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Bloggers rule

Here’s a couple of kick-ass links: First, Delusional Economics‘s insider correspondent, Deep Throat, has a brilliant exposition of mark-to-market accounting and the impact it has on big bank capital ratios in an up market, or down. Second, Critical Influence has a super exposition of the dark history of income to house-price ratios. Neither is to

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The Federal Bond Insurance Corporation (FBIC)

Whilst just about every man and his dog in the bank debate remains focussed on the irrelevance of interest rate margins, this blog has been thinking about how to address the underlying cause, the banks’ dependence on foreign funds and how to manage it. It’s come up with the following: The Federal Bond Insurance Corporation

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Ireland vs Australia

The Europeans are learning a very hard lesson and it is this: you should never lock yourself into macro-economic settings that cannot be altered when conditions change. That is the central problem confronting the European periphery, they are stuck in a currency that cannot be devalued to improve their competitiveness. Thus they lurch from budget

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Links November 17: The miracle commodity

Dollar up, all else smashed: Grains, meats, energy, metals, BDI.And iron ore rises!?!The back-up in US bond rates. FTIreland’s woes. CalculatedRisk, Alphaville, Moneygame, Matthew LynnOTC derivative stall. AlphavilleUS housing – down in 2011. Calculated RiskChina overtaking US in global power. WSJIMF boots dollar. BloombergDemocrat confusion. FTFat margins mystery. SMHPerhaps Stutchbury should have read it. BHP

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CBA’s ponzi-free quarter

From BankingDay today: Monthly data on lending finance from the Australian Bureau of Statistics shows a mild rise in commercial finance commitments over the last quarter, after months if declines. Personal lending volumes are rising gently are back over levels of new business experienced before the financial crisis. These factors gave rise, in the context

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Links November 16: Reds under the beds

Norris joins Smith in warning of Reds under Beds. SMHMore bank rate rises coming. The AgeAaaaand, get ready for more of this. The AgeBe honest. Right back at ya, Michael StuchburyLooks like covered bonds. The AustralianChina’s winning model. Peter HartcherUS winning currency war. EconbrowserNO QEIII. David RosenbergEmpire manufacturing collapses. Zero HedgeEurope toying with disaster. Ambrose

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Crowded trade

If you’ve been wondering why the Australian dollar is so strong, much stronger than anyone in the media has acknowledged, then Bloomberg has a must read piece today. The quotes from bond investors are uniformly and amazingly…uniform: “The Australian dollar is among what we’re calling the world’s new safe havens,” said Jonathan Lewis, founding principal

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March of the rent-seekers

Yesterday on the ABC’s Inside Business, Alan Kohler interviewed David Gruen, CEO of Lateral Economics and Peach Financial. Kohler introduced Gruen as “…an independent economist who’s currently studying the issue and also has skin in the game, running a small mortgage broking business” which, this blogger supposes, scrapes home as disclosure. Peach is a mortgage

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Some good news

From BankingDay: A series of reports from journalists with Swan and Prime Minister Julia Gillard at the G20 meeting, in Seoul, culminated in a front-page lead story in The Australian headlined: “PM helps big banks beat new G20 rules”. The report said Gillard had “won significant concessions for Australian banks at the G20 summit …

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Beware the chastened superpower (updated)

With the amazing shrinking fig leaf of the G20 leaving us all exposed to the great powers worst, there’s some overdue angst in the media and officialdom about where the dollar is headed. From David Uren at The Australian: With Australia standing out as almost the only open capital importing country with strong economic fundamentals,

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Links November 15: The big risk

The G20 joke. Baseline ScenarioAustralia exposed after G20 failure. David UrenIt’s worse. RBA says commodities exposed to Chinese exports. RBAIf the Budget isn’t overspending, why should export industries be sacrificed to miners? Gittins‘ hypocrisy. More sensible ways to manage the resources boom. Tim Colebatch Why Chinese foreign investment is good. EconomistWhy bank equity is cheap.