According to Bloomberg the Australian government is attempting to eat its own head: Australian Prime Minister Julia Gillard will argue for special consideration for the nation’s strong banks at the Group of 20 summit amid a global push to overhaul rules on capital to prevent another financial crisis, the Australian Financial Review newspaper reported. “It’s

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Insidious desperation.

We note today that Admiral Norris has conceded that he is doing damage. Asked if last week’s bumper rate rise would force customers to lose their homes, Mr Norris said: “Well yes, a few.” Hmm…. But the Admiral had a very strong defence for the reasons behind this. If banks don’t make profits, economies go


Good news is bad news

Is funding so desperate at the Sydney Opera House that it must resort to hosting this kind of bubble stunt? From the SMH: An auction of luxury homes held at the Sydney Opera House last night raised just $4.1 million, much less than the $30 million vendors were hoping for, less than a week after


G20, 19, 18, 17, 16…

There’s a swag of diplomatic maneuvering going on that bodes badly for world trade. The US has embarked on some renewed China containment strategy reminiscent of, but less formal than, the old mooted “quadralateral” of democracies, with Hillary charming us and Obama charming India. Japan can be assumed to be a party. This may be


Links November 9: Kicking the can

The great straddle. Peter HartcherUS to push India into Security Council. FTChina’s exploding trade surplus. John Garnaut China loves QEII, US loves China’s export model, Elvis says. BloombergEveryone hates QEII and it will fail. Andy XieRon Paul to oversee Fed. PoliticoZoellick wants gold reserve debate. FTSarkozy and Hu want new reserve regime. Dow JonesMore bank


Australian Banks: Delusion Meets Desperation

The following article was posted on Seeking Alpha – a leading North American investment blog that provides free investment market analysis primarily from money managers, investment newsletter writers, and the general public. The great Australian housing bubble debate is gathering momentum. In recent weeks, several international observers have released warnings that Australia’s housing market is severely overvalued. For instance, in its latest survey of


Trapped Banking

Today we note that the banking lobby of Australia seems somewhat confused about how mortgage banking works. Tougher laws to crack down on bank fees would encourage banks to raise their lending rates beyond Reserve Bank moves more often, the banking lobby says. … If Australia becomes more risky because of Government intervention, including through


More on Desperation

Yesterday we posted a message about desperation. We finished the post with the sentence. Expect the desperation to get worse in the coming weeks and months from everyone involved. Well it didn’t take long. A reader “Stephen” just sent us an e-mail to tell let us know that CBA have just announced that they are


The ‘pay more for stability’ meme

There’s an argument catching on in media commentary that the Australian banks are right to be ramping interest rates, and the Australian population is wrong to complain about it, because it’s the price we must pay for a stable banking system. Champions of this argument have included a triptych of the smarter commentators, including Michael


RateGate builds

There were a bunch of stories out yesterday and this morning about how rate rises have sucker-punched the housing market for Sydney and Melbourne I, II. See also Delusional Economics for some good graphs on inventory and a scary take. After one result only, it’s a little early to tell how much damage is done.


Innovation can’t save failed innovation

Amidst the ongoing banking furor, one innocent little paragraph leapt out at this blogger over the weekend: “A secret briefing note obtained by The Sun-Herald confirms Treasury is working on a plan to allow customers to carry account numbers from one financial institution to another.” We already know that a key plank of Labour’s new


Links November 8: The rush to regulate

Irrationality all around. Phillip CoreySwan goes after exit fees. The OzMore ‘no bubble’ porn. David UrenGittins postures on Labor posturing.SMH Annabel Crabb joins bank defence. The DrumNorris: the creditors will run. The OzSydney Bubble House: icon hosts auctions. BloombergProspects for US upturn. NYTQEII & global monetary disorder. Doug NolandEnd of the Euro. Samuel BrittanObama in


Stage 4 – Desperation

Once the damage begins and it becomes apparent to the wider community that the droning lies of the vested interests may not actually be quite so true then things really get desperate. As we said back at stage 1 The newly debt laden ( the “stimulated” ) are in deep trouble due to falling prices,


Chris Joye exposes himself

Maybe we are closer to an historic housing bust than this blogger thought. The bulls have entered outright panic. From The Australian: Christopher Joye, an Australian property market bull, yesterday offered US guru Jeremy Grantham a $100 million bet on house prices. Mr Joye, managing director of property research group Rismark International, challenged his equally


The great Oz RE Casino.

While the adults are trying to have reasoned rational conversation about reducing the systemic risk in the Australian economy and banking system, the children have turned it into a game of “dare”. CHRISTOPHER Joye, an Australian property market bull, yesterday offered US guru Jeremy Grantham a $100 million bet on house prices. Mr Joye, managing


Weekend reading: Son of Wallis Now!

Delusional Economics, Unconventional Economist and this blog demand Wallis Inquiry to address bank’s wholesale funding addiction. Deflating hooters! William PesekQEII versus everyone else. FTFleck vs Biggs on QEII. Zero HedgeCorrelation rocket. EconompicUS pending home sales down. Calculated RiskUS’ improved employment report. Calculated RiskHow many jobs does the US need? Zero HedgeFitch prepares downgrades on ForeclosureGate.


This is gonna hurt

Fellow econblogger, Delusional Economics, has posted an excellent, yet frightening summary of some of the key risks currently facing the Australian financial system, housing market and broader economy. It is captured in an email message from “Deep Throat” – an experienced financial industry participant whom wishes to remain anonymous. Deep Throat has delivered a worrying analysis of the Australian banks’


And the winner is … Michael Pascoe

This blogger would like to congratulate Michael Pascoe. Today he wins the award for the worst ever argument published in the Australian media. For you skeptics, let’s roll the tape… Oh ye of little faith – a little pricing power causes wholesale abandonment of confidence in markets to sort out supposed hubris. So much for


Stage 2 – Damage begins

Stage 1 – Was Panic and Escape. The panic is expected , the escape is logical; but until there is real evidence there is a problem it is still all hearsay. The denial can creep back in, and people can pretend there isn’t really a problem. That is until the damage begins. THE number of


Risk on

The Bernanke Put has pulled up in a tank on the front lawn of Greenspan’s paltry moral hazard. There’s no more pretense that US central banking is about price stability in anything. Indeed, the US has embraced the complete opposite with the FOMC now openly aiming to boost asset and consumer prices. Not to mention,


Links November 5: QE II launch

FOMC statement in plain English. NPRBernanke put. Gavyn Davies, Felix SalmonBOJ QE pumped stocks, temporarily. PragCapAnd the markets love it. FTMultilateral trade scenarios.Michael PettisBudget catches Dutch Disease. SMHDOW rocket. BloombergCommodity rocket: Copper up, B of A screwed; PIGS monstered I, II, III;


How long can the hangover last.

Another day, another bank giving an unconvincing performance to overseas investors that there is no problems with Australian banking. WESTPAC’S $6 billion profit was not good news for all, with as many as 6000 head office and administration workers to go over the next two years. The job cuts are part of attempts by chief


Are they at it again ?

Some months ago we found a desperate attempt to drum up business by the RE industry. However because there is no regulator for this ridiculous industry it seems they have no problem with trying again. Today we note that a new set of poor dears are struggling because the neighbours have turned into renters… Time


A benevolent bust?

The FT’s Lex column has an interesting take on the RBA, commodities and the housing bubble today: Most Australians spent the first Tuesday in November obsessed with the Melbourne Cup. But the “horse race that stops the nation” did not prevent Glenn Stevens from working. The governor of the Reserve Bank of Australia raised interest



So, the Canadians have blocked BHP, as predicted. Good for them. Commentary is full of the usual one-eyed drivel about a “shock decision”. John Durie is typical: BHP can attempt to overturn the decision and will be as confused as everyone else given this was only Canada’s second rejection of a foreign takeover since it



This blog has dug up some beautiful graphs that show precisely where the RBA thinks net interest margins are for the big banks. But it’s not going to show them to you. The reason why is that they’re irrelevant. Despite what all but a handful of senior commentators are telling you, neither interest rates nor


Links November 4: Go to sleep little sheep

Bank strategy working. Apparently, it’s all about interest rates:Jennifer Hewitt on small business pain David Uren on gouging, notJohn Durie on ACCC powersScott Murdoch’s blahLenore Taylor supports Hockey’s nine pointsTerry McCrann & Stephen Bartholomeusz apologise for WestpacExcept Glenn Milne, who gets that it’s much bigger.Fed goes for $600 billion. BloombergQEII pushed RBA’s hand. WSJ, BloombergEmerging


Stage 1 – Panic and escape

Well the RBA came out and surprised everyone yesterday by putting up rates by a teenie weenie 25 bps. Setting off the gougies, as we expected, and frothing up the pollies who handed the same banks their position of power. Before we give some further analysis of what we think is going to happen next,


Hats off to a real banker

The SMH reports that today the chairman of Adelaide/Bendigo Bank Robert Johnon has called for a new Inquiry into banking: Bendigo and Adelaide Bank Ltd has called for another parliamentary inquiry into Australia’s financial system to address the banking system’s reliance on offshore funding. Bank chairman Robert Johanson told shareholders he hoped the Senate’s inquiry