Tag Archives: housing bubble

RBA Officials Have Vested Interest In Fate Of Aussie Real Estate

23 Jun

From Business Spectator, September 20, 2010:

According to a recent report by Goldman Sachs chief economist, Tim Toohey, household debt levels in Australia now stand at an elevated level, both in relation to historic norms, and compared to other countries. For instance, Australia’s debt to household income ratio is higher than in the United States and Spain, and stands at a similar level to the United Kingdom.

Toohey has written a perceptive report on the Australian housing market, in which he argues that housing prices are between 25-35 per cent overvalued. As a result, he says, we run the risk that Australia’s house prices could drop sharply if a sharp decline in Chinese growth prompted a steep drop in our export earnings.

Interestingly, it appears that Reserve Bank officials are the keenest investors in rental properties. “We are not sure whether to be relieved or concerned that of the five central bankers who were brave enough to note their occupation on their tax form, all five had an investment property!”, the report says. “Of the 200 occupations classified by the Australian Tax Office, the employees at the Reserve Bank topped the list with respect to their investment property exposure.”

There’s more than one way to look at this very interesting revelation.

1. The “independent” RBA has a vested interest in fuelling Australia’s property bubble – which helps to explain the low interest rate policies of the early 2000’s that so helped to encourage excessive borrowing and real estate speculation.

2. The “independent” RBA has a vested interest in keeping the property bubble afloat – so that RBA officials do not suffer capital losses on their existing property portfolios.

3. My favourite.  The “independent” RBA has a vested interest in first fuelling a property bubble with low interest rates – meaning officials make profits on the way up – and then, collapsing the property bubble at a time of their choosing (by raising interest rates), so that officials can buy in to the property market again (and buy up even more), after prices have fallen dramatically.

One can only wonder about the investments of “independent” RBA Governor, Glenn “$234k Pay Rise At GFC Peak” Stevens.  Has he profited from his Board’s decisions on interest rates? Will he personally profit by (again) raising interest rates into the teeth of an onrushing GFC 2.0?

Next time you hear an RBA official like Stevens talking about interest rates, or the housing market, just remember this article.

And remember that, whatever happens to the housing market, it is those same “independent” RBA officials who know what is going to happen… before you do.

GFC2 Will Be Brought To You By “A Stupid F***in’ Government And Above All, Wankin’ F***in’ Bankers”

20 Jun

WARNING: We all know that any warning to the effect that the following contains language that may offend some viewers, or is unsuitable for children, only guarantees that children and/or those who might be offended will definitely view the potentially offensive material.  So, this warning is a warning that the following does NOT contain language unsuitable for children or that may be offensive to some viewers.  And if you believe that, then there’s really no help for you, now is there.

Fitch Ratings Lists Australia’s 50 Most Delinquent Regions

15 Jun

h/t MacroBusiness.

Does your area feature in the Top 50 list of regions with the highest rates of mortgage payment delinquency (click to enlarge):

Source: Fitch Ratings

Source: Fitch Ratings

Mortgage arrears rising.

House prices falling.

Recently downgraded banking system with $15 Trillion in Off-Balance Sheet “Business” (derivatives) versus only $2.66 Trillion in On-Balance Sheet “Assets” … 66% of which “assets” are actually loans.

Australia “almost certainly” in recession in 2nd half of 2011.  With eastern Australia already “in deep recession” and NSW/VIC manufacturing “stuffed”.

Warnings of a “perfect storm” of fiscal woe “by 2013 at the latest” from the man made famous for predicting the GFC.

Confirmation that the USA is defaulting on its debts (just as Barnaby warned in 2009).

Warnings that our biggest customer China is likely to experience a “hard landing”, with a 60% chance of the trigger being an internal banking crisis.

Warnings that China and our second biggest customer, Japan, are set to slow … or implode.

A blithering idiot RBA Governor who “does not know anyone” who predicted the GFC, but still in charge of setting interest rates. Having learned nothing from his screw up in raising rates into the teeth of the 2008 GFC.  And keen to raise them again.

Our banks being warned for even more reckless lower lending standards, in trying to keep their property bubble-fuelled ponzi scheme from collapsing.

And both major parties planning to steal our super to pay down ever-rising, all-time record public debt.

This is “How Australia Will Look When The SHTF”.

China’s Economy At Risk Of “Hard Landing”, 60% Chance of Banking Crisis By Mid-2013

12 Jun

Nouriel Roubini, one of the dozen or so economists who predicted the GFC, has just given an ominous warning for all those – like Wayne Swan, the Treasury department, former Treasury secretary (and now personal adviser to Gillard) Ken Henry, and the RBA – who are blindly banking on a never-ending China boom, with continuous record high terms-of-trade, to get us out of their $1.59 million per hour Interest-only debt hole.

From Bloomberg, 11 June 2011:

China’s economy is at risk of a “hard landing” after 2013 as efforts to spur growth through investment cause excess capacity, said Nouriel Roubini, the New York University professor who predicted the financial crisis.

“China is now relying increasingly not just on net exports but on fixed investment” which has climbed to about 50 percent of gross domestic product, Roubini said in Singapore today. “Down the line, you are going to have two problems: a massive non-performing loan problem in the banking system and a massive amount of overcapacity is going to lead to a hard landing.”

The nation faces a 60 percent chance of a banking crisis by mid-2013 in the aftermath of record lending and surging property prices, according to Fitch Ratings. A record $2.7 trillion of loans extended over two years has pushed property prices in China to all-time highs even as authorities set price ceilings, demanded higher deposits and limited second-home purchases.

Anything else?

There is increasing evidence of a potentially “excessive” slowdown in the world economy and crude prices may climb to as much as $150 per barrel if unrest in major oil-producing nations intensifies, Roubini said.

Roubini in July 2006 predicted a “catastrophic” global financial meltdown that central bankers would be unable to prevent. The collapse of Lehman Brothers Holdings Inc. in 2008 sparked turmoil that led to the worst financial crisis since the 1930s.

Oops.

There goes the neighbourhood.

And your super.

Hmmm, what was that warning Barnaby gave us around a year ago? Something about “a bigger GFC”?

Barnaby is right.

Dr Steve Keen Explains That Our Banks Have Lent Irresponsibly

11 Jun

Dr Steve Keen is one of only 13 economists world-wide who predicted the GFC in advance. And not just on a guess or a hunch … only these 13 advanced reasons why they believed that a GFC was coming.

Indeed, in May 2010 Dr Keen was the winner of the Revere Award – voted by his peers – for being the international economist who first and most cogently forewarned of the coming GFC

Here’s Dr Keen explaining how our “safe as houses” banks have lent irresponsibly. Even moreso than American banks.

Listen and learn, from a rare expert who is still in touch with the real world, and therefore does know more than just useless intellectual “theories”:

Fresh Evidence Our Banks In ‘Race To The Bottom’ Means You Can Kiss Your Super Goodbye

9 Jun

From news.com.au, 7 June 2011:

Fresh evidence is emerging of a “race to the bottom” among banks and other lenders as demand for mortgages slides and competition boils over.

Lenders are increasingly cutting standards by enabling home buyers to make smaller deposits, new research indicates.

About three in every five mortgage products now enable home buyers to borrow up to 97 per cent of the value of their property, according to financial research group RateCity.

RateCity chief Damian Smith said the rise in loan-to-value ratios (LVR) indicated that lenders wanted to kick-start growth in the sluggish home loan market.

“We haven’t seen this level of money offered to mortgage borrowers since the start of 2009,” Mr Smith said.

He warned that change in lending criteria was putting borrowers at risk.        

“There is a concern for some borrowers who take on too much debt, because it makes them more susceptible to risk if rates increase or property values fall.”

It’s not just borrowers that are put at risk.

What this means is that the day is drawing nearer when the Government proclaims “No Super For You!!”

How’s that, you say?

Bear with me on this. All will become clear:

High loan-to-value ratios also place banks at greater risk, with the likelihood of a lender absorbing a loss in the foreclosure process increasing as the amount of equity decreases.

Similar borrowing practices were behind the collapse of the US housing sector when people with a higher chance of defaulting on on their payments were provided loans at higher-than-normal interest rates.

Indeed.

It places banks at greater risk.

On 18 May 2011, Fitch’s Ratings credit rating agency offered this ominous warning about Australia’s banks’ lending standards (from Business Week):

… Australian banks could have their credit ratings cut if they lower standards to boost mortgage sales as demand for home loans slumps.

If we do start to see signs of erosion in those lending standards, there may be some negative pressure on ratings coming through,” Tim Roche, director of Fitch’s financial institutions group in Sydney, told a credit forum today.

Here’s how the domino effect works.

1. House prices fall – as they are right now.

2. Banks lower lending standards – as they are right now.

3. Arrears on mortgages rise – as they are right now.

4. Ratings agencies cut Big Four banks’ credit rating – as they have just done, and are threatening to do again.

5. Banks cost for wholesale funding rises due lower credit rating.

6. Banks pass on increased costs to you, as interest-rate increases.

7. Mortgage arrears rise further due to interest rate, cost-of-living pressure.

8. House prices fall further due “distressed” vendor sales.

9. Banks’ “asset” values, profits fall.

10. Residential Mortgage-Backed Securities (RMBS) fall in value and are downgraded – as they are right now.

11. Banks’ lose trillions on “derivatives” bets related to RMBS.

12. Banks’ credit ratings downgraded even further.

13. Rinse and Repeat, from 5.

14. Bank/s cannot borrow (a “credit squeeze”).

15. Short-sellers smell blood in the water; Banks’ share prices collapse.

16. Banks fail … just as in the USA, UK, and the EU.

17. Government pilfers your super to prop up our government-guaranteed, Too Big Too Fail banks.

Think it can’t happen here?

It can.

And it will.

Both parties are already planning for it.

The Government has effectively guaranteed it (How? By guaranteeing the banking system; a guarantee underwritten by you, the taxpayer).

And Senator Joyce has specifically forewarned of it.  Just as he (correctly) forewarned of the US debt default that is happening right now.

Labor has introduced legislation moving in that direction in the May budget.

And the Liberal Party has just announced a new policy – disguised as a “reform” to “help” business – that is aimed squarely at getting the ATO‘s hands on your super … before it even gets to your super fund.

Learn all about the wave of superannuation confiscations rolling across the Western world, and our own super theft to come, here.

UPDATE:

h/t reader and Guest Poster “JMD”, in Comments below.

Want to try and access your super early, and beat the government to it?

No can do.

Not unless you’re underwater on your mortgage. Then you can … to pay out the banksters:

“You can however access your super early, ‘to prevent your home being sold by the mortgage lender as a result of non payment on your home loan’. It would be interesting to find out when that rule was slipped in, allowing the banks to access your super but not you.”

Go to http://www.rest.com.au/Forms-Publications.aspx

You will see a tab to click on; Withdrawals from your account, then a pdf; “Fact Sheet: Accessing your super early.”

Liberal Party’s Sneaky Plan To Steal Your Super To Pay Labor’s Debt

7 Jun

From the Liberal Party’s website, Latest News, 3 June 2011:

The Coalition will relieve the red tape burden from Australia’s small businesses by giving them the option to remit the compulsory superannuation payments made on behalf of workers, directly to the ATO.

Small business will be given the option to remit superannuation payments to the ATO at the same time as they remit their PAYG payments.

This will require only one payment to one agency – rather than multiple cheques to multiple superannuation funds. The ATO will be responsible for sending the money to superannuation funds directly.

Senator Barnaby Joyce writing for The Punch, 13 May 2011:

On Tuesday night’s budget, Labor sneaked in an Amendment of the Commonwealth Inscribed Stock Act 1911. Here is the most telling statement for where our nation is going under this Green-Labor-Independent Alliance. Under Part 5 Section 18 subsection 1 “omitting ‘$75’ and substituting ‘250’ ”.

Now that is in billions ladies and gentlemen and it is real money that really has to be paid back. If we have all this money stashed away under the lower net debt figure that is always quoted by Labor, then why not use some of this mystery money to pay off what we owe to the Chinese and others who we are hocked up to the eyeballs to.

The reason why we can’t is at least $70 billion that makes up ‘net’ debt is tied up in the Future Fund and student loans.

Of course, the public servants will not be happy when we use their retirement savings, put aside in the Future Fund, to pay off some of Labor’s massive debt.

So you won’t vote for the Coalition then?

There’s no salvation on the Left.

Labor has already introduced legislation in the 2011-12 Budget that aims to grab your super too.

In fact, Labor’s Minister for Financial Services and Superannuation, Bill Shorten, published an op-ed a month ago stating that he views your super as “our sovereign wealth fund”.

There is a wave of government confiscations of private retirement savings rolling around the Western world right now.  The first ripples have quietly rolled onto our shores already.

Your super savings are not safe.

From either party.

Learn the full story, in “No Super For You!!”

No Super For You!!

6 Jun

* Extended update of original article published 18 May 2011. Includes details of a disturbing new Liberal Party policy, announced Friday 3 June.


What will you do when they take away your super?

From the Washington Post, 17 May 2011:

Treasury to tap pensions to help fund government

The Obama administration will begin to tap federal retiree programs to help fund operations after the government lost its ability Monday to borrow more money from the public, adding urgency to efforts in Washington to fashion a compromise over the debt.

Treasury Secretary Timothy F. Geithner has warned for months that the government would soon hit the $14.3 trillion debt ceiling — a legal limit on how much it can borrow. With that limit reached Monday, Geithner is undertaking special measures in an effort to postpone the day when he will no longer have enough funds to pay all of the government’s bills.

Geithner, who has already suspended a program that helps state and local government manage their finances, will begin to borrow from retirement funds for federal workers.

The USA is taking public servants’ pension funds, to pay government bills.

Note that well.

Because just over 3 weeks ago – and 4 days before that Washington Post story hit the wires – our own Senator Barnaby Joyce made a very disturbing revelation (below).

Think it could only happen in America?

From Reuters, 21 October 2008:

Argentina’s center-left President Cristina Fernandez on Tuesday signed a bill for a government takeover of the $30 billion private pension system in a daring and unexpected move that rocked domestic markets.

From Bloomberg, 26 November 2010:

Hungary is giving its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension.

Economy Minister Gyorgy Matolcsy announced the policy yesterday, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.

“This is effectively a nationalization of private pension funds,” David Nemeth, an economist at ING Groep NV in Budapest, said in a phone interview. “It’s the nightmare scenario.”

But Argentina and Hungary are not like us, right? That couldn’t ever happen in a Western economy like ours, could it?

From eFinancialNews, 29 November 2010:

France seizes €36bn of pension assets

Asset managers will have the chance to get billions of euros in mandates in the next few months for the €36bn Fonds de Réserve pour les Retraites (FRR), the French reserve pension fund, after the French parliament last week passed a law to use its assets to pay off the debts of France’s welfare system.

Oh, but that’s France. They’ve got hangover problems from the Global Financial Crisis, right? That couldn’t happen in a really strong economy like ours, one that sailed through the GFC without even having a recession … right?

Wrong.

Poland was the only economy in the European Union to achieve economic growth through the GFC. It then doubled economic growth in 2010. It is the sixth largest economy in the EU, and is considered “Europe’s new economic superstar“.

Despite this apparent success, Poland too has just passed new laws to steal more of its citizens’ private retirement savings.

From Warsaw Business Journal, 9 May 2011:

The government’s controversial pension reform plan, which slashes the percentage of workers’ salaries going to private pension funds (OFEs) from 7.3 to 2.3 percent, became law on May 1. OFEs will start receiving the reduced amounts from June.

The changes mean that the state-controlled social security and pension fund, ZUS, will now receive 17.22 percent of workers’ salaries…

Critics have said the changes were nothing more than some creative accounting by the government to shore up its budget deficit

And from Global Pensions, 6 May 2011:

It appears moving backwards on pension reforms has become the thing to do on both sides of the Atlantic.

Hungary last year moved much of its private pension assets to the state. Last month, new rules came into effect in Poland diverting 5% of the 7.3% of salary going to private pension funds to the state.

another recent reversal we’ve seen has come from Latin America. In the 1990s, Bolivia’s decision to move its pension assets from the state to private managers placed it among the most advanced pension systems in the region. However, the current government has decided to nationalise the assets once more claiming it is creating a pension system that is equal for all.

Oh yes, but Poland is really just a Central European economy, not long removed from communism. Something like that couldn’t ever happen in a mid-level, “advanced Western economy” like ours … right?

From Business Insider, 10 May 2011:

Irish Bombshell: Government Raids PRIVATE Pensions To Pay For Spending

“The various tax reduction and additional expenditure measures which I am announcing today will be funded by way of a temporary levy on funded pension schemes and personal pension plans.”

But the Irish had a really big housing bubble, didn’t they? No way anything like that could happen here … right?

From the Sydney Morning Herald, 4 March 2011:

Australian house prices remain the most overvalued in the world, according to the latest quarterly ranking of global house prices by The Economist magazine.

But our housing market could never fall. Not like it did for Ireland … or the USA … or the UK … or Spain … right?

From AAP, 29 April 2011:

Capital city home prices have posted their biggest quarterly fall in at least 12 years, as more stock in the housing market allows prospective buyers to wait for bargains, a survey shows.

Capital city dwelling values fell by a seasonally adjusted 2.1 per cent in the first quarter of the year, according to the latest RP Data-Rismark Home Value Index.

The quarterly change was the steepest since the index series began in June 1999, RP Data research director Tim Lawless said.

And from the Sydney Morning Herald, 17 May 2011:

Real estate slump will leave banks in pain too

Australian real estate, long the subject of global concern, bears all the symptoms of a market that simply has run out of puff.

Ever since America’s housing bubble burst in 2007, setting off a chain reaction in Britain and across Europe – which then infected the global financial system – international pundits have been warning of a similar catastrophe here.

Do you remember what our government did the last time our real estate market began to fall sharply?

It was during the 3-month peak of the GFC, in late 2008 / early 2009:

Steve Keen's Debtwatch

The Labor Government guaranteed to use taxpayers’ future earnings to underwrite our banks’ trillions in foreign liabilities. Poured $20 billion in borrowed money into Residential Mortgage-Backed Securities (RMBS). And borrowed billions more to prop up the housing market. How? By bribing thousands of young people into massive debt, thanks to the government’s double-trouble First Home Owners Grant.

About that $20 billion in RMBS that Wayne Swan purchased.  With borrowed money. Just how safe is that $20 billion “investment” looking?

From the Sydney Morning Herald, 26 May 2011:

Arrears on mortgage repayments spiked to a record high in the first three months of 2011, as more Australians struggle with rising costs, Fitch ratings agency says.

Arrears on prime residential mortgage-backed securities (RMBS) of 30 days or more hit a record high of 1.79 per cent in the first quarter, from 1.37 in the final quarter of 2010, the group said, as Christmas spending and the Queensland floods forced more Australians to struggle in repaying their mortgages.

RMBS are home loans which are bundled together and sold to institutional investors by banks and mortgage lenders. Misrated RMBS were at the heart of the subprime crisis in the US which lingers to today.

It only gets worse though:

The increase in arrears for the most fragile band of mortgage borrowers, low-doc loans, with payment delays of 30 days or more hit 6.74 per cent in the first quarter, up from 5.7 per cent in the final quarter of 2010, a higher level than December 2008 quarter, when the financial crisis hit and the Reserve Bank began rapidly lowering rates.

Low-doc mortgages are written for riskier borrowers than prime mortgages, which are written for customers who have a reasonably safe ability to borrow.

Delinquencies of three months or more on conforming low-doc mortgages, which are used by people who are self-employed for example, soared past 5 per cent in the March quarter, from about 3 per cent the December 2010 quarter.

Would our Wayne have “invested” any of that borrowed $20 billion in low-doc RMBS?  Or, did he stick with prime RMBS?

From the Australian Office Of Financial Management website:

Purchase of RMBS – Program Update

Minimum Eligibility Requirements

* Low documentation loans, that is loans underwritten using alternative income verification procedures, may be included in mortgage pools.

Well done Wayne.

$20 billion worth of RMBS. With low-doc loans included. A brilliant government “investment” in keeping our property bubble inflated. And now that investment too, is failing, with record-high arrears on the mortgages backing those “securities”.

But there’s nothing really to worry about, because we’ve got the “strongest banking system in the world”, right? Even if the property bubble does pop, our government would never need to go looking for even more money, to bail out our banks … right?

On 17 May 2011, leading credit rating agency Fitch’s downgraded 54 ‘tranches’ of Australian Residential Mortgage-Backed Securities, indicating that “cash-strapped borrowers and tight-fisted mortgage insurers are a greater threat to Australian banks than previously thought.

The next day, another leading credit rating agency Moody’s downgraded our Big Four banks.

From the Sydney Morning Herald, 18 May 2011:

Moody’s Investors Service has downgraded the long-term debt ratings of Australia’s big four banks to Aa2 from Aa1, citing their relatively high reliance on overseas funds rather than local deposits.

Moody’s explanatory paper effectively stated that our banks are Too Big Too Fail.  That the Big Four’s liabilities must continue to be supported by the Australian Government Guarantee For Large Deposits And Wholesale Funding that Labor “decisively” introduced (like Ireland) in response to the GFC. And if the guarantee is removed, Moody’s indicated that the Big Four’s long-term debt ratings will be downgraded by at least two further ‘notches’.

Meaning?

Moody’s has just placed our government on notice.  Australian taxpayers are now effectively on the hook – permanently – to bail out our banks when our housing bubble bursts.

Exactly the same thing that happened in the USA, UK, Ireland, Spain et al.

Don’t believe that we have a housing bubble?  Think the nightmare housing-driven bank collapse scenario that is throttling the rest of the Western world won’t ever happen here?

Fine.

If the housing-collapse trigger event is not enough to bother you, then take a moment to think about derivatives.

Those “exotic” financial instruments that were at the heart of the Global Financial Crisis. The ones that famously prudent investor Warren Buffet referred to as “a mega-catastrophic risk”, “financial weapons of mass destruction”, and a “time bomb”, way back in 2003.

The same kind of exotic instruments that lauded economist Saul Eslake also referred to just a few days ago, in an argument with me on my blog over my criticism of his public lobbying for a carbon dioxide “pricing” scheme (emphasis added):

“And while it is true that banks might make money from an emissions trading scheme, they could just as likely lose (as many banks have done from trading other ‘derivatives’”.

Do our banks have much exposure to derivatives now – even before an emissions trading scheme is introduced?

Sure do.

Prepare to be shocked.

According to RBA statistics at December 2010, Australia’s banking system has $15 Trillion in Off-Balance Sheet “Business”, versus a mere $2.66 Trillion in On-Balance Sheet “Assets”.

And exactly what kind of “business” makes up 92.3% of that “Off-Balance Sheet” $15 Trillion – more than 10 times our nation’s annual GDP?

You guessed it. Derivatives.  Those “financial weapons of mass destruction” which so nearly blew up the whole world in 2008-09.

Finding it a bit difficult to get your head around these huge numbers?  Pictures often help.

Take a look at this simple chart comparing our “safe as houses” banks’ On-Balance Sheet “Assets” (blue line) – which are 66% loans – versus their Off-Balance Sheet “Business”, 92.3% of which is derivatives (click to enlarge):

$2.66 Trillion in "Assets" versus $15 Trillion in Off-Balance Sheet "Business"

Still feeling confident about our banking system?

There’s more.

Australia’s banking system only just dodged a bullet in 2008-09, thanks almost entirely to the government (taxpayer) guarantee which is still in place today.

“Almost” entirely thanks to the government guarantee, you say?

That’s right. Something else helped save our banking system too.

The Australian public remains blissfully unaware that during the GFC, two of our Big Four banks, and our very own central bank, the RBA, all obtained secret emergency loans from the US Federal Reserve – which is simply printing new money, Zimbabwe-style.

From Business Spectator, 3 December 2010:

National Australia Bank Ltd, Westpac Banking Corp Ltd and the Reserve Bank of Australia (RBA) were all recipients of emergency funds from the US Federal Reserve during the global financial crisis, according to media reports.

Data released by the Fed shows the RBA borrowed $US53 billion in 10 separate transactions during the financial crisis… according to a report in The Australian Financial Review.

NAB borrowed $US4.5 billion, and a New York-based entity owned by Westpac borrowed $US1 billion, according to The Age.

If you think “it could never happen here”, if you think that our government would never take away your super to pay for its massively wasteful spending, its crappy “investments”, or to bail out our Too Big Too Fail, very recently downgraded, multi-Trillion derivatives-laden banking system, then it’s time for you to think again.

Were you one of the many who ridiculed Barnaby Joyce’s warnings in late 2009, about the possibility of a US debt default (“Barnaby Warns Of Bigger GFC“)?

That’s coming to pass right now. Trying desperately to avoid a default is the reason why the US Treasury has now resorted to stealing federal workers’ retirement savings, to pay government bills.

So pay close heed to another prescient warning from Barnaby, given on 13 May 2011:

On Tuesday night’s budget, Labor sneaked in an Amendment of the Commonwealth Inscribed Stock Act 1911. Here is the most telling statement for where our nation is going under this Green-Labor-Independent Alliance. Under Part 5 Section 18 subsection 1 “omitting ‘$75’ and substituting ‘250’ ”.

Now that is in billions ladies and gentlemen and it is real money that really has to be paid back. If we have all this money stashed away under the lower net debt figure that is always quoted by Labor, then why not use some of this mystery money to pay off what we owe to the Chinese and others who we are hocked up to the eyeballs to.

The reason why we can’t is at least $70 billion that makes up ‘net’ debt is tied up in the Future Fund and student loans.

Of course, the public servants will not be happy when we use their retirement savings, put aside in the Future Fund, to pay off some of Labor’s massive debt.

!??!

That is exactly what is happening in America. Right now.

And Barnaby is warning that it could happen here too.

The first steps in that direction have already begun.

From Global Custodian (Australia edition), 11 May 2011:

The Gillard government’s 2011-12 budget has proposed a raft of initiatives aimed at encouraging superannuation fund and private investment in infrastructure projects.

In light of the botched “school halls” program, and the stalled white elephant NBN – which so far has only achieved a 12% takeup rate, versus their predicted 58% – would you really trust this government to wisely and prudently invest your super in Government infrastructure projects?

Others have their doubts.

From The Australian, 12 May 2011:

The government’s plan to use tax incentives to encourage superannuation funds to invest in new infrastructure could be thwarted by inadequate returns on projects and a reluctance by the states to take on project risk, experts say.

First, a little “encouragement” for super funds to invest in government spending programs.

Then, when the costs blow out, or when the government debt becomes unmanageable … or when the banks need bailing?

“No super for you!”

Barnaby is the only one on the ball.

And, he is the only politician in Australia with the honesty, decency, and courage, to (once again) try to forewarn the public about the risks of debt, and where this debt train is taking us.

Still not convinced there’s anything to worry about?

Then consider the words of Labor’s PM-in-waiting, the Minister for Financial Services and Superannuation, Bill Shorten. He already thinks of your super as a “significant national asset” … a kind of “sovereign wealth fund”.

From Shorten’s op-ed published in The Australian, 4 May 2011:

Superannuation is our sovereign wealth fund

This week marks 12 months exactly since the government announced plans to take compulsory superannuation from 9 per cent to 12 per cent.

… our superannuation savings place Australia fourth in the world. Its $1.3 trillion in funds under management through superannuation significantly boosts national savings and provides greater retirement security for millions of Australians. Superannuation is also a significant national asset because it strengthens our financial sector.

Superannuation “strengthens our financial sector”? Can you see where this is going?

Shorten and his cohorts already have their eyes on our $1.3 Trillion in super savings. In Labor’s view, your retirement savings are “our sovereign wealth fund”.

When our Too Big Too Fail, derivative-laden banks inevitably run into trouble again – as indeed they are right now with a falling housing market – you should have no doubt that our government will follow the lead of the USA, France, Ireland, Poland, and all the rest, and simply take your super to prop up our “financial sector”.

After all, they have “guaranteed” our banks.  Your future taxes … and if necessary, your super … are the collateral for those guarantees.

But if the Coalition wins government everything will be fine, right?  They’re far better economic managers, right?  We can all trust the Liberal Party not to put their hands on our super, to pay down Labor-incurred debts … right?

Wrong.

Just this past Friday 3 June 2011, the Liberal Party announced a new policy that they will take to the next election. Loaded with weasel words, it is yet another harbinger of the super theft to come, sneakily disguised as a helpful “reform”.

From the Liberal Party website:

Further relief for small business

The Coalition will relieve the red tape burden from Australia’s small businesses by giving them the option to remit the compulsory superannuation payments made on behalf of workers, directly to the ATO.

Small business will be given the option to remit superannuation payments to the ATO at the same time as they remit their PAYG payments.

This will require only one payment to one agency – rather than multiple cheques to multiple superannuation funds. The ATO will be responsible for sending the money to superannuation funds directly.

Can you see the cunning plan here?

Billions and billions of dollars in compulsory superannuation payments, going directly from our employers’ bank accounts to the government’s tax department , every 3 months. And we have to simply trust the government of the day, that every cent of it will immediately be passed on to our private super funds. Not siphoned off into special “investments”, or government accounts.  Or simply “sat on” for a month or so, in order to prop up the government’s weekly cashflow needs.

Oh, but not to worry … it will just be an “option” for “small” businesses to do this, of course.

Right. If you believe that, then I’ve got an air-backed derivative called a “carbon permit” to sell you. Ever heard the old saying, “It’s the thin end of the wedge”?

A final thought.

Our government is presently considering the Garnaut proposal for introduction of a carbon dioxide “pricing mechanism”. A key part of this proposal that has (surprise surprise) drawn strong public support from economists employed by the banking sector, is the suggestion that the billions of dollars raised should be administered by an “independent” Carbon Bank. One that …

…could be allowed to borrow money to invest in renewable energy projects against the future revenue of Labor’s proposed carbon tax and emissions trading scheme.

In other words, a Carbon Bank run by unelected, unaccountable parasites – chosen from the banking sector, no doubt – with the government … meaning taxpayers … acting as the final guarantor for any losses made on their “green” “investments”.

Does that prospect concern you?

Can you see where this is all heading?

We have a government that has already racked up nearly $200 billion in gross debt.

Is running a “forecast” $50 billion annual budget deficit.

Is presently borrowing at a rate of over $2 billion per week.

And – like an America’s “Mini-me” – has now moved to raise our debt ceiling by another $50 billion (ie, a 25% increase), to a new record quarter of a Trillion dollars.

This is the same government of completely unqualified economic incompetents behind a string of costly disasters – killer ceiling insulation, overpriced school halls, “green scheme” rorts, subsidised Toyota hybrids (that noone except government is buying), the problem-plagued Nation Bankrupting Network … and their latest rort-ridden debacle, “free” set-top boxes.

Do you honestly believe that this government would not end up burying taxpayers with even bigger losses from their carbon dioxide “air tax” scheme too?

Do you honestly believe that this government would never follow the lead of Argentina, Hungary, Bolivia, France, Poland, Ireland, and now the superpower USA … and steal your super to pay for massive debts that they have racked up?

These are just some of the many sound reasons why Senator Joyce has persistently tried to raise public awareness of the real and grave peril of ever-increasing government debt and deficit, in a (supposedly) post-GFC world.

Your retirement savings depend upon your taking notice of his warnings.

Barnaby is right.

If like me you are under 50 years old – indeed, if you are under 60 years old – then I’m willing to bet you all of my super that you will never see all of yours.

And unlike our bank(st)ers and government … I never bet.

Fresh Financial Crisis “Around The Corner”

31 May

More warnings that GFC 2.0 is on the way … and that those toxic financial inventions called derivatives will be front and centre again.

From Bloomberg:

Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is “around the corner” because the causes of the previous crisis haven’t been solved.

The total value of derivatives in the world exceeds total global gross domestic product, creating volatility and crisis in stock markets, Mobius told reporters inTokyo today.

“Are the banks bigger than they were before? They’re bigger,” Mobius said. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”

The global financial crisis three years ago was caused in part by the proliferation of derivative products tied to U.S. subprime loans and contributed to the collapse of Lehman Brothers Holdings Inc. in September 2008.

How relevant is all this to Australia?

Very.

Australia’s Big Four banks have recently been downgraded by Moody’s credit rating agency, mainly due to their reliance on off-shore borrowing.

What this means in practice, is that another GFC-style credit “freeze” in the USA and/or Europe would again bring our banks to their knees in a matter of weeks, begging for Government (ie, taxpayer) financial support.  The granting of which is exactly what has brought Ireland to the brink of total bankruptcy.

Even more worrying, Fitch’s credit rating agency recently placed 54 ‘tranches’ of Australian residential mortgage-backed securities (RMBS) on ratings watch “negative”, due to increasing arrears by overstretched mortgage borrowers.

These are the same kind of exotic financial derivatives that brought down the USA financial system.  And the same clever “investments” that Wayne Swan has poured $20 Billion into.  What’s worse, Wayne has even invested in RMBS that include “low doc” loans. Can you say “sub-prime”?

But in my view, perhaps the biggest concern of all is our banking system’s combined $15 Trillion in Off-Balance Sheet “Business”, which is mostly in, that’s right, derivatives.

Barnaby was right.

How Wayne “Franked” Another $20 Billion

27 May

It’s long past due time that Wayne Swan formally adopted the name of his alter ego, Frank Spencer.

From ceiling insulation to school halls to “green” loans to computers in schools to set-top boxes, every “investment” that our Treasurer touches, ends up totally ‘Franked’.

From the SMH:

Arrears on mortgage repayments spiked to a record high in the first three months of 2011, as more Australians struggle with rising costs, Fitch ratings agency says.

Arrears on prime residential mortgage-backed securities (RMBS) of 30 days or more hit a record high of 1.79 per cent in the first quarter, from 1.37 in the final quarter of 2010, the group said, as Christmas spending and the Queensland floods forced more Australians to struggle in repaying their mortgages.

RMBS are home loans which are bundled together and sold to institutional investors by banks and mortgage lenders. Misrated RMBS were at the heart of the subprime crisis in the US which lingers to today.

As we have seen previously (How Australia Will Look When The SHTF), Wayne has “invested” $20 billion of borrowed money into Australian RMBS since the GFC, to prop up our housing bubble.

Including an extra $4 Billion which he approved in April – (ie) after the period of increasing arrears that is mentioned in the SMH article.

This news gets much worse though:

The increase in arrears for the most fragile band of mortgage borrowers, low-doc loans, with payment delays of 30 days or more hit 6.74 per cent in the first quarter, up from 5.7 per cent in the final quarter of 2010, a higher level than December 2008 quarter, when the financial crisis hit and the Reserve Bank began rapidly lowering rates.

Low-doc mortgages are written for riskier borrower than prime mortgages, which are written for customers who have a reasonably safe ability to borrow.

Delinquencies of three months or more on conforming low-doc mortgages, which are used by people who are self-employed for example, soared past 5 per cent in the March quarter, from about 3 per cent the December 2010 quarter.

Would our Wayne have “invested” any of that borrowed $20 Billion in low-doc RMBS?  Or, did he stick with “prime” RMBS?

From the AOFM website:

Purchase of RMBS – Program Update

Minimum Eligibility Requirements

* Low documentation loans, that is loans underwritten using alternative income verification procedures, may be included in mortgage pools.

Oooooooooo!

Wayne’s ‘franked’ another $20 Billion.

Some Mothers Do ‘Ave ‘Em

UPDATE:

Another ‘franked’ “stimulus” program from Wayne. Remember the doubled First Home Owners Grant, that also helped to prop up our housing bubble?

The Reserve Bank has warned many first home owners who bought into the market with the help of generous federal government assistance may now be vulnerable to rising interest rates.

RBA deputy governor Ric Battellino said today there were concerns that buyers who bought into the market in 2009, when the federal government grant was increased, may have over-committed themselves.

Are any of those hundreds of thousands of “vulnerable” first home owner mortgages actually “low doc” loans, Wayne?

Are any of them packaged up in the $20 Billion worth of RMBS that you “invested” borrowed money in … Wayne Frank?

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