Apr 09
26
Australian Banks Need Airbags Fitted
At Perceptric, we observe and we count and then we blog and
occasionally as a result, we consult.
Today is freebie consult for Kevin.
One thing we count is the popularity of memes, themes and
trends.
The popular press is having a heyday with the Global
Financial Crisis (GFC) (And, almost 38% of the requests for content on Perceptric appear to be for articles about the GFC.)
In March Last year Chris Gilbey
blogged about The
Coming Crash
Here's my last news flash for you. If a fellow with no
education, a poor diet, and inadequate medical treatment living at 3,500 meters
above sea level can figure out that the US dollar is undesirable as a store of
wealth, how much longer do you think it can last as the world's reserve
currency? The short answer is that the party is over and all things dollar
related will go up the stack with it. Henrico
Orlandi Mar 8, 2007
And then in October, he blogged about Inside
the Crash in which he quoted Eliot Spitzer
From an article in
the Washington Post Thursday, February 14, 2008
Not only did the Bush administration do nothing to
protect consumers, it embarked on an aggressive and unprecedented campaign to
prevent states from protecting their residents from the very problems to which
the federal government was turning a blind eye.
This was the article
– that ended Eliot Spitzers Governership of New York and removed all hope of Hillary
Clinton being nominated
for the “Big” job.
Dear Reader I can hear the question in your mind “But what’s
the Point? Where’s the meme, the trend?”
meme no.1 – it doesn’t pay to criticize the governments
fiscal policy.
meme no.2 if you do – you will be felled – for some
unrelated reason.
meme no 3. and while everyone is watching the magicians
other hand – the financial institutions keep on carrying on.
87% of Perceptric.com readers according to Alexa originate
in Australia.
Yet Inside the Crash is our most reviewed article.
Are Australian readers researching their own possible future? I put it to you
that they are.
The global meldown has everyone watching the banks for the
first sign of recovery.
The press, analysts and economists are predicting a long
haul.
Overseas bank bail-outs don’t seem to have had any effect on
the continuing closures and layoffs within our own borders.
People are scared and divided into two consumer camps. There
are the hoarder savers and the ostriches (tomorrow may never come, so live it
up now).
This division of consumer spending is causing quite rightly,
some concern in the bowels of the Australian Banking industry which combined
with financial horror stories from abroad is resulting in a credit squeeze in
Oz.
In Australia,
our housing sector is yet to see the full force of the future deflation.
Our Prime Minister is doing his best to encourage young
people to get into their first home before the First Home Owners Scheme expires
at the end of June.
What he hasn’t put into effect is the anti-deflationary
measures required to ensure that current purchasers are not the first ones
evicted when the housing market heads south.
One way to do this would be to guarantee the present equity
in each and every new issued mortgage.
New home buyers are exposed on two fronts.
Continuing employment
Equity value –v- interest rate rises.
Eventually the Australian Reserve Bank will be forced to
raise interest levels, and unemployment is rising.
Kevin Rudd needs to implement an Australia
wide mortgage guarantee insurance policy, available at a nominal fee (and
mandated as part of the mortgage documentation) to all new home buyers aged
between 20 and 30.
Most Mortgage protection policies are structured with a
fixed term payout clause.
In this instance, the Government needs to ensure that the
“fixed term” liability is removed for a period of up to six years.
These are the people that will be the victims when thousands
disappear off their equity balance sheet and they are retrenched.
If the Government moves to protect the new home buyers (GIO),
ensuring in the process that they will not turn into the new homeless ex-buyers
of the future, then the banks will reward this initiative by again loosening
the commercial strings for businesses that create Australian goods for
Australian consumption.
The train wreck hasn’t yet reached our shores; let’s lay
down lots of sandbags before it does.