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Exclude homes as speculative assets.
Topic Started: 29 Aug 2015, 10:57 AM (3,223 Views)
John Frum
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Loki
30 Aug 2015, 10:46 PM
They are really a giant leech, sucking the lifeblood out of the economy.
Vampire Squid actually, but close enough.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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peter fraser
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Loki
30 Aug 2015, 10:46 PM
In a discussion where the suggestion is that without banks, there would be a shortage of goods and services, to wit:

OK - I see your point, but there is a case that a business with access to finance has options that a business without access to finance doesn't have, especially if that business wants to grow quickly. Essentially borrowing is a time issue.

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I gave you two counter examples. There are hundreds of thousands more, but I thought two would be enough to see if you could "make an effort" to defend your suggestion, or perhaps even moderate it slightly. But no, it appears that you either believe your own bullshit, or worse.

Yes there are businesses that don't require financing, I have one, but many do need finance, so lets not rule it out as a credible option.
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No, you gave me your belief system, which conveniently fits the narrative of your business. It's the same narrative as the banking system spews out: "The banking system is systemically important to the economy." Puhleeese. Banking, at it's core, is borrowing money at one rate, and lending it at a higher rate. Even a child could do that. What banks are supposed to do is manage risk, but even that is too difficult. They take risks, and when they don't pan out, the taxpayer foots the bill.

Like any business a bank can get it wrong. Whether a government picks up the pieces of the bank is up to the government of the day. There is nothing carved in stone.

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Other than transaction systems like EFTPOS/Paypass, it's difficult to see what social utility the banks offer. Certainly without a government granted oligopoly they wouldn't be viable as businesses. They are really a giant leech, sucking the lifeblood out of the economy.

Banks are no saints, but our economy needs them.

I've told you that many loans that once would have been written as business loans and categorised as such by the ABS, are now written as home loans and the ABS count them as home loans. That skews the statistics, and the skew is considerable. But hey if you choose to not believe that then that's Ok with me, but don't label what you don't know as a lie, because it's not.
Edited by peter fraser, 30 Aug 2015, 11:48 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Trojan
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Loki
30 Aug 2015, 02:07 AM
OK, so you should be able to show that someone with $10,000 in savings who earns $50,000 per year can get a $5,000,000 home loan.

There is no shortage of capital for lending, so it should be easy for you.

Come on. Back up your claim.
Lol, people have posted here many times that the amount of loans written is not restricted by shortage of deposits but by the amount of good loan customers.
So to try and back up your claim that loans are restricted by capital, you ask people to prove bad loan customers can get a loan!?!?!
That's exactly our point! Bad borrowers can't borrow money because they are unable to repay the loan ... it has nothing to do with the limited amount of deposits.

Since deregulation, there has never been a case of a bank saying to a potential borrower, "You are a great borrower and we would happily lend you some money if we had any left. Unfortunately, we have lent it all out to home buyers so you'll have to wait till they repay some of that money first"
Edited by Trojan, 31 Aug 2015, 12:53 AM.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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Loki
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peter fraser
30 Aug 2015, 11:46 PM
OK - I see your point, but there is a case that a business with access to finance has options that a business without access to finance doesn't have, especially if that business wants to grow quickly. Essentially borrowing is a time issue.


Sure, money is condensed time. It brings future transactions forward to the present. However, that carries a risk. What if you miscalculate the future demand, and bring your expansion plans forward to the present. When future demand fails to materialise, you should go bankrupt. That is how capitalism works. How it doesn't work is by putting a tax burden on future generations to pay for the mistakes of the current generation. By making failure riskless.
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Yes there are businesses that don't require financing, I have one, but many do need finance, so lets not rule it out as a credible option.
In the 21st century, most businesses can self fund. If there wasn't some idiotic compulsion to pay dividends, most large Australian companies could self fund without ever taking on debt (extremely capital intensive businesses such as mining are the exception). This has been increasingly so for more than 3 decades. That's why the mortgage and other consumer lending has been the great white hope of the banking industry for the last two decades. Businesses are increasingly self-funding, and more importantly,they are funding startup businesses through venture financing and private equity.

Sure, there are still plenty of people who fund their SMEs by using their house as collateral. They will be wiped out in a severe recession as their business AND their collateral takes a hit.
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Like any business a bank can get it wrong. Whether a government picks up the pieces of the bank is up to the government of the day. There is nothing carved in stone.
I'll remember that the next time the government bails out the banking system. I might even get it carved into a little stone.
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Banks are no saints, but our economy needs them.
What our economy needs is an easy way to trade with each other. At least Australian banks recognise this and have started to put resources into payment systems. They may be too slow, to clumsy and too late. Cryptography and the internet means there are now an infinite number of payment systems, pretty much wherever the internet is. No wonder they got Abbott elected to kill the internet.
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I've told you that many loans that once would have been written as business loans and categorised as such by the ABS, are now written as home loans and the ABS count them as home loans. That skews the statistics, and the skew is considerable.
I concede that is the case. But as the size of the skew is not known (or at least, not provided by you), then it could as easily be 1% as 30%.
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But hey if you choose to not believe that then that's Ok with me, but don't label what you don't know as a lie, because it's not.
Creative accounting then.

Trojan
31 Aug 2015, 12:47 AM
Lol, people have posted here many times that the amount of loans written is not restricted by shortage of deposits but by the amount of good loan customers.
So to try and back up your claim that loans are restricted by capital, you ask people to prove bad loan customers can get a loan!?!?!
That's exactly our point! Bad borrowers can't borrow money because they are unable to repay the loan ... it has nothing to do with the limited amount of deposits.

Since deregulation, there has never been a case of a bank saying to a potential borrower, "You are a great borrower and we would happily lend you some money if we had any left. Unfortunately, we have lent it all out to home buyers so you'll have to wait till they repay some of that money first"
You should probably stick to threads where goldbugs are being ridiculed. You are so far out of your depth here.

It's late. Maybe I will school you tomorrow.

Edited by Loki, 31 Aug 2015, 12:56 AM.


“Talk sense to a fool and he calls you foolish.” - Euripides
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peter fraser
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Loki
31 Aug 2015, 12:52 AM
I concede that is the case. But as the size of the skew is not known (or at least, not provided by you), then it could as easily be 1% as 30%.



It's true I can't quantify the skew, but it's considerable. If I had to have a stab at a number, I would say that between 20% and 30% of business loans to the SME sector are written as home loans, with the likelihood of it being much higher.

I hardly ever write a small business loan when a home loan is an option, it's easier and cheaper for the client. I would like to know why you called this a lie, when you clearly don't consider it to be one.

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You should probably stick to threads where goldbugs are being ridiculed. You are so far out of your depth here.

It's late. Maybe I will school you tomorrow.

On that issue Trojan isn't as far off the mark as you, but maybe tomorrow, it's getting late.
Any expressed market opinion is my own and is not to be taken as financial advice
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Trojan
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peter fraser
31 Aug 2015, 01:18 AM
On that issue Trojan isn't as far off the mark as you, but maybe tomorrow, it's getting late.
Which part of my post is off the mark? Happy to be corrected.

Better than being threatened to be "schooled" and runaway by someone who doesn't know the difference between a non creditworthy borrower and banks having insufficient funds to lend)
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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Veritas
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Quote:
 
They actually confirm what I am telling you, but you can't see it.

Not the IMF or the others contradict what I have told you. Their data only reflects loans against residential security, which is the dominant class of property held by small business owners and investors.

Banks are lenders who require bricks and mortar as security, and that has always been the case.


I cant see it because you are providing no evidence whatsoever.

Besides, do you think Australia is the only country where small business secure lending against resi property?
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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peter fraser
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Trojan
31 Aug 2015, 11:58 AM
Which part of my post is off the mark? Happy to be corrected.

Better than being threatened to be "schooled" and runaway by someone who doesn't know the difference between a non creditworthy borrower and banks having insufficient funds to lend)
Actually you are not off the mark at all.
Veritas
31 Aug 2015, 12:54 PM


I cant see it because you are providing no evidence whatsoever.

The evidence is the rise in residential lending as a percentage of overall lending, which is what one would expect to see if I am correct. The strong rise in house values also would naturally skew the % towards residential even if business lending didn't change by one dollar.

Quote:
 
Besides, do you think Australia is the only country where small business secure lending against resi property?

No I don't think that at all. I don't know how the loans are categorised in other countries. It would be useful to find out for say the USA, Canada, or the UK and compare it.

I would think that the USA didn't deregulate as we did, their lending markets were always much more progressive (loose) so maybe their has been no change to the methods used.

I'll ask a mortgage broker in the USA who I occasionally speak to, to see if he can offer any explanation as to how they categorise their lending.
Edited by peter fraser, 31 Aug 2015, 01:17 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Trojan
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Loki
31 Aug 2015, 12:52 AM
You should probably stick to threads where goldbugs are being ridiculed. You are so far out of your depth here.

It's late. Maybe I will school you tomorrow.
Still waiting for you to school (sic) me on how an uncredit worthy borrower proves bank's lending is constrained by deposits
It's easy to pretend you know it all and everyone else is wrong but the only person you are fooling is yourself. :re:
Edited by Trojan, 1 Sep 2015, 11:08 AM.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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Trojan
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Loki dear, you are posting in many threads but avoiding this one.
When are you going to make good of your threats?
Or did you finally realise you were the one who was out of your depth? :lol
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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