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What if mortgage rates went to 7%?
Topic Started: 25 Oct 2016, 11:39 AM (5,649 Views)
Ex BP Golly
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Rufus
26 Oct 2016, 08:00 AM
The applicants may tell fibs but the process rectifies that. In the application only verified values are used for important assets and liabilities.
They can still BS about the value of their furniture and art collection, but that's a value that no one takes any notice of.

On a personal balance sheet there are important items, and others that no one gives a toss about. We let them inflate the value of their stamp collection or antique furniture, it makes them feel better and it doesn't matter a hoot.
Dream on.
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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Rufus
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Ex BP Golly
26 Oct 2016, 12:26 PM
Dream on.
And your reason to think that is what??????????
Take risks - if you win you will become wealthy, if you lose you will become wise
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Simon_S
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b_b
26 Oct 2016, 10:17 AM

Therefore people like Simon will get very frustrated waiting for official cash rates to increase from “market forces"
So what you're really trying to say is the "Official Cash" Rate is the Market?

So the RBA sets the Cost of Money and the Risk Premium as well as the Yeild for Investors both Foreign and Local?

So the Banks Don't and Cant raise Rates independent of the RBA.............


Matthew
25 Oct 2016, 11:23 PM
Really? Explain how?

I don't think anybody including yourself knows what point you are trying to make is other than references to 1929.
So you're expecting wage growth in the next crises?

RBA: 2 Depressions 1 Banking Collapse

Quote:
 
Over the past 150 years, Australia has experienced two macroeconomic
depressions, both of which coincided with worldwide depressions.1 The first of
these was in the 1890s and the second in the 1930s. These were also times of
financial distress both domestically and in the rest of the world. For Australia
there were many similarities across both depressions. Indeed Sinclair (1965, p. 85)
suggests: ‘There is such an obvious similarity between the economic depressions
which occurred in Australia in the 1890s and the 1930s that it is tempting to
suggest that history was repeating itself in the latter case
’.


Quote:
 
The central argument of this paper is that variation in the performance of the
financial system across the two depressions was primarily due to variation in the
condition of the financial system prior to each depression. We show this by
examining the behaviour of a range of indicators of financial stability over the
decade prior to each depression.4 These indicators are:
(i) the level and nature of investment;
(ii) property market speculation;
(iii) credit growth;
(iv) capital inflows;
(v) degree of risk management within the financial system; and
(vi) competitive pressures in the financial sector.


1890's 75% Private Debt to GDP
1930's 45% Private Debt to GDP
2016 125% Private Debt to GDP.........And climbing

What could possibly go wrong.....................

Edited by Simon_S, 26 Oct 2016, 01:02 PM.
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b_b
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Simon_S
26 Oct 2016, 12:55 PM
So what you're really trying to say is the "Official Cash" Rate is the Market?

So the RBA sets the Cost of Money and the Risk Premium as well as the Yeild for Investors both Foreign and Local?

So the Banks Don't and Cant raise Rates independent of the RBA.............
What I am saying is the RBA sets the interbank rate. This in turn sets the vast majority of total Bank funding costs (locally and internationally held deposits). If you are unclear on this point I am happy to explain why.
Edited by b_b, 26 Oct 2016, 01:17 PM.
(S – I) + (T - G) + (M - X) = 0
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Simon_S
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b_b
26 Oct 2016, 01:15 PM
What I am saying is the RBA sets the interbank rate. This in turn sets the vast majority of total Bank funding costs (locally and internationally held deposits). If you are unclear on this point I am happy to explain why.
Oh they only set the interbank rate............Not the International cost of money?

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Matthew
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Simon_S
26 Oct 2016, 12:55 PM
What could possibly go wrong.....................
I doubt you have any idea
My only hope for my three boys is that they turn out nothing at all like Chris.
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Simon_S
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Matthew
26 Oct 2016, 01:41 PM
I doubt you have any idea
If you had a clue you would have provided something substantial to support your claims but as usual..........

NOTHING...........
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b_b
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Simon_S
26 Oct 2016, 01:39 PM
Oh they only set the interbank rate............Not the International cost of money?
Each central bank sets their own benchmark rate. They do it in much the same way as the RBA.

As for the RBA, they set the interbank rate for AUD. That is the benchmark for all AUD funding.
Edited by b_b, 26 Oct 2016, 01:50 PM.
(S – I) + (T - G) + (M - X) = 0
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Simon_S
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b_b
26 Oct 2016, 01:49 PM
Each central bank sets their own benchmark rate. They do it in much the same way as the RBA.

As for the RBA, they set the interbank rate for AUD. That is the benchmark for all AUD funding.
Thanks for stating the obvious b_b

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b_b
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Simon_S
26 Oct 2016, 01:58 PM
Thanks for stating the obvious b_b
I have been saying the same thing for a day. Not sure why you didn’t get it.

So in summary
- The RBA sets the official cash rate
- They do so by manipulating the ESA balances by way of open market operations (buying and selling repos)
- The cash rate sets the cost of funding for all variable AUD commercial bank liabilities
- People waiting for "market forces" to increase interest rates will be waiting a long long time
Edited by b_b, 26 Oct 2016, 02:13 PM.
(S – I) + (T - G) + (M - X) = 0
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