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Why Australia can't avoid a recession; (& Canada, Korea, China and others)
Topic Started: 12 Dec 2016, 11:25 PM (8,492 Views)
Rufus
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Jon Snow
15 Dec 2016, 10:11 PM
Oh, so loans are not assets of the bank. Got it. :tu:
They are assets but not assets the RBA will lend against.

You may be thinking of the AOFM "buying" securitised loans from banks during the GFC when that market froze.
http://aofm.gov.au/operational-notice/operational-notice-purchase-of-rmbs-extended-program/
Take risks - if you win you will become wealthy, if you lose you will become wise
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Trollie
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Simon_S
15 Dec 2016, 09:48 PM
LOL....That went straight over the top of your head but not surprising......

Rates Rises getting to you Trollie?

What did Timo do to you Trollie? You can tell me........
Yet another thread timo got burned on. Not doing too well at this come back thing are you timo.
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Simon_S
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Trollie
16 Dec 2016, 10:56 AM
Yet another thread timo got burned on. Not doing too well at this come back thing are you timo.
I love Rate Rises........Don't you Trollie?

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Rastus2
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Trollie
16 Dec 2016, 10:56 AM
Yet another thread timo got burned on. Not doing too well at this come back thing are you timo.
what is your obsession with this timmo person ? You do know you are yelling into shadows.. he's not here :re:
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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popey
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Rastus2
16 Dec 2016, 02:57 PM
what is your obsession with this timmo person ? You do know you are yelling into shadows.. he's not here :re:
why are you even replying to a troll? LOL
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Foxy
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Zero is coming...

skamy
15 Dec 2016, 01:31 AM
You are getting on a bit so maybe it is good to reduce your debt if you are fearful. However, history has shown that the tail end of a downturn is a great time to borrow to invest.

Just stay away from the fear based stuff like gold - it is about to take a hammering.
Made a lot of money out of gold.

Debt, well 5% goes to the bank every year.

I could live very nicely on that...

Peter
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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Jon Snow
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Sydneyite
15 Dec 2016, 10:44 PM
Re the collateral requirements of the RBA repo program for it's intervention in the overnight cash market, from here: http://www.rba.gov.au/mkt-operations/resources/tech-notes/open-market-operations.html
And from APRA: http://www.afma.com.au/standards/market-conventions/Reciprocal%20Purchase%20Agreements%20Conventions.pdf
QED. Banks CANNOT use loan assets as collateral for overnight cash market loans from the RBA to make up liquidity shortfalls.
OK point conceded, but in the interest of discussion, so what?

The RBA could have introduced an emergency liquidity facility that bypassed the usual repo market. No wait, they did: http://www.rba.gov.au/mkt-operations/resources/tech-notes/clf-operational-notes.html

As b_b is fond of saying, the RBA cannot run out of money. If they choose to lend to any bank at any terms in any amount, they can.

As to the idea of a deposit run, it seems implausible. Say there are only two banks CBA and NAB, and the following three scenarios in a crisis:

1) 200B of CBA's deposits are withdrawn by nervous nellies and deposited in NAB, and 200B of NABs deposits are withdrawn and deposited in CBA. No liquidity crisis.

2) 200B of CBA's deposits and 200B of NAB's deposits are withdrawn as cheques and put into a sock drawer. CBA and NAB have 400B of contingent liabilities floating around "out there" in sock drawers, but they still have the cash! No liquidity crisis.

3) 400B of CBA's deposits are withdrawn and deposited in NAB. Now NAB has 400B extra liabilities and 400B in non-interest bearing "cash". Big problem for NAB. So either they lend the 400B to CBA, or buy some of CBA's assets, or a combination of both. No liquidity crisis.

So, I am still fairly sure that the wholesale and deposit guarantees were not a liquidity measure or to prevent a "deposit run". Bank runs are from the days when banks issued their own bills.

It was more likely a stability measure to prevent the sudden exit of foreign capital, collapsing the exchange rate, and causing chaos in credit markets as the long end of the curve is repriced to the new market price of risk.

Or not.
Speak when you are angry and you will make the best speech you will ever regret.
Ambrose Bierce
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Rufus
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Jon Snow
16 Dec 2016, 09:44 PM
OK point conceded, but in the interest of discussion, so what?

The RBA could have introduced an emergency liquidity facility that bypassed the usual repo market. No wait, they did: http://www.rba.gov.au/mkt-operations/resources/tech-notes/clf-operational-notes.html

As b_b is fond of saying, the RBA cannot run out of money. If they choose to lend to any bank at any terms in any amount, they can.

As to the idea of a deposit run, it seems implausible. Say there are only two banks CBA and NAB, and the following three scenarios in a crisis:

1) 200B of CBA's deposits are withdrawn by nervous nellies and deposited in NAB, and 200B of NABs deposits are withdrawn and deposited in CBA. No liquidity crisis.

2) 200B of CBA's deposits and 200B of NAB's deposits are withdrawn as cheques and put into a sock drawer. CBA and NAB have 400B of contingent liabilities floating around "out there" in sock drawers, but they still have the cash! No liquidity crisis.

3) 400B of CBA's deposits are withdrawn and deposited in NAB. Now NAB has 400B extra liabilities and 400B in non-interest bearing "cash". Big problem for NAB. So either they lend the 400B to CBA, or buy some of CBA's assets, or a combination of both. No liquidity crisis.

So, I am still fairly sure that the wholesale and deposit guarantees were not a liquidity measure or to prevent a "deposit run". Bank runs are from the days when banks issued their own bills.

It was more likely a stability measure to prevent the sudden exit of foreign capital, collapsing the exchange rate, and causing chaos in credit markets as the long end of the curve is repriced to the new market price of risk.

Or not.
The deposit guarantees were to prevent a bank run.
Banks can't create money except during the loan process.
Take risks - if you win you will become wealthy, if you lose you will become wise
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Jon Snow
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Rufus
16 Dec 2016, 10:37 PM
The deposit guarantees were to prevent a bank run.
If a bear made that statement, b_b would ride in on his white stallion and disabuse you of the notion that a "bank run" can even happen in the modern monetary system. But, because it's you, free pass.

Read my three scenarios above again and tell me which of them you think the deposit guarantees were designed to prevent.

Quote:
 
Banks can't create money except during the loan process.
The RBA can create as much money as it likes. And the RBA is a bank, and it loans to member banks.
Speak when you are angry and you will make the best speech you will ever regret.
Ambrose Bierce
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herbie
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Rufus
16 Dec 2016, 10:37 PM
The deposit guarantees were to prevent a bank run.
I personally pulled about $180K out of me bank accounts 'n had it stashed around tha house in tha run up to 'n during tha GFC - Before Krudly Dudly got tha hint 'n introduced his bank guarantee. (George Bush II had a lot ta do wif him comin' ta his senses - As best as I could made of it - Yunno, a personal phone call ta Stupid [as in Krudly Dudly] late one nite as best I could make of it.)

Anyway, I took about three months ta think it all over/ask meself just how much I trusted tha f***er's guarantee before moving it back inta his potentially shitty banks.

'N some time after doing so I turned up $5K I had stashed in a vacuum cleaner I couldn't even recall stashing there - LOL

Ah, they were heady days alright ... :)

Edited by herbie, 16 Dec 2016, 11:55 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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