If loans create deposits you don't need term funding from anyone else, do you? You certainly don't need it from the global capital markets. If loans create deposits, you don't need money from anyone, in fact. You can just poof it into existence.
And yet, we don't don't have "Manager of Poofing Money into Existence" in the internal directory.
What is more, if banks can just create money, why are the Irish banks bust?
Why didnt they just create money to fill the gaping holes on their balance sheets?
Same goes for the American banks that were forced into insolvency.
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
If loans create deposits you don't need term funding from anyone else, do you? You certainly don't need it from the global capital markets. If loans create deposits, you don't need money from anyone, in fact. You can just poof it into existence.
And yet, we don't don't have "Manager of Poofing Money into Existence" in the internal directory.
The NZ banks are subsidiaries of the Aussie banks (other than Kiwibank) so same applies to them there.
Not many are aware of just how much exposure Aussie banks have to the NZ property market.. If the NZ property market implodes our banks will suffer for it, and then we will, socialising losses and all..
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
If loans create deposits you don't need term funding from anyone else, do you? You certainly don't need it from the global capital markets. If loans create deposits, you don't need money from anyone, in fact. You can just poof it into existence.
And yet, we don't don't have "Manager of Poofing Money into Existence" in the internal directory.
No not at all, APRA insist on deposit coverage so deposits are necessary, and APRA also insist on a portion of deposits to be held as long term deposits, so that is sourced in the term markets overseas, and swapped to $AUD.
Some banks had got a little lazy and preferred to securitize as much as possible, but when that became difficult they had to become banks again and attract more deposits from other institutions.
I didn't say that deposits were not necessary, and as you know banks must hold sufficient tier reserves before they can expand their loan portfolio. Funding a loan does create a deposit nevertheless. One debit to a loan account, and a corresponding credit to another account.
Veritas
24 Jun 2013, 11:28 PM
What is more, if banks can just create money, why are the Irish banks bust?
Why didnt they just create money to fill the gaping holes on their balance sheets?
Same goes for the American banks that were forced into insolvency.
Banks can't lend money to themselves, so filling a hole with bank credits isn't an option.
Banks can't lend money to themselves, so filling a hole with bank credits isn't an option.
So why did bank not doing so well A lend (create) money for bank not doing so well B, and bank not doing so well B loan (create) money to bank not doing so well A?
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
What is more, if banks can just create money, why are the Irish banks bust?
Why didnt they just create money to fill the gaping holes on their balance sheets?
Same goes for the American banks that were forced into insolvency.
Ireland was different. Their currency was over valued and when pressure came they couldn't devalue it, their run up was much larger 4x for Ireland, 5x for Dublin, they built too many new housing estates and they don't have a properly functioning central bank as they gave that away to the Continent.
US banks weren't as tightly regulated as ours. The merchant banks were predominantly the ones that failed and that was due to them getting into house lending/fee churning away from their traditional deal making activities. Things are more conservative here and it's predominately the 4 retail banks that write the loans.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
So why did bank not doing so well A lend (create) money for bank not doing so well B, and bank not doing so well B loan (create) money to bank not doing so well A?
Because they are heavily regulated and must constantly report to the regulatory authority as well as the market, and the problem in the USA was that banks would no longer trust each other to pay for the day to day inter-bank operations, so lending to another bank was out of the question. Banks themselves no longer knew what their loan books would be worth in just a few months time, and those loan books are part of their tier requirements. In a bank run where asset values fall (loans go underwater) the future is more closely related to the laws of chaos than normal banking.
Banks have to maintain a complex set of ratios otherwise they become insolvent as far as the regulator is concerned, and then it's all over unless the government or a very wealthy investor can step in. You might recall that Warren Buffet rescued GE in the USA - at the time they were the largest financier in the world but they weren't a bank and couldn't access Fed funding.
Any expressed market opinion is my own and is not to be taken as financial advice
Ireland was different. Their currency was over valued and when pressure came they couldn't devalue it, their run up was much larger 4x for Ireland, 5x for Dublin, they built too many new housing estates and they don't have a properly functioning central bank as they gave that away to the Continent.
US banks weren't as tightly regulated as ours. The merchant banks were predominantly the ones that failed and that was due to them getting into house lending/fee churning away from their traditional deal making activities. Things are more conservative here and it's predominately the 4 retail banks that write the loans.
It the powerful narrative discharge by mouse.
Of the course.
Prior to a pop pop,
Narrative a unknown and not even "poof into existence."
After the pop pop, mouse the schooled in a "what happen",
Narrative a unknown and not even "poof into existence."
After the pop pop, mouse the schooled in a "what happen",
And why it a immune.
Master better to teach mouse to frame future.
But then mouse would have to think for itself.
And that not work in scale of things.
Are you saying that it's easier to explain things after they happen than predict things before they happen? If so, you are correct. But just because something is difficult shouldn't mean you don't try.
“You Keep Using That Word, I Do Not Think It Means What You Think It Means” - Inigo Montoya
I think he is suggesting that if the housing bubble burst in Australia we would look back at the current set of circumstances and explain it clearly. Well they had a high run up in prices with a mining boom. Prices didn't fall much after the GFC. China imploded. Commodity prices collapsed. High immigration rates fell away. Dollar collapsed. First recession in 22 years took everyone by surprise. Something like that.
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