Banks - GRRRRRRRRRRRRRRRRRRRRRRR

[Giardiasis]

My point isn't that interest rates reflect house prices - it's that as house prices get up into the range they are now high interest rates become far more crippling. The chance of a 1% rise resulting in mass defaults becomes very real and borrowers have no way of predicting rate changes over a 25 year period. At least if rates are capped they can't say they were caught unaware.

As well, it seems to me that affordable housing is in the interests of all Australians as one of the main advantages of living in this country is the accessablility to real estate as opposed to smaller, longer established nations.

Where did I say people shouldn't have to pay for it? The problem as I see it is when the average working family can't afford the average family home or the basic standard of living.

Anyone that borrows money to buy a house is must wear the risk of changes to the price of money. That is the very point I’m making regarding why low interest rates hurt the economy, because people think an investment is worth it, and then get burnt. All low interest rates do is fuel a boom based on a lie. The bust must come to re-adjust the allocation of capital. The intention of an interest rate cap sounds brilliant, but it totally ignores observed reality, and the nature of political economy.

It is impossible to manipulate variables in the economy to achieve desired outcomes. Your assertion that capping interest rates will result in affordable housing is just plain wrong, it will lead to nothing but a property boom that is not backed up by genuine savings.

Personally I think home ownership is something people do not understand, and to link it to something government should encourage through policy can only lead to bad outcomes.

 

[Disco08]

Did you look at the graph of median house prices/wages and mortgage affordability for Melbourne I posted a link to earlier? Do you think those trends are healthy?

If the info I found but forgot to link to earler (I'll try and find it again later) is correct countries like England, Holland, Norway, Denmark and Sweden have all brought interest rates down below 3% in recent years which represents significant historical lows. Why would they do that?

Ruibbish. Minimum full time wage in this country is approx $32,000. Assuming you and your partner both work at minimum wage that is $64k per year before tax. Based on this you are able to borrow $340k on a standard home loan according to the CBA calculator which would give monthly repayments of $2,236. Assuming tax at 15% (in reality the tax paid would be a lot less than this flat rate) and no government benefits etc take home monthly pay would be around $4,467.

Now using your example a search of real estate in Braidwood NSW (general area you were talking about) you can buy a three bedroom home for $305k.

This is on the bare minimum wage allowable in Australia.

Given full time employment sits well under 40% I think you have a fairly misguided perception of what the average first home buyer's situation is. Have a look at this, albeit slightly old, piece for an insight.

 

[Giardiasis]

Did you look at the graph of median house prices/wages and mortgage affordability for Melbourne I posted a link to earlier? Do you think those trends are healthy?

If the info I found but forgot to link to earler (I'll try and find it again later) is correct countries like England, Holland, Norway, Denmark and Sweden have all brought interest rates down below 3% in recent years which represents significant historical lows. Why would they do that?

No I do not, but they would only be made worse by an interest rate cap. They are unhealthy because too many people have gotten into debt fuelled by cheap credit. It’s like your solution to a hangover is more booze.

They do that because they all have central banks that control the overnight cash rates for their respective countries, and are of the mistaken belief that they can achieve “price stability” by adjusting that cash rate. They are fools, and they serve only the banking class, and no others. The obvious examples you missed are the United States and Japan.

 

[Disco08]

Obvious examples of what? Other countries that have lowered their interest rates? The Scandinavian nations and Holland have long led the world in providing their residents with a high standard of living which is available to a large percentage of their population so I think it's pretty rich you calling them fools. Are you an expert in this field?

Those trends will obviously be helped by lowered interest rates. Whether that includes a cap is basically irrelevant. How exactly do you think lowering interest rates will hurt this situation?

Nothing wrong with a good hair of the dog BTW. ;D

 

[MB78]

Disco lets assume you are right with your capping of rates. Can you answer the below?

How does the reserve bank slow down the economy if rates are capped at 3%?

 

[pahoffm]

Of course labour costs have increased; turning to casual employment was a way to mitigate those increased costs. Now the technology is available, it has become cheaper to switch from labour to capital in the form of self-service check-outs for the big supermarkets.
Gee whiz you have more and more regulation that increases the costs of labour, and you diagnose your observation to deregulation. It is the very fact that labour costs are high that the small players can’t get in the game, they can’t compete with the big supermarkets who can turn to capital. How you attribute this to oppression on the part of Woolworths is strange to say the least?

And, you can't see that there is no loss incurred by society by this loss of labour?

And, you can't see that de-regulation hasn't placed more economic power in the hands of a shrinking few?

Also, I didn't blame Woolworths alone. You isolated a small portion of my orginal post that referred to Woolworths.
In FMCG, I share blame between Coles, Woolworths and those who should have shown better regulatory control.

 

[Disco08]

Disco lets assume you are right with your capping of rates. Can you answer the below?

I'm not sure the RB would want to slow the economy down while mortgage affordability is at such drastically low levels. Once the balance was restored then obviously the need for a cap would be removed.

FWIW capping rates was just a suggestion. If that proved too problematic then simply allowing the RB to bring rates down to more manageable levels (as we've seen other nations do) while legislating that banks be required by law to follow suit would achieve similar results.

 

[Giardiasis]

And, you can't see that there is no loss incurred by society by this loss of labour?

And, you can't see that de-regulation hasn't placed more economic power in the hands of a shrinking few?

Also, I didn't blame Woolworths alone. You isolated a small portion of my orginal post that referred to Woolworths.
In FMCG, I share blame between Coles, Woolworths and those who should have shown better regulatory control.

I certainly see a loss for youth employment caused by governments and unions forcing up the cost of labor. The fault lies with them. Woolworth's looking to reduce it's costs provides a benefit to shoppers and shareholders.

What de-regulation do you speak of? All I see is that Australia is one of the most regulated countries in the world.

 

[pahoffm]

I certainly see a loss for youth employment caused by governments and unions forcing up the cost of labor. The fault lies with them.

That's the point I make, it is government lack of regulation that allows the deterioration of working conditions.

Coles & Woolworths in FMCG.
and CBA, NAB, ANZ & WBC in the banking sector, are examples of where super profits are made, as a result.

 

[Giardiasis]

That's the point I make, it is government lack of regulation that allows the deterioration of working conditions.

Coles & Woolworths in FMCG.
and CBA, NAB, ANZ & WBC in the banking sector, are examples of where super profits are made, as a result.

Please tell me what regulation you believe is required

 

[pahoffm]

Please tell me what regulation you believe is required

Not so easy now, because the horse has already bolted the stable.

A contemporary example would be QANTAS.
One to two years ago, they made a $200 million profit and had their maintenance was done in Australia.
This fellow Joyce, who isn't even Australian, comes in. QANTAS goes from a $200 million profit to a $200 million loss, then he goes about trying to an ANSETT on QANTAS, to fire sell it overseas.

The same is done to our property with no guarantees of Australian ownership. Prices are just again beginning to rise out of the hands of ordinary Australians.
The RBA passes on a rate cut, and the "big fat" banks only pass on a small portion to mortgagees.

In the early to mid-1980s, when the economy was better regulated the legislation to maintain certain level of ownership should have been maintained, and no one entity should have been allowed more than 15-20% of the national market.

Keating de-regulated the banking industry, the banks took immediate advantage to cause a "bubble" of lending. Two years later, 1987, we hada stock market crash and, consequently, in 1990, a property crash.

In the mid-1990's, after further banking %age lending / holding ratios were tampered with again, we had another "bubble" and, in 1998, another crash.

I know "rationalists" like you, Giardiasis, licking their lips when sales balloon, when property prices boom, and when there are mega-profits in the market. Everything looks great rising to record levels.
But, then you complain about labour costs and how these can be cheaper.

I suggest to you to:
1. Keep financial & ownership regulations in place.
2. Retard short-term "bubbles" from occurring in the market.
3. Look at a labour cost as a human being eking out an existance.

Personally, I've still had a gutful of "Director's" bonuses based on fraudulent dealings, then National governments having to mortgage their citizens to pay out the debt, as in the case of both Europe and the USA.
I would have loved to have seen some of these "Directors" in jail, where they belonged.

I read today that JP Morgan announced a "BIG" increase in profits.
Apparently Wells Fargo Bank did the same.
So, when are they going to start paying money back to the American people that they borrowed from.
Sorry, stole from.

And as for Australia, maybe taxes on super-profits should be levied on the big banks, if these are to be levied on mining companies, instead of going to Directors in bonuses.

 

[pahoffm]

So we can start by actually holding Bank Directors and their "mates" accountable for fraud.
And asking them to repay the amounts given to them in 1998.

Also, for bank lending.

Housing loans should NOT be granted without a 15-20% deposit.
Banks should not loan out any more than 85% of property value.
Banks love housing loans, mortgagees are easily bullied.

For commercial property.
Banks should loan up to the %age that is pre-sold.
And, yet they over-lend to big developers when units aren't pre-sold.
The "big banks" are gutless against property developers and fail to lend enough, even when developments are pre-sold.
The result is that construction companies have to go to mezzanine finance and borrow at rates of 30%+.
No wonder building industry bubbles occur.
Banks hate construction companies, these can't be bullied.
Usurers love construction companies.

That is where there needs better regulation.

I'm sure there are many more.

 

[AngryAnt]

Phantom vs Giardiasis - WHEN WORLDS COLLIDE

 

[Giardiasis]

Please provide the regulation you think is lacking that would provide greater working conditions within the retail industry, such as Woolworths. I will then explain to you some of the effects of such regulation.

I know "rationalists" like you, Giardiasis, licking their lips when sales balloon, when property prices boom, and when there are mega-profits in the market. Everything looks great rising to record levels.
But, then you complain about labour costs and how these can be cheaper.

You are mistaken; I am not inclined to moisten my lips to such eventualities. Perhaps you missed my posting regarding the misallocation of capital?

I complain about labour costs in regard to regulations such as the minimum wage, unfair dismissal laws, collective bargaining etc.

 

[Lidsand]

assuming we do cap the lending rates this would obviously directly effect the deposit rates but what would be stopping a foreign bank or institution from offering much higher deposit rates? without deposits the banks cost of borrowing would increase meaning higher home loan rates. its an unsustainable commercial situation where only the foreign banks win

 

[AngryAnt]

Note to Phantom - Giardiasis is a libertarian, or at least sometimes espouses libertarian values, not an economic rationalist.

 

[pahoffm]

Well, I wonder if all those who espouse deregulation of the financial sector feel happy that thousands of rural Victorians have lost hundreds of millions of dollars through the Banksia collapse.

Well done deregulators, and all who earned fat bonuses on Banksia's behalf.

 

[TigerForce]

Well, I wonder if all those who espouse deregulation of the financial sector feel happy that thousands of rural Victorians have lost hundreds of millions of dollars through the Banksia collapse.

Well done deregulators, and all who earned fat bonuses on Banksia's behalf.

Financial Planning firms are still under-regulated IMO.

 

[mld]

Financial institutions never collapse under more regulated markets.

 

[Giardiasis]

Well, I wonder if all those who espouse deregulation of the financial sector feel happy that thousands of rural Victorians have lost hundreds of millions of dollars through the Banksia collapse.

Well done deregulators, and all who earned fat bonuses on Banksia's behalf.

You are still yet to state what regulation should be enforced. All investment comes with risk.