New Australia

The Credit Crisis

This world credit crisis has been caused by the Clinton administration when they decided to enact some republican proposals to de-regulate the banking sector in 2000. This included:

• Repeal of the repeal of the Glass-Steagall Act that prohibited mergers of commercial banks, insurance companies and brokerage firms.
• Enact the Commodity Futures Modernisation Act (CFMA) that de-regulated financial derivatives. This enabled derivatives like credit default swaps to be traded without oversight.

The chief architects of this have just been appointed by President Obama to key roles in the Obama administration. more...

President Obama's Road to Ruin

The Obama plan has been to buy the toxic debt that the big five banks have manufactured with tax payers funds - so the debt has been nationalised.

The alternative was to set up several new government-owned banks and insurance companies (software + people + offices) backed with a small fraction of what has been spent bailing out the Big Five. The Big Five and AIG would then have collapsed. The new banks could have been sold off later in a public float.

Suggested Solutions

• Safeguarding jobs: Strengthen IR laws to discourage lay-offs and encourage reducing working hours for employees of struggling companies. (See Jobs page.)
• Safeguarding Homebuyers: Removing the "General Exit Clause" from loan agreements, and other measures to protect home buyers from bank foreclosure.
• Increase Infrastructure Spending: More funding for vital rail, public transport, renewable energy, public health and public education projects.
• Increase Public Employment: More nurses, doctors, teachers, public transport staff, etc.
• Regulation & Transparency: This needs to limit the types of financial instrument that any Australian business can be involved with. Instruments that are inherently risky and have little regulatory oversight need to be banned. In recent times the 'free market' mantra has been that if people want to trade high-risk instruments then that was their choice. However, as we have seen lately, this can eventually lead to the collapse of the whole system. Regulatory agencies such as APRA need to be government-controlled, not industry bodies. Taxes on speculative financial transactions such as a tobin tax should also be considered.
• Credit Limits: Again the 'free market' mantra has been that if people want to take out more debt than they could ever repay then that was their choice. But when this is done on a huge scale to fund speculative investment and excessive consumption the results can be disastrous.

Bad Ideas:

• Guarantee further foreign borrowings by Australian banks: This continues the borrowing binge that has led to Australia's asset price bubble and there is substantial risk that the government would be unable to meet the guarantee if the $A collapsed relative to the currency of the loan. (However, this is mostly $USD, which may well collapse faster than the $A.)
• Increase first home buyers grants: These grants pass through the home buyers hands to benefit the seller rather than the home buyer. A better approach would be to increase spending on public housing.
• $1,000 cash bonus per child: This is another measure that encourages population growth which urgently needs to be discouraged.
• $900 cash bonus per taxpayer: Taxpayers wisely bank most of these payments so they do not stimulate the economy. The money should be spent on health, education and public transport projects.

Carbon Credits Scam

2^nd July 2009: How Goldman Sachs has created and exploited succesive bubbles to enrich itself and how it plans to exploit the next bubble: Carbon Credits. more...

G20 Makes Crisis Worse

15^th Apr 2009: "...Banks to use their own judgement in determining the fair value of assets. That means there is no objective criteria for assessing the value of the assets, which, in turn, allows the banks to keep pretending that those toxic assets are actually worth something." more...

The Big Fives coup

2^nd Apr 2009: The five big US banks are on the brink of a coup, and their partners in crime are many. more...

Bank's Toxic Bomb

17^th Feb 2009: A secret European Commission report shows that exposure of the European banks to "toxic" assets is £16.3 trillion ($A36 trillion), or 44 per cent of total European bank assets. more...

Bomb Still Ticking

16^th Oct 2008: There is about $A 400 Billion of credit default swap exposure held in Australia. the assets of Australian banks is about $A 142 Billion. (Ken Davidson) more...

Fed Cred on the line

15^th Oct 2008: Questions US Fed Reserve solvency and ability of the Australian Prudential Regulatory Authority (APRA) to regulate Australian banks given APRA is just an industry body. (Michael West) more...

In hock to the world

7^th Oct 2008: "If the banks can't get their funding in global markets then the RBA will have to step in (as they are already doing to prop up the system). How long can they keep this up given that we have another four years or more of mortgage money being called in as it falls due and our currency being manipulated by major external interests?" more...