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16 Comments
Why would we be asking a bank CEO about whether or not to be concerned over banks behaviours?!!! Banks are the cause of so many of the worlds problems that it is well past due time that Governments started acting to rein them in, properly regulate them and make them more accountable. A good start would be re-writing the law to ensure that depositors funds remain the property of the depositor, and the bank is accountable for how it is used.
What response are we going to get? - "Its awright officer, notin' goin' on here!"
"Simple really if you want to look after your money, put it elsewhere" like where? We have discussed this before, there is not much choice really, and the information available to try to make a reasonable risk management question is either so convoluted to be unintelligible for the average reader, or just not available in the public arena.
I also note on National Radio this morning Catherine Ryan interviewing some chap who is sufficiently concerned about bank behaviour to write a book about it. to borrow from another quote - all it takes for a few bad eggs to run rampant is for the authorities to support it or look the other way and twiddle thumbs. It is time that Governments take their role about representing the people of the country seriously and actually do it!
OK flip it back, why invest in a business? shares? housing?
Also who covers you if you invest in the above and things go wrong?
"where?" frankly it is your money so I dont care where you invest it. What I do care that you expect others no matter their income to cover your losses so you can invest with no risk. Especially when in effect some OAPs only have the OAP to rely on yet as tax payers would be required to cover those better off. Or the kids just starting work who have a educational loan to pay off, want a house and a family but have to carry an even bigger burden because you refuse to.
Please explain to me why it is morally OK to expect others to carry your loss?
Govn represent the people? this is politics be serious, the pollies support those who fund them. unless and until voters such as yourself ask the hard Qs and vote accordingly.
You're brush is too broad. I don't consider having a bank account an "investment", unless I have specifically moved it to an "Investment account" with commensurate restrictions and interest. I also do expect (and believe) that any money I hold in a daily use account is also put to work by the bank, but gets less interest as a result of being available to me immediately. As I have little choice or suitably varied alternatives to using a bank, and technically the bank claims ownership of those funds then damn right I expect to be covered. I did not agree to have the law changed to say if I put my money into a bank for all the original principles and reasons that banks were created, that that money then became the bank's and not mine. If however, the law is written to say I own my money irrespective of where it is then the responsibility falls to me to ensure the risk is at least acceptable. I have a share portfolio, if it goes down, well I chose which share to buy and I can monitor the company's performance and communications as well as who is on the board and so on, so my fault, but I can't do that for banks. they don't give me a say, or as you pointed out in another comment stream, even pay a risk premium despite some very concerning behaviour patterns.
So morally when the Government and banks have removed my right of ownership arbitrarily, then damn right they need to ensure that I am covered some way!
No investment always carry's risk of loss. A deposit account is clearly an "Investment account" as you get a return on your capital. Then we have chequeing accounts, we get no interest that clearly is not an investment account (unless we split some hairs). The very point of the OBR is that the chequeing account stays viable and takes (in theory) no loss. The law didnt change as far as I am aware, just the OBR makes the possibility of loss explicit. Which takes us full circle if you dont like the conditions remove your money but it in a safe under your bed, or invest it somewhere a bit safer.
If you invest in a business in effect you put the capital at risk and may lose it, a deposit account (or anything else) should be no different. ie you cant say "oopsie my business folded I want all my money back and the tax payer pays for it" that wouldnt fly, ditto a deposit account. Now if you leave all your $s in a chequing account, well OK and in fact that with the OBR looks a bit safer.
The problem with you owing your money on deposit is moral hazard, ie you then can pick any investment you want at the highest rate you can find with no risk, like duh. If you invest in a business in effect you put the capital at risk and may lose it, a deposit account (or anything else) should be no different.
Narev suggests over reaction also a threat
In a $900 trillion plus derivatives world collateral calls are always a threat.
The entire point of leveraged positions is the margin of safety. That is true on both sides of that equation, as for the provider and the borrower/user. In the most famous examples of collapse, from AIG to LTCM losses were never really the issue. None of them could withstand instead collateral calls to their liquidity reserves. As noted last week, AIG’s “toxic waste” positions ended up registering some $20 billion profits to the Federal Reserve and the government via its (illegal) Maiden Lane SIV’s. AIG just could not withstand the liquidity demands brought about by increasing calculated volatility. Read more
Apra is executing a risk weighting collateral call causing significant anguish in addition to myriad swap/repo counterparty demands
"sanguine. If you're sanguine about a situation, that means you're optimistic that everything's going to work out fine."
The 900trillion sums thrown about by Stephen Hulme are mind boggling, the USA's debt is only 20trillion, NZ owes a few billions, almost chicken feed. Further global debt at 200trillion? assumes BAU ie grow for ever. On a finite planet that is simply impossible especially when 4% growth per annum needs 2.5% more cheap fossil fuel per annum and we are at peak oil. It simply cannot be continued for decades need to pay this off, therefore it has to be defaulted on.
The only way these 2 idiots can consider the ongoing situation "sanguine" is if they are dosed to their eye balls on Prozac or are utterly incompetent, or great liars.
Steven... I could have a bet with you for $1 trillion ...that the coin will land heads... (Its not money until we settle the bet..)
( thats' part of the world of synthetics and derivatives).
If I can't pay u.... nothing happens.... you get whatever I have and life goes on..... its' just between u and me... ( but hey... maybe I can get AIG to insure the bet ...)
The actual number $900 trillion is not so scary.... whats terrifying is that its Banks that are doing it..
How on earth the world ever allowed Banks to get involved in this shit is the madness part of it.... all of a sudden it becomes a big deal.... and destabilizes the global financial sector....and the global economy..
I think derivatives can be a wonderful thing.... a great way to hedge and transfer risk..... but shit... $900 trillion in in the realm of gambling with monopoly money.. way beyond the realms of hedging risk in an "economic' sense ...in the real economic world...
"whats terrifying is that its Banks that are doing it.." indeed it isnt real business making a good. A Professor Black? who used to prosecute such banksters has said much of this was illegal til the regulation was removed thanks to Bush.
"If I can't pay u." indeed and that is the joke, its got to extremes. We can have hedge funds worth a few "real" millions under-writing major banks for billions and that it seems is OK, I fail to understand how when calls actually arrive how they get paid.
"I think derivatives can be a wonderful thing" from my limited understanding these and futures were designed to give assurance and stability, instead they have been abused to the point of farce / danger. The biggest joke for me is the betting by an independent 3rd party putting money on an event occuring between two parties with no loss or risk for that 3rd party, ie a side bet, how the heck did we get to the stage that is allowed?
If you want to get a grip on current economics it is better to look at history: in our case NZ history.
In fact I think that history should be made a compulsory subject right through secondary school.
How many know what really happens in a major global depression: read John Mulgan's "Man Alone" to see how Auckland University Students and country farmers teamed up to baton the heads of starving workers in Queen st in the 1932 protests. Similar violence took place during the 1951 Watersider's strike in lower Queen st. There was a long, ugly depression during the late 1800's.
The problem with property booms is that they create inequalities in the long run which in turn lead to social division and possibly violence. The Key/English govt promotes such possibilities.
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