I agree with this article.Obviously we now have a situation in Australia where the Big Four are too big to fail and also too big to offer essential banking services at a reasonable price.

In the absence of government action to control the banks effectively (who would have thought?) then it is up to citizens to vote with their wallets.May I suggest credit unions as a viable alternative.

The article is actually quite gentle.

The word "obscene" did not appear once.

Unfortunately, the Banks are simply playing the great Aussie game of "love your monopoly".

Competition is a concept more talked about than a reality, almost anywhere you care to look.

If you build a tunnel, you get the government to protect you from competition. Even the competition that exists before you built the thing - witness the blatant protectionism provided by the NSW government to the Cross-city and the Lane Cove tunnels. In both cases, existing public roads were compromised, in order to funnel traffic to the private roadways.

If you buy Sydney airport, you are allowed - even encouraged - to hold airlines, travellers and the general public alike to ransom.

And don't forget, it took many expensive attempts before the Ansett/Qantas duopoly was broken, despite the obvious stupidity - and transparent gouging - involved in flights leaving the same airport, for the same destination, at the same time, at the same inflated fare, for many years.

It must be deep in our psyche, that anyone who makes a pile of money is held in esteem, even if the process by which the riches were acquired involved massive collusion between companies to extort from the people. In everything from toll roads to cardboard boxes.

And that is what is happening with Banks. And will continue to occur until some force that currently does not exist in this country, is brought to bear.

(Footnote: In this highly-interlinked world of ours, of course, any reduction in Bank profits will have a knock-on effect in Mr & Mrs Average Australian's superannuation. Food for thought)

Most of us have strong feelings about our Banks and our experiences of the services they offer. And indeed, like many of our private health funds, that is what they are there to do - offer services in return for the opportunity to conduct their business in a businesslike way. Unlike the so called "not for profit" health funds, our banks are expected to make a profit, not just by their shareholders but by all of us. How else are we to establish a rational basis for our confidence in the system? A system upon which we all depend. Banks borrow short (term) and lend long (term). They borrow (accept deposits of) small amounts and lend large amounts. They act as a clearing house for our transactions. They are at the centre of the economic life of our community. But how much profit is appropriate ? The share market values bank shares according (mainly) to the profit capacity of the trading entity. Bank shares seem pretty expensive to most of us. But the rational basis for that valuation is that it is sustained by the probable profit and dividend stream. Thus it seems that the market views banking as a highly profitable and relatively risk free commercial environment. Unlike many / most of our other enterprise sectors, although our mining giants also enjoy similar awe and admiration from our investors. So banks and their CEOs become prisoners of the pursuit of profits, and are bound to lose sight of the "service" ethos that most of us think used to underpin the sector. But the reality is that banks have always been operated by smart people intent on making a profit. And regulation or non-regulation seems to do little to frustrate the outcome for the customers - all of us. Competition needs to be more real for that tool to be effective, but that takes political will, which is in short supply these days. And therein lies the answer ........

In explaining why banks are so profitable, David Richardson failed to mention the main reason: banks are permitted by government to manufacture money as credit, out of thin air. If you or I were permitted to do the same, we could become obscenely wealthy too!

The process by which banks manufacture money is quite complicated. The process is rarely explained in terms that the public can understand, and the matter is further complicated when some bankers deny that banks manufacture money, whilst others freely admit it. If politicians understand the process they prefer to keep quiet about it, it seems.

The best explanation I have seen is contained in a set of old web pages starting at http://www.dkd.net/oldpoliticspages/moneyapo.html If anybody knows of a better explanation I would be glad to know where it is.

The term “bank” origionally derived from an Italian term for “bench”, where money lenders in Italy would sit behind a bench, and loan out money in return for interest.

Now we see banks deriving a considerable amount of their profits from “fees”, (and not necessarily from interest), and it can cost someone money simply to have money in a bank.

When there is a productivity crisis in Australia (and many other countries), and when almost everything in Australia is now imported, it brings into question why some banks are making so much profit.

It means that money lent from banks is not greatly improving productivity, or decreasing the trade deficit.

It also means that the banks are simply eating away at the savings of the public, without greatly improving their wealth or long term ability to pay interest.

Pericles
I thought you were in favour of licences to print money? Changed your mind?

Forkes
"If countries closed their borders to foreign finance and unnecessary foreign trade, and developed workable currencies and essential industries within their borders, they would soon have more goods available at a fraction of the price and at a fraction of the cost to the environment."

How would you decide what trade was unnecessary?

If that paragraph were true at the national level, then wouldn't the same thing be true at the state level? And if it were true at the state level, wouldn't it be true at the regional level? And so on down to the town level? and then the household? And if not, why not?

The article you cite concludes that we should urge governments to provide "a realistic currency that works". What should that be, do you think?