Atman,Australia is not safe since the US Federal Resreve unbeknownst to most,has bailed out our banks for $ billions.This makes our banks beholding and slaves to the Fed.If the Fed calls in loans or ups the rates due their created inflation,then our banks must do likewise.This will mean that many will have to sell up their properties in a very depressed market.We see in the US properties selling for 10 or 20% of their purchase price.This can happen here but unlike the US situation,we cannot walk away from our properties and be free from debt.We can be left with enormous debt even when the banks forclose and possess our property.

To save us,we need to pressure our Govt to make the RBA the lender of first resort so that our banks don't collapse under the financial rape created by the US Federal Reserve.

http://forum.onlineopinion.com.au/thread.asp?article=12490#215892

Arjay, great video, thanks. the Chinese banks have been fairly silly too, having taken advice from Macquarie bank sales men like Keating & Carr on how to do joint private/public infrastructure projects Aussie style, like some of toll roads/tunnells we have here which are no going broke from overpricing.

these deals were done by having banks borrow the money from "industry super funds". what are they going to do for some retirees whose funds were lost in this way? give them a 100 metre section of road so they can set up a toll booth to collect their pension?

as such the Chinese banks are sitting on loans to local governments for all manner of projects like trains that just crashed.

Thanks, Saul, for a very measured and useful analysis. Australia is certainly very much better placed than Europe to weather a stormy future. That said, I do have reservations about using Keynsian stimulus to make the ill effects go away. Again.

It’s popular, of course, because it works. Or would work ... if during the boom times national governments paid down debt, so that the next time stimulus was needed there’d be ample capacity to spend ahead without racking up debilitating debt. I see the problem in the US in very different terms from the EU’s dramas. America’s AAA bond rating was lost not because they’re unable to pay their debts, but because there’s strong political will to reign in debt by cutting spending and improving productivity. That, too, works; look at what GM has achieved since GFC Mk I. The impasse between Obama and Congress may have spooked S&P to re-rate long-term treasury bonds because there’s a real risk that Congress won’t approve budget stimulus based on further borrowing. That may be a good thing: it shows that the world’s largest economy is serious about living within its means, even at a cost. The likely result is near-term pain, but long-term gain. The Tea Party is rubbished for insisting on a serious debt limit and won’t wear paying for stimulus from higher taxes. That isn’t such a radical idea, is it? I think they have a point.

Contrast that approach with the EU, where productivity is poor, investment is feeble, and the only solution on the table involves the few healthy economies subsidising further stimulus by some extraordinarily unhealthy ones. There are no measures on the table which might address the underlying problem: an ageing population expecting AAA rated social services, with no growth or productivity gains to offset increased expenditure. That’s unsustainable, and the odds of a major train wreck are not negligible.

Australia can afford to go Europe’s way ... for the time being. Or we can take the US medicine, which won’t be pleasant near-term, but which might build a better future.

The first stimulus merely postponed the day of reckoning.

What's termed as the 2nd GFC, isn't. It is simply GFC 1 postponed.

Suggesting the stimulus had any advantageous longer term effect is rubbish. It has worsened our position as we face up to the postponed GFC 1.

The Governments that rushed into supporting the stupid stimulus action and especially the socialist big spending borrowers and taxers, with their attendant rorts, in Australia were led up the garden path by economists who guessed wrong and who had simply ran with the Keyensian herd.

They've all made the next few years in Australia a damn sight harder than they could have been. And now watch the b......s bulls..t about the stimulus and try to convince us debt is still the best the answer to the current crisis.

I reckon your analysis is pretty spot on Arjay. And when the full extent of the borrowings of not only Australian Banks but also many of our Public Bodies becomes evident I think we will see a return to much greater financial regulation and a dismantling of the 4 Pillars operation of our current banking system.

Formersnag,the difference between China and the West is that China has many Govt banks which create 80% of its' new money for growth debt free for the tax payer.We borrow nearly all the money from growth from private banks,this is why the West is in so much debt.Our total debt to OS banks etc is now over $800 billion which is over $5000 for every working person and growing.

China has a surplus not a deficit problem.Getting the West to pay their trade debts is the problem from them.This is one of the reasons the US Fed is counterfeiting the US currency.They are devaluing the US $ to lessen their debt but also keep their ponzy schemes going.Much of the money they created did not going into the US economy.The Wall St cronies borrowed more at zero rates to buy up assets and keep the worthless derivative market afloat.Our banks are said to have 20% of their value in worthless derivatives.

We as tax payes have been made guarantors for the big banks.The NAB borrowed $4.5 billion from the US Fed and raised another $3 billion from the share market.Westpac borrowed over $1 billion from the US Fed.Our banks are not all that safe.

imajulianutter, Arjay
While ever governments have or can grant a monopoly license to print money or - what amounts to the same thing - to lower interest rates, it won't matter how much regulation you put in place, the same economic problems that we are witnessing now, and their consequential social injustices, will keep recurring on a grand scale.