It seems to me that if we join the dots, our taxation system
has as much to do with the present structure of our banking system,
as anything.

Australians don't generally regard bank deposits as a great way
of saving, for by the time inflation has taken half of real returns
and marginal taxation the other half, not much is left. So rather
then leave money unproductively in bank deposits, the average
punter will prefer to buy another house etc, or spend it.

The real effect of this is that banks need to borrow roughly
half of their money from overseas. That is the half that is lent
to SME, at higher interest rates.

Now a small, less profitable bank is going to struggle to borrow
from international markets. As we have seen during the GFC, there
was a flight to quality and many small lenders simply could not
compete. A number of overseas banks pulled the plug on Australia
and left. So our large and profitable banks are thriving.

To secure better funding for SME, what we need is more domestic
saving. That won't happen whilst savers are being robbed by
the tax office, which refuses to allow for inflation losses
on deposits invested. Punters are not silly. Indexing interest
returns to allow for inflation, could easily fix it.

The banks, along with all big business, have been shown the door to guaranteed wealth beyond the dreams of kings and potentates, simply by becoming 'too big to be allowed to fail'.
Without regulation, the big four would very quickly become the big one.
The essential problem with unregulated competition (like any race) is that it inevitably results in one winner, and an almost infinite number of losers.

All the arguments for intervention display a double standard.

Grim wants to police banking because it might become a monopoly – but government already is a monopoly.

Yabby is right that the reason for the flight of savings into real estate is because of taxation and the sneak tax of inflation. Without these depredations, people could provide for their retirement by savings.

Thus governments have caused the GFC firstly by taxing and sneak-taxing savings; secondly by creating banking cartels; thirdly by enabling and protecting the fractional reserve Ponzi scheme; fourthly by the Ponzi scheme of fiat money; fifthly by credit expansion; sixthly by insuring deposits; seventhly by socializing losses; eighthly by directing it into home ownership…..

And then the interventionists look on the resulting unfair uneconomical mess and blame unregulated capitalism, and say we need more price-rigging!

Thus this belief system is irrational because it is unfalsifiable – all evidence and reason against it is taken as showing that there is a need for more.

Yet if it is true that government has this super-competence, why not abolish private ownership of the means of production? Well, we all know the answer to that, don’t we?

There is no reason to think that government has the knowledge, the competence, or the disinterestedness to manage the economy as a whole. That being so, what is it about the existence of the private sector that is supposed to confer on government a greater competence to manage what it did not have the power to do even with total power?

All government interventions are intended to override the market price and substitute a different price. The rationale is that government represents society. But where do people think the market prices are coming from? They come from the voluntary elections of all the people in society, repeated every day, in buying and selling, or abstaining from buying and selling. These voluntary interactions are far more representative of society than government ever has been or ever could be.

All government can bring is a legal monopoly on the use of weaponry and prisons; (cont.)

(cont.) voting once every three years and under compulsion; no law against politicians lying to get in; no way to distinguish offers you accept from those you reject; no way to withhold payment; an ethic that forced taking is right; no requirement to account to the taxpayer for money taken or services provided; many hidden taxes and charges; the routine ability for vested interests to get benefits paid for with money confiscated from someone else; two major parties with no significant difference on almost all areas of policy, and bureaucracies guided by rules and regulations.

It is a myth in the true sense of the word, without basis in evidence or reason, that government is more representative of society and the greater good, than society’s voluntary interactions that produce all the wealth that government confiscates.

Evan, your call for more regulation does not distinguish three distinct classes of problem:
1. Problems caused by government regulation in the first place;
2. Problems that government is justified in regulating, eg fraud; but fails to provide a practical remedy for;
3. Problems that government is not justified in regulating in the first place – so-called ‘unequal bargaining power’.

Power means being able to force the other party to do what you want, even if they don’t agree, in the final analysis using weapons or threats of weapons. It has no application to market transactions in which force and fraud are illegal; but characterizes all government – a double standard.

Secondly, if you buy milk for a dollar, that means you value the milk more than the dollar, and the milkman the dollar more than the milk. People’s unequal valuation of the same thing underlies all voluntary transactions, and therefore all economic activity, and therefore human society itself. There is no reason whatsoever why policy should try to make bargaining power ‘equal’. It is not just meaningless in theory and impossible in practice. It directs scarce capital into purposes the specific criterion of which is that it would be loss-making, and therefore satisfy human wants less rather than more.

I have worked in a couple of banks over the last few years.
They are essentially daycare for adults, very little productive work is done by staff; mostly paper shuffling. Most banks have at least 18 levels of mis-management, computers do most of the real "banking" and "accounting". The people side of things is generally "un-accounting"...or how to hide things in the figures.
Having been insulated from real competition, profits are obscene and essentially unlimited. Even in a year where they are bailed out they are allowed to profit and pay bonuses.
If a farm were to sell off it's tractors, harvesters, etc and instead hire 5 expensive accountants...would it survive long?
We have sold off many productive industries and finance is now 30% of our GDP. This "useless paper shuffle" tax on economy is having an impact now...hence the changes to foreign ownership of houses (stripped away with no public notice), the extreme migrant intake and the frantic property spruiking.
We need to restrict lending to actual savings and put a tariff on imported money.
I wonder which party will be blamed for the next "recession we had to have"...the current crop of leaders are clearly in denial.

Say again, Ozandy?

>>We need to restrict lending to actual savings...<<

How is that supposed to help anything, pray tell?

If I have savings, I don't need to borrow, do I? And if you need to borrow some of my savings - boy, are you going to pay for the privilege!

It's a scarcity thing, really.

For a start, consider for a moment exactly how many Australian families actually are debt-free, right now. Then subtract from that number those who live from pay-day to pay-day, with a balance that approaches zero each period, just before it is topped up again.

Then look at the corporate sector, extract their borrowings from their balance sheet, and see what you are left with

That is your potential pool of funds to lend.

Are you really going to allow your feckless fellow-countryman to dip into this pool for less than an arm and a leg? Consider the risk, of lending to someone who doesn't have the smarts to save?

Nup. Won't work.

Unless I'm missing something, that is always a possiblity. In which case you can explain to me the magic ingredient that I have overlooked.

>>...and put a tariff on imported money.<<

Errr... does that include payments for goods I export to other countries, in order to help our balance of payments?

Or are you simply suggesting some kind of fortress Australia, where we pretend that the outside world doesn't exist?

In which case, you'd better be prepared to take a massive hit in your standard of living, and explain to your grandchildren why you felt justified in living the good life yourself, but forbidding them to do the same.

We live in the world as it is, not as you think might have been better, if only...