The Australian Alert Service is the weekly publication of the Citizens Electoral Council of Australia.
It will keep you updated of strategic events both in Australia, and worldwide, as well as the organising activities of the CEC.
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In this week's Australian Alert Service
16 January 2019
Break the self-inflicted spiral of economic doom
With the biggest Australian housing collapse since the
global financial crash occurring in 2018, and international warnings that our bubble is in the "Top 30" crisis triggers
for a new GFC, the actions of Australian leaders—from Financial Services Royal Commissioner Kenneth Hayne to
our politicians—will be closely scrutinised in the coming
weeks as the Royal Commission reports (1 Feb.) and parliament returns (12 Feb.).
In December the Reserve Bank of Australia told banks to
keep credit flowing to households and businesses, and from 1
January the Australian Prudential Regulation Authority (APRA)
removed lending restrictions to get money flowing. Despite
these moves, neither banks nor regulators can make people
borrow, and investors in particular are spooked. International
funding for our banks is drying up, and simultaneously they are
being asked to keep more cash on hand in case of a new crisis.
The Big Four banks are screaming about an 8 November
APRA proposal which will force them to comply with international standards by holding more bail-inable capital—one
of the more expensive types of capital for banks to raise. The
market for such bonds is not there, given the global financial climate, they say. The increased funding burden would
lead to higher lending rates, throwing more Australians into
mortgage stress. Smaller banks like the Bank of Queensland
have already had to raise rates this year.
To meet the proposed increase, of $75 billion over five
years, Aussie banks would become the biggest issuers globally
of this type of bail-in debt, to recapitalise themselves in a crisis. For the same purpose, the Reserve Bank of New Zealand
is demanding our banks, which control nearly 90 per cent of
NZ bank assets, increase their NZ capital by $15-20 billion.
The Australian Financial Review reported 9 January that
JCP Investment Partners, which had warned in mid-2017
that a collapse of the housing bubble could wipe out 17 to
50 per cent of the capital of Australia's major banks, is now
putting the chance of a banking crisis and credit crunch at
40-50 per cent. "[T]he environment for the Australian banking sector seems at best, very challenging", it said.
Bank funding began deteriorating in November with US
and Australian central bank rates diverging. "One of the medium-term challenges for the Australian financial system is
the ability to continue to attract offshore debt to fund the
$1.7 billion mortgage market", JCP warned.
This comes in the context of a global credit crunch, reminiscent of 2008, which affected lending dramatically over
Christmas ("Christmas crunch portends 2019 financial disaster", AAS 9 Jan.). But the reaction of authorities is locking
us into a self-inflicted spiral which ensures an even worse
crisis will engulf us. It is time for real solutions that address
the mistaken underlying assumptions of today's economy.
For instance: We needn't be dependent on foreign investment; governments can use a national bank to create credit that will not have an inflationary effect if directed into the
productive sector. Strict regulation is necessary, be it for business or banking; Glass-Steagall restrictions on commercial
banks to prevent them from speculating will not collapse the
financial system, but save it.
There is a growing global movement for change in precisely this direction. A pro-Glass-Steagall (and anti-war) US Congresswoman, Tulsi Gabbard, has announced she will run for
US President in 2020 (as will 21st Century Glass-Steagall legislation sponsor Sen. Elizabeth Warren). There is a resurgence
of support for national banking in the USA (Almanac). In the
UK, Labour Leader Jeremy Corbyn, whose party manifesto includes banking separation and a National Investment Bank,
is potentially a hair's breadth from taking the Prime Ministership following the 15 January defeat of Theresa May's Brexit
plan by a historic margin (432 to 202). Here in Australia we
have made these policies a major topic of discussion among
both political leaders and the population—we are in a position to make them reality.
Articles include the following:
- Housing approval collapse shows the game is up
- Criminal masterminds: the real 'Big Four'
- 'Winter is coming': Subservience to bankers and failure to reform is leading us into another crash
- Italy's tenth-largest bank in receivership; Glass-Steagall solution raised
- A Wall Street felon and high frequency traders plan to form stock exchange
- Government shutdown is a no-win situation for all
- 'Global Britain': an attempt to retain power as global balance is disrupted
- Xi's Taiwan 'invasion threat' is just more Western hype
- Qld activists launch plans for potent 2019
- May's Brexit trap extends legacy of Thatcher, Blair
- ALMANAC: Frequently asked questions on the National Infrastructure Bank (NIB)
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