Ignoring real crisis
Now accompanying every notice of assessment issued by the Tax Office are the figures for the federal government’s gross debt: this year’s ($340 billion); last year’s ($257 billion), and the interest payments on this gross debt ($13.2 billion). No doubt this was mandated by the Treasurer.
While such information is instructive under the government’s narrative of a debt and fiscal crisis, I wonder if the government would mandate disclosure of how much gross private debt Australians owe to financial institutions – $2200 billion – thereby making all aware of the real crisis engulfing us and the rest of the privately indebted world.
Tom Fanning, Blackburn
Not to sure if you read former Director of Budget for Ronald Reagan, politician and fund manager, David Stockman and author of The Great Deformation, but he’s a worthwhile read.
http://davidstockmanscontracorner.com/why-the-feds-outrageous-gift-to-foreign-banks-risk-free-aribitrage-on-ioer-is-just-the-tip-of-the-iceberg/
Yes, of course they’re achieving greater profits from shoving more and more cash into the ongoing Oz residential bubble = fantastic market capitalisation. Lindsay David (Australia: Boom to Bust) also notes the CBA and Westpac have assets to cash ratios of 59.8 and 70.6 respectively, whereas Lehmann Bros had only 34.5 times their cash in assets. If Lehmanns couldn’t manage a crunch with a far better cash ratio, maybe we’d better believe “Australia is different”!?
You can add to that the huge gap between our banks market capitalisation and their asset base. CBA is ranked number 10 in the world based on market capitalisation yet is no where to be seen in global rankings when compared to the value of its asset base.
The reason for that is its ability to borrow from money markets at 1 basis point then deposit its borrowings at the Fed Reserve and earn 25 basis points interest. New accounting rules allows the bank to book this debt and the interest it earns as cash earnings and profit so it can pay stock dividends and buy back shares thus driving its share price to record highs.
CBA owes its fortunes to new GAAP accounting rules (tricks) and it’s license to operate in New York.
The funny thing is the MSM and Canberra think its share price is the reflection of a booming economy and a healthy property market.