The issues with banking are not simply a matter of failed risk management or fraud. Its fundamental model is flawed. Banks are no longer about service delivery to customers, they are rent-seekers at the expense of the community, pure and simple.
They create money, and ‘super-profits’, as easy ‘credit’ inflates the land component of mortgages – so that a great part of the community has become shackled to extraordinary and quite unnecessary debt-servicing.
This is a characteristic of banking which merits education and exposure. A lack of housing affordability is a creature of the banks inflating land prices and inadequate public capture of land rent, not simply of an under-supply of land – as misunderstood by economists. Prosper Australia’s Melbourne water-use studies, show high levels of residential vacancies, in fact, in many suburbs, not just in high-rise apartments.
When hyper-construction fails to make any significant impact on housing affordability, given its dissatisfaction with the political class, it’s a distinct possibility that the Australian people may also look to political demagogues for relief. No? Haven’t we slavishly followed the US in most things?
Instead of assuming its proper role as a community service, US professor Michael Hudson suggests that the FIRE sector–finance, insurance and real estate–is running amok and has become the economy. I consider Hudson’s on the money, if you’ll pardon the pun.
The failed banking model may only be rectified by greater capture of our publicly-generated ‘economic rent/surplus product’. This can best be done by an all-in, single rate land tax, together with more realistic mining and spectrum rent charges. That done, banks have less to capitalise into land prices, &c., and against which they may ‘lend’.
Like mining, banking is an ‘extractive’ industry. It needs to be put back in its place if the Australian economy is to recover.