Even the Reserve Bank of Australia (RBA) realises that Australia’s Big Four Banks have an unstainable bubble of derivatives and overpriced property. Refer to the attachment 1.
‘Australia’s banks have become addicted to derivatives, the fraudulent and toxic betting instruments that caused the 2008 financial crash. While derivatives betting globally levelled off for a few years after 2008, in Australia it exploded. The combined derivatives exposure of Australia’s banks has risen 163 per cent in eight years, with Bank’s consolidated off balance sheet business now in excess of $35 trillion.’
Members of Parliament from Parkes, Maranoa, Paterson and New England have been asked to confirm or comment on Sussan Ley’s basis for the Government having strong control of banking.
‘Australia’s approach to managing risk in the banking sector has been to focus strong oversight by the Australian Prudential Regulation Authority (APRA). Banks continue to be intensely supervised by APRA and the Australian banking system continues to perform strongly.’
APRA is protecting the Government by requiring each of the banks to reduce their derivatives exposure by $4.5 trillion by the end of this year.
I am often asked about derivatives. They are so deadly because their indicative value is more than nine times the GDP of the whole planet. Warren Buffet describes them as a weapon of mass destruction. Others feel that they are a financial trick.
It is suggested that everyone who is interested in our future should see the film 'The Big Short.' This is a story about real people played by actors including some boffins who just before 2008 could see the property and derivatives bubble about to burst. They wanted to make millions by betting (shorting) with banks that some other banks would fail. On cue the property and derivatives bubble burst. It was not working out well because 'some banks' saw what was happening and bet on banks like Bear Stearns and Lehman Brothers. They and other banks disappeared and miilions of mortgage holders went broke. The bofffins had to admit that they had not foreseen that and had to be content with only a about a million each.
The benefit of the film is that it shows that we are nearing the same bursting of what is now a much larger bubble than in 2007. It goes part way to describing derivatives like credit defaulkt swaps
Once again he tries to take the easy way out and goes to the internet which says says that 'A derivative is a contract between two parties which derives its value/price from an underlying asset. The most common types of derivatives are futures, options, forwards and swaps.'
Malcolm Turnbull was involved in all of this as a high flyer in Golman Sachs where he mader hgis fortune.
A frightening example is described ghere:
‘The bankers in the room had seen some financial slight of hand, but the manoeuvre that Mr. Faissola’s staffers proposed was audacious. They described a simple trade in two parts. For one half of the deal, Paschi would make a sure-thing, moneymaking bet with Deutsche Bank and use those winnings to extinguish its 2008 trading losses. Of course, Deutche doesn’t give money away for free, so for the second half of the deal, the Italians would make a bet they were sure to lose, While the first half of the deal was immediate, the second would play out slowly , over many years. No sign of the 367 Euro million sinkhole would need to show up when Paschi compiled its yearend financial reports.
All of those involved hailed the deal as brilliant but others were greatly concerned about this use of derivatives. A full scale audit was ordered. A day before the audit began the body of Mr. Faissola was found in his London home hanging from a dog leash
Our banks have to borrow from overseas so they are vulnerable. Many countries are concerned about their futures as the Rothschild Group have a reputation for preying on countries whose debts are out of control.
Prime Minister Malcolm Turnbull has a big black mark on his curriculum vitae, in the name of Goldman Sachs, that should ring alarm bells. Goldman Sachs’s influence in government the world over has been a story of misery and economic destruction. This, the most powerful investment bank in the world was in large part responsible for causing the 2007-08 global financial crisis and the current economic crisis in Greece, among other nations; its business model, based on sleight-of-hand, takes from the majority to benefit an elite minority. Instead of growing the economic pie to benefit all, Goldman Sachs chokes funding for productive industries in favour of supporting asset and commodity price inflation.