Australian Politics General...

[luutzu]

i haven't said share holders aren't happy with the risk they are, they just want to be paid for it, at the end of the day, the competition in the market would rise if profits were unfairly large, and reduce profits.

The heads I win tails you lose example is a fallacy.

How is it a fallacy?

The bankers are telling depositors that ATMs, a safe place for their money, and zero real interests on their money [often, it's negative zero real interest]... banks are saying that that's fair. That depositors putting money in the bank for nothing is having a good deal.

But for the bank to take on extra risk in their dealings, either recklessly lending out to anyone or recklessly speculating in this and that market... those risks they bravely takes on... those risks are partly paid for by depositors [through not getting nothing for their money].

Again, if the banks just take depositor's money and lend it out properly, the overall risk is so insignificant it's almost zero. For banks to take on more risk by lending to high-risk borrowers or through playing the markets... that's extra risk the banks decides to take on. Why then should depositors have to forgo their money's interests to compensate for those extra risk.

If the risks to the banks are solely related to holding too much of depositor's cash; or risky taking in deposits... then sure. But it's not deposit-related risk is it?

On top of all this, the gov't is guaranteeing that if the shiet hits the fan, taxpayers will bail out the bank's lender [i.e. depositors].

Aren't modern banking an perfect example of socialised costs - passing costs onto taxpayers - but privatising all profits?

And how is this also not an example of heads I win, tail you lose?

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Say you deposit your cash with me. I tells you that it costs a lot to hold your cash man. Wouldn't you ask if those costs are covered by the returns I'm getting lending it out? Sure it covers the costs of taking your money, but man... I gamble with your deposits and might lose... so that's a big risk... and because of that risk, I'm gonna have to not pay you anything for your money.

Fair?

No! What if your gambling send you broke and I lose my deposits? Since that's the case, I want a much higher return for the risk of you and your gambling habits dude.

No worries man, the gov't will bail you out. So what risk?



That's not capitalism and entrepreneurialship. Crony capitalism that takes from the poor and the public and dole it out to the rich.

 

[Value Collector]

No! What if your gambling send you broke and I lose my deposits? Since that's the case, I want a much higher return for the risk of you and your gambling habits dude.

No worries man, the gov't will bail you out. So what risk?



.

You can't have t both ways.

Firstly you are saying that the shareholders cash is not at risk, but then you are saying depositors cash is at risk.

If you saying shareholders don't have much risk, then depositors have basically no risk.

If you are saying depositors do have risk, (still less risk than the mattress though) then you have to admit shareholders putting their capital infant of depositors funds is providing a good protection service.

guess body guards look like over paid moochers till they starting taking bullets to the chest for you.

Watch this at the 30 second mark, who do you want to be, they guy taking a round to the chest, or the guy crouching behind, again shareholders are the first to take hits, we don't care, we just want to be paid.

 

[luutzu]

You can't have t both ways.

Firstly you are saying that the shareholders cash is not at risk, but then you are saying depositors cash is at risk.

If you saying shareholders don't have much risk, then depositors have basically no risk.

If you are saying depositors do have risk, (still less risk than the mattress though) then you have to admit shareholders putting their capital infant of depositors funds is providing a good protection service.

guess body guards look like over paid moochers till they starting taking bullets to the chest for you.

Watch this at the 30 second mark, who do you want to be, they guy taking a round to the chest, or the guy crouching behind, again shareholders are the first to take hits, we don't care, we just want to be paid.

If the banks can have it both ways, why can't I?

Banks have many risks... let's give it that for now.

What's the risk of taking depositor's money and storing it? Electronically, with some cash reserves as required by the gov't.

What's the risk in that? Practically zero risk.

What's the risk to the bank in taking depositor's cash and lending it out responsibly? i.e. not speculating, not getting creative and smart with the deposit. Just your normal lending out to responsible business operators and mortgages.

That risk is very, very minimal. It's not zero, but it's not "risky" if it's done responsibly.

With minimal to zero risk in responsibly handling depositors cash, wouldn't it make sense to then pay depositors something like inflation + 1% return on their cash?

If the bank decided to take on more risk, i.e. more profit, by lending to people with five credit cards, charging them some 20%p.a.; or lending to risky businesses, and charging them 5 to 7% or whatever it is...

Those are additional risks the bank decides to take on, on their own.

Why then should depositors pay for that additional risk that their cash does not at all cause?

That and in real life, on a level playing field [ok, not so real life]... when you take people's money, it's only common sense that you pay them for it.

If taking deposits and handling it is too risky for you the banker, then maybe banking isn't your cup of tea.

But of course there's only 4 banks with 1 tiny "bank" in Australia... so depositors are being screwed and have no choice but bending over.


It's like you giving me money and I turn around saying that man, I'm quite reckless and just don't know how to handle money responsibly. So I'm risky.. .and becuase of my riskiness, you'll have to pay me for looking after your cash. That's fair.

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With regards to gov't guarantee... again, that's a free insurance policies for the banks. Without it, depositors will most likely not put their cash at the bank, or will demand a much higher interest for their deposits. Both of which will cost the banks quite a bit.

But since Big Brother is looking after the poor bankers... bankers can tell depositors that "there's no risk because the gov't will cover you". That's transferring risk onto the public, among whom are also depositors.

This is call having your cake, eating it and laughing all the way to the bank.

 

[SirRumpole]

If you are saying depositors do have risk, (still less risk than the mattress though) then you have to admit shareholders putting their capital infant of depositors funds is providing a good protection service.

Paying shareholders half of the shares dividend yield would be fair I reckon.

The CBA's yield is about 8% , so 4% on depositor's funds would seem fair.

 

[sptrawler]

Exactly how much risk do you think that bank shareholders are subject to in this country with a responsible prudential regulator, a government guarantee on deposits and only four major banks ?

I'd say it's extremely unlikely that bank shareholders in this country will ever lose their investment as the banks profits seem to be continually growing as are their share prices and dividends, so your theoretical calculations are just that, theoretical.

After the 1987 stock market crash and the subsequent demise of Bond Corp, Qintex, Adelaide Steamships etc, some Australian banks were looking very shaky.

 

[sptrawler]

Paying shareholders half of the shares dividend yield would be fair I reckon.

The CBA's yield is about 8% , so 4% on depositor's funds would seem fair.

If CBA was giving 4% interest on deposits, what sort of interest would home buyers pay?

 

[luutzu]

If CBA was giving 4% interest on deposits, what sort of interest would home buyers pay?

Does it matter?

Money come at a cost. Why should depositors have to pay for it just so bankers and mortgagee can have it easier?

Putting higher interest on mortgages might mean property prices will come down. That'll disappoint investors with half a dozen properties, but it'd be good for home-owners who's trying to get buy a roof over their head.

 

[SirRumpole]

If CBA was giving 4% interest on deposits, what sort of interest would home buyers pay?

I recall paying about 18% at one time.

 

[Value Collector]

If the banks can have it both ways, why can't I?

Banks have many risks... let's give it that for now.

What's the risk of taking depositor's money and storing it? Electronically, with some cash reserves as required by the gov't.

What's the risk in that? Practically zero risk.

What's the risk to the bank in taking depositor's cash and lending it out responsibly? i.e. not speculating, not getting creative and smart with the deposit. Just your normal lending out to responsible business operators and mortgages.

That risk is very, very minimal. It's not zero, but it's not "risky" if it's done responsibly.

With minimal to zero risk in responsibly handling depositors cash, wouldn't it make sense to then pay depositors something like inflation + 1% return on their cash?

If the bank decided to take on more risk, i.e. more profit, by lending to people with five credit cards, charging them some 20%p.a.; or lending to risky businesses, and charging them 5 to 7% or whatever it is...

Those are additional risks the bank decides to take on, on their own.

Why then should depositors pay for that additional risk that their cash does not at all cause?

That and in real life, on a level playing field [ok, not so real life]... when you take people's money, it's only common sense that you pay them for it.

If taking deposits and handling it is too risky for you the banker, then maybe banking isn't your cup of tea.

But of course there's only 4 banks with 1 tiny "bank" in Australia... so depositors are being screwed and have no choice but bending over.


It's like you giving me money and I turn around saying that man, I'm quite reckless and just don't know how to handle money responsibly. So I'm risky.. .and becuase of my riskiness, you'll have to pay me for looking after your cash. That's fair.

-------------

With regards to gov't guarantee... again, that's a free insurance policies for the banks. Without it, depositors will most likely not put their cash at the bank, or will demand a much higher interest for their deposits. Both of which will cost the banks quite a bit.

But since Big Brother is looking after the poor bankers... bankers can tell depositors that "there's no risk because the gov't will cover you". That's transferring risk onto the public, among whom are also depositors.

This is call having your cake, eating it and laughing all the way to the bank.

Depositors have would have three option.

1, Put cash under mattress at home - Low cost, High risk, no return

2, Store it with a storage company in vault - High Cost, Low risk, no return

3, store it in the banking system - Low/no cost, low risk, some return

Option three is clearly the best.

 

[sptrawler]

I recall paying about 18% at one time.

I remember it well, they weren't giving 4% on deposits then, more like 15%.
Ah the good old days, rampant inflation, rampant wages and prices, got us where we are today magic times.

 

[Value Collector]

Paying shareholders half of the shares dividend yield would be fair I reckon.

The CBA's yield is about 8% , so 4% on depositor's funds would seem fair.

It's not about dividends, its about return on equity.

But lets say you halve the dividend, and to do that you design the system to halve the return on equity from 16% to 8%.

So share holders are only earning 8% on their capital in the bank, thats a pretty low return on capital, you would find it hard to get investors willing to put up the capital.

How much do the you want to pay the security holders one level down from share holders, e.g. the unsecured debt holders?

 

[luutzu]

Depositors have would have three option.

1, Put cash under mattress at home - Low cost, High risk, no return

2, Store it with a storage company in vault - High Cost, Low risk, no return

3, store it in the banking system - Low/no cost, low risk, some return

Option three is clearly the best.

....orrrrr

option 4....


btw, do you have to like a company to buy stocks in them?

It really does make you a better person than me though. I know some of the companies I own screws people unfairly, I still buy them. Moral decay, but what can you do?

But ey, I stop at arms manufacturers and tobacco or gambling.

 

[SirRumpole]

So share holders are only earning 8% on their capital in the bank, thats a pretty low return on capital, you would find it hard to get investors willing to put up the capital.

But 5% (correction) is the CBA's actual current dividend yield ie what the investors are currently getting on their capital and they are not complaining as far as I can see.

If you have CBA at 5% yield and you thought 8% was a bad return you are in for a shock.

 

[Value Collector]

.


btw, do you have to like a company to buy stocks in them?
.

Yes

...orrrrr

option 4....

Which is?

 

[luutzu]

I remember it well, they weren't giving 4% on deposits then, more like 15%.
Ah the good old days, rampant inflation, rampant wages and prices, got us where we are today magic times.

Not much inflation for some decade now. Property prices is sky high for some reason.

I still remember the good old days when $100K could buy a decent 3-bedroom home in the suburb. The same, now run-down, property now goes for about $700K, easy.


I was half listening to some lecture about inflation control being a simple tool to help the asset-rich while screwing over the working poor.

Say a young family, working, owing a few hundred grand in mortgage... if inflation were let loose somewhat, their wages will increase while their mortgage will decrease in real term by a heck of a lot.

Can't have that now can we? So fighting and doing everything we can now to keep inflation under control.. keeping a "balance budget", suppress wage increases [to fight the evil inflation]... and still property prices make us all better off?

 

[luutzu]

But 8% is the CBA's actual current dividend yield ie what the investors are currently getting on their capital and they are not complaining as far as I can see.

Hard to complain when you get people's money for free. Lent out at an average of 200% margin... collect billions in net profit.

 

[luutzu]

Yes


Which is?

Have been telling you.

Anyway, would you deposit your cash, even for a day, for zero real interest? No? Then why is it fair that depositors ought to?

It's a safe place for their money? It's supposed to be safe. And depositors aren't exactly hiring a safety deposit box are they? Their cash is being use the moment it comes into the bank, use to make money for the bank.

 

[sptrawler]

Not much inflation for some decade now. Property prices is sky high for some reason.

I still remember the good old days when $100K could buy a decent 3-bedroom home in the suburb. The same, now run-down, property now goes for about $700K, easy.


I was half listening to some lecture about inflation control being a simple tool to help the asset-rich while screwing over the working poor.

Say a young family, working, owing a few hundred grand in mortgage... if inflation were let loose somewhat, their wages will increase while their mortgage will decrease in real term by a heck of a lot.

Can't have that now can we? So fighting and doing everything we can now to keep inflation under control.. keeping a "balance budget", suppress wage increases [to fight the evil inflation]... and still property prices make us all better off?

The property investors in W.A aren't laughing.
I've seen prices in some places, go from $200k to $1m and now back to $200k.

 

[luutzu]

The property investors in W.A aren't laughing.
I've seen prices in some places, go from $200k to $1m and now back to $200k.

Screwing the young new money is part of the plan too.

 

[Smurf1976]

The property investors in W.A aren't laughing.
I've seen prices in some places, go from $200k to $1m and now back to $200k.

Just wondering if that's "middle of nowhere" or mining towns or is it in places with a more diverse economy?