Posted by: graemebird | October 9, 2008

Banks Borrowing Overseas For Liquidity Is Insane/National Ball And Chain.

Do you people understand the stupidity of our domestic banks borrowing abroad for liquidity problems? The heartbreak and national vandalism of it all?

This is by no means a criticism of borrowing from foreigners under capitalism (properly considered). But I’m talking in the context of our socialist faith-based money the absolute heartbreak of domestic banks borrowing from foreign banks, specifically for domestic liquidity problems?

Its national vandalism is what it is. And it sticks out like a sore thumb as a pox on the land. To be sure it would be a good good thing if a government, with an authentic desire to phase out ponzi-money… to ban this practice outright and lets not waste a day in doing it.

If we kept this idiocy going national strength would flow directly to those countries with the highest reserve asset ratio.

Banking is so easy to understand. And the phenomenon of foreign-bank to domestic-bank borrowing would strike anyone as just so appalling and vandalism if you only went to the trouble to understand this banking racket and knew who to listen to.

I’m beginning to think this Glen Stephens is a good guy even if he screwed up things for the first few months of this year. His act is looking better at the moment.

From comments on this forum; (I quote a gentleman on another forum:)

“Graham Bell Says:
October 8th, 2008 at 11:40 pm
Everyone:

Seeking a lower exchange rate for the Australian Dollar might have scored a few political brownie-points way back in ancient history.

Way back when Australia still manufactured much of its own machinery, spare parts, tools and raw materials [such as steel] …. way back when Australia still made much of its own fertilizer and chemicals …. way back when Australians still owned many of their own productive assets …. way back when oil was so cheap.

Those happy time have gone forever …. so just get used to it.

While you’re at it, better get used to the new and very very harsh reality.

So since most of our ability to make our own production inputs disappeared long ago – in one financial craze or fashion after an other – why on earth would anyone, in their right mind, want to exacerbate the already bad current situation and also demand even more grief fall on themselves by cheering on the attacks on the Australian Dollar??”

If this were to happen in the context of

1. Almost no monetary growth
2. A high reserve asset ratio (at least 40%)

…Than we could get some of these input producing industries back.

The thief-economics crowd reckon we ought not get these industries back. For my part I’d want to get them all back and we could let the dollar slide even further, by preventing our banks from borrowing abroad for their liquidity problems, by providing all the cash they need indirectly for everyones liquidity problems, but by preventing the banks from creating new ponzi-money.

There is nothing more heartbreaking than domestic banks borrowing abroad for liquidity problems. Nothing more nationally stupid. Since the foreigner cannot create the cash thats needed, the foreigner has to indirectly participate in the local scramble for cash. This is one of the very strange problems of socialist fiat money. When there is a scramble for cash we get in more debt and when we expand the money supply we get in more debt. Nothing works but reducing the ponzi-money. Keeping the money supply the same, or perhaps growing very slowly (if our dollar was seriously devalued we could afford to keep our money supply rock solid) , and replacing the ponzi-money with locally printed cash.

Now this is part of the reason why our dollar has fallen. Stephens is now doing things pretty right.

From December to about June he let the money supply collapse. Our banks were borrowing overseas for liquidity. This is always counterproductive nationally. On the other hand borrowing overseas for long-term projects, with the bank as mere intermediary, is fine but it would be better if the debt was demoninated in our own currency. In fact if its a bank to bank thing, while we still have this hateful poxy, socialist, faith-based money we ought to stipulate that bank to bank lending overseas be only long-term and only in AUD.

That sounds interventionist but its only one of these things that must be recommended while we are planning the phase-out of this poxy fiat-fractional-reserve idiocy.

If you stop the money supply growth by slowly bringing up the reserve asset ratio, perhaps 1% per week, starting from 3%……….
…… What you are doing is strengthening the solvency of the banking system and the society WHILE AT THE SAME TIME ATTACKING THE PROFITABILITY OF THE FINANCE SECTOR.

That means dragging back value to the real economy. A beautiful thing.

So we want these guys solvent yet unprofitable. And we can open up the field for banking. So any business can have a banking operation. And in transition our regulations would be such that an unprofitable yet highly cashed up bank would simply sell off individual branches and restructure their act.

Stephens is turning out alright for the time being. He doesn’t understand matters the way I do. But he appears to be a conscientious fellow. A few weeks ago he was looking around for ways and methodologies of cutting off the boom…. this in the middle of the crisis.

But this is exactly what he needs to find out. Because he needs to flush in the cash, but be able to stop these guys pyramiding too much on that cash.

My guess is that our lower dollar is a very good thing. In that it may be bank driven. All these banks in the USA bloody-marvellous-Britain and the Bonapartist EU are trying to borrow money for bank liquidity. As I said. This is one of the many boneheaded and self-defeating reactions of socialist money……….

…. And since we might be one of the few places where our banks are actually REDUCING our overseas bank-to-bank borrowing, I suggest this is a key reason why our dollar has fallen relative to some countries whose banks are now having a harder time of it.

This theory will be verifiable only in about two months time when the RBA figures come out.

Its so fucking stupid. We borrow to fund bubbles when the money supply grows fast. And we borrow for bank liquidity (totally futile) when the money supply growth is slow. And in neither case are we borrowing to expand the cash-flow of exporting companies.

So we just get in more debt all the time and nothing to show for it except the loss of our manufacturing capacity.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

POSTSCRIPT:

The problem is that the only reason banks borrow from anyone but the central bank in the first place IS SPECIFICALLY FOR LIQUIDITY.

“DEREGULATION IS NOT DEREGULATION”

Can we forget this bullshit talk that the anglosphere banks are deregulated? When both the left and the thief-economics right say bank-deregulation what they really mean is 1. no reserve asset ratio and

2. a floating currency.

Thats all they mean. There was never any other meaning to deregulation they are full of shit and a pox on both their houses. Regulations are thicker on the ground then ever.

Now while we have this poxy faith-based money a floating currency is fine. But then trying to our currency down would be fine too if we had slow monetary growth and a willingness to pay off our debts.

But its the first thing that is the killer.

Milton Friedman argued for the latter. But by analogy crony-town managed to smuggle in the former. And this is one of the two or three main reasons the anglosphere has suffered from persistent loss of industry and balance of trade problems ever since.

You see I said that banks borrowing overseas for liquidity purposes is a really bad thing……………

…. But the problem is this…….

THE ONLY REASON A BANK EVER FUCKING BORROWS IN THE FIRST FUCKING PLACE IS TO BOLSTER ITS LIQUIDITY.

This has been the case and will always be the case until we have a reserve asset ratio.

You see the banks in bloody-marvellous-Britain, the USA, Australia and NewZealand… these banks do not borrow money to relend. What they do instead is they create money out of thin fucking air and only borrow money for liquidity. And since they don’t care where they borrow from some of that cash comes indirectly from foreigners and some from offering a bit more for locals on your term deposit. But the foreigners cannot supply cash. So we get into debt for nothing. Our dollar is overvalued for no good reason. And we hollow out our industry for fucking what? Socialist subsidised bank freedom?

Why do we do this to ourselves? There is only really 4 reasons why we run a trade deficit. Only one of which is legitimate and the other 3 apply but the legitimate reason doesn’t.

Its so important that everyone understand this issue. I mean I don’t mind being a rickshaw driver for visiting Chinese just so long as we at least have it enough together to maintain our sovereignty. I’m easy to please. I’m easily satisfied. But we will lose everything if stupidity like this continues.

Don’t worry about feeling stupid. If you don’t understand ask an honest question.

Postscript II

Yes I know what you are thinking. That means from a technical point of view Mahhatir was right. But he was unrighteous in wanting to restrict the hot money since after all he wasn’t going to replace the fiat-money with the good stuff.

But it does show his instincts were sound.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Look I just have to keep driving this lesson home. Because our banks only ever for borrow for liquidity (us not having a reserve asset ratio) this means they are always putting their hand out and borrowing from foreign banks. Its a fucking scandal. And that means this borrowing is always counterproductive. Since the foreign banks CANNOT provide liquidity. Since liquidity really means PRINTING PRESS.

Hence when our banks borrow from foreign banks the foreign banks simply indirectly participate in the domestic search for liquidity. They cannot improve domestic liquidity overall since they have no printing press. Hence the exacerbate the liquidity problems of the banks that are not borrowing from them and the only net effect is a temporary overvaluing of our currency. So what happens from there is our balance of trade doesn’t balance. And the anglosphere just keeps losing its productive power, despite the fact that in nearly all other respects we are run better than most other countries.

In fact without a reserve asset ratio our very strength is our undoing. All the other policies that are superior to how things are done in most other countries serve to merely purchase the rope to hand ourselves. Since without a reserve asset ratio our banks will continue to chip away at our foundations. The band finally loses its rythm section. But my goodness the vocalist is worlds best practice. We are dying. And we have got to stop this.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Interim policy conclusions:

1. Ban our banks from borrowing overseas until we have successfully transitioned to a reserve asset ratio of at least 40%

2. Try and devalue the dollar in other ways but hold the money supply rock solid as you phase out ponzi-money and phase in cash.

3. 40% RAR is the point where a more comprehensive deregulation of banking can occur and where the plan to phase from fiat to commodity money’s (mostly via tax exemptions) can start to be implemented over the top.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Its been my experience since people habitually lie and say confusing things about monetary-economics and banking that one really does need to be explicit and somewhat repetitive.

So I want to make this quite clear what we ought to do in the medium-term:

OUR BANKS SHOULD BE BANNED FROM BORROWING OVERSEAS.

DOMESTIC BANKS BORROWING FROM FOREIGN BANKS FOR LIQUIDITY IS PERVERSE, CRAZY AND SELF-DEFEATING……….

BUT SINCE OUR BANKS DON’T HAVE A RESERVE ASSET RATIO THE ONLY REASON THEY SEEK TERM DEPOSITS IN THE FIRST PLACE IS FOR LIQUIDITY. YOUR DEPOSIT IS LIKE BUFFER OR INSURANCE. THEY DON’T RELEND IT. SINCE THEY SIMPLY LEND OUT OF THIN AIR AND BUY YOUR TERM DEPOSIT AFTER THE FACT AS A BUFFER. OR INSURANCE.

Since our banks only borrow term deposits for buffer/insurance than every last dollar our banks borrow overseas is a bad thing and ought to be banned outright until we are halfway through phasing out this horror-show of exploitation, destabilization, and wealth-destruction that is ponzi-fiat-money.

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Responses

  1. “181
    Jason Soon Says:
    October 9th, 2008 at 5:27 pm
    Bird has some great ideas too

    Ban our banks from borrowing overseas until we have successfully transitioned to a reserve asset ratio of at least 40%”

    Finally I’ve reached your better judgement. And you see why. Mahhattir did this thing when even Milton Friedman would have been against him doing it.

    Mahhattir would have done this before your own ideas were carved in rock. So you would have given commonsense and Mahhattir the benefit of the doubt.

    And so there would have been cognitive dissonance later down the track.

    But Mahhattir was right my oath he was. But not right to imprison his number two over it.

    Its funny how guys like this work. I mean Mahhattirs an evil genius of sorts. But he got it right when the Austrians were looking the other way and the neoclassicals hadn’t really sized up the situation.

    I remember him after his retirement talking to SIR THIS OR SIR THAT in Papua. And these Aussies trying to put financial pressure on the Papuans.

    And I don’t know why but a Papuan in a suit to me looks (I’m not joking or bellittling anyone) immensely dignified to me.

    And anyway there is Mahhattir turning on the charm. And he’s talking in Christian terms. Talking about how the aussies expect people to be perfect and without sin. Like they don’t realise that we all are sinners. And so he’s just carressing this Sir whatever’s authentic ( and I think benevolent) Christian views and this dignified man is barely restraining laughing out loud.

    I mean I hate how he locked that other man up. I don’t like that he was in charge so long. And I hate that these charmers lord it over us. But you got to hand it to this fellow. This guy had a lot of street-smarts.

    And as you see I can say without fear of contradiction that he was right in his instincts on this score.

  2. what have you done to the front page of your blog dude? it now has the oldest posts

  3. I was trying to put some of the more important posts first. I’ll probably reverse it tomorrow.


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