How safe are our Banks?

[Shutterbug]

According to Mike Smith, CEO of the ANZ bank, there are somewhere in the region of 250,000 banks around the World.
Only 18 of them carry a AAA-rating.
Four of those are here in Australia.


Mike

[damian]

Whats your point ? (<- this isn't sarcasm by the way, just a question)

The big 4 "confessed" their exposure months ago. I think it was the nab that wrote off 95% of theirs, which is a clever move, because if they lose more than 95% it will be so small it won't be noticed and if they lose less they can claim it as a "profit"

There are two fundamental differences between Australia and the US right now. While our personal debt is high (possibly higher than theirs per capita) our government debt is low. The second is that commodities are a very much smaller part of their gdp than ours. Commoditiy prices will hold up through this. Conversely consumer spending, which is a much larger % of their gdp than ours will fall.

Their banking market is much more fragmented than ours and thier government passed laws that encouraged them to make bad loans. We, and they, pulled this trick in the late 80's. This time we did it less and they more. 105% mortgage, plasma here I come!

[Steve Fryar]

And that's why i have never had too many problems with banks in my neighbourhood.Though,I'm pretty sure BankSA regrets knocking me back on that loan.Their loss,Wespacs gain.I find my bank is pretty good and being in a small country town,they are more than helpful.In the city.....I can't say.

[Big Shed]

There are two fundamental differences between Australia and the US right now. While our personal debt is high (possibly higher than theirs per capita) our government debt is low. The second is that commodities are a very much smaller part of their gdp than ours. Commoditiy prices will hold up through this. Conversely consumer spending, which is a much larger % of their gdp than ours will fall.

There is a flaw in your logic there Damian. Yes I agree that the US economy consumer driven, and yes I agree that ours is largely commodity driven. Where I see a flaw is that you contend commodity prices will hold.

We sell most of our commodities to China, which turns them in to consumer goods, which they sell (mainly) to the US. Therefore if the US consumers are not spending, China will not be producing and therefore the demand for our commodities will fall, as will the prices for those commodities.

Low demand is low prices, high demand is high prices.

(At least that is what I learned in Economics 101).

[STAR]

There is a flaw in your logic there Damian. Yes I agree that the US economy consumer driven, and yes I agree that ours is largely commodity driven. Where I see a flaw is that you contend commodity prices will hold.

We sell most of our commodities to China, which turns them in to consumer goods, which they sell (mainly) to the US. Therefore if the US consumers are not spending, China will not be producing and therefore the demand for our commodities will fall, as will the prices for those commodities.

Low demand is low prices, high demand is high prices.

(At least that is what I learned in Economics 101).

From the information i have been pickup up it appears that the US exports 10% of its GDP. So much of the US economy is based on the US internal demand. China exports 30% of its exports to the USA.

While this looks serious for China, the Chinese economy has been growing at about 9 to 12 % per year. With the US downturn it will drop to about 6% which is still double what we have in Australia and indeed the rest of the world. Because the population of China is so great it will not take that much to increase the GDP and to direct its focus on internal growth.

Because Australia's economy has been more focused on Asia with Japan and more lately China, we are more likely to come out of this financial crisis better then most.

We all know that the US has been living beyond their means. Their Harvard Business School model was flawed. Greed is good. Debt is ok providing it is in the support of Capital.

The number of US CEO's that have ridden over here on their white stallions, cut expenses and staff, reduced development, improved the bottom line and ridden off into the sunset with their saddlebags lined with gold go on for ever.

But eventually, the Financial Gods in the sky , say enough is enough, You can not keep cutting costs, somebody, somewhere has to improve output.

The US is in serious sh#t because from one report that I have read is that the US Republican G W Bush Government is the best that the Cigarette, Oil, Financial, Sex and Gambling industry could buy.

[damian]

Yeah but China would take 2 - 3 times the iron and coal we send them now if they could. Even if they stopped exporting entirely tomorrow they could still use all the iron and coal we are capable of shipping right now. The only effect it'll have is the upward rocketing of prices will moderate. Bowen basin coal was about $55/tonne in 2000. This year it's about $150/tonne. It might not be $300/t in 2016 but it won't be $55 either...

[Sebastiaan56]

From the information i have been pickup up it appears that the US exports 10% of its GDP. So much of the US economy is based on the US internal demand. China exports 30% of its exports to the USA.

While this looks serious for China, the Chinese economy has been growing at about 9 to 12 % per year. With the US downturn it will drop to about 6% which is still double what we have in Australia and indeed the rest of the world. Because the population of China is so great it will not take that much to increase the GDP and to direct its focus on internal growth.

Because Australia's economy has been more focused on Asia with Japan and more lately China, we are more likely to come out of this financial crisis better then most.

We all know that the US has been living beyond their means. Their Harvard Business School model was flawed. Greed is good. Debt is ok providing it is in the support of Capital.

The number of US CEO's that have ridden over here on their white stallions, cut expenses and staff, reduced development, improved the bottom line and ridden off into the sunset with their saddlebags lined with gold go on for ever.

But eventually, the Financial Gods in the sky , say enough is enough, You can not keep cutting costs, somebody, somewhere has to improve output.

Well said! The more we outsource to India, the more vunerable we become.

The US is in serious sh#t because from one report that I have read is that the US Republican G W Bush Government is the best that the Cigarette, Oil, Financial, Sex and Gambling industry could buy.

Now that is scary, there is considerably more money to be made in industry and BHP wouldnt pay a CEO the Prime Ministers salary, (300K?)

[Gingermick]

I do it for 300K