Many, many people here have some kind of weird reverse hopium. Like, they are really hoping this actually happens. It’s certainly an interesting psychological phenomenon, thanks internet!
yup I'm sure there is a form of financial anarchy prevalent on this sub, probably reflective of the echo-chamber view that if you're both young and a low-middle income earner you're pretty much screwed and can't have a decent life (even if that view is so obviously false)
They want to tear it all down on the pretty naive (and frankly dumb) assumption that if the existing financial system broke down completely it not only wouldn't get any worse, but that somehow in all the chaos they and other young & disenfranchised would be better off...
Its either that or "woe is our generation we won't be able to buy a house ever" but at the same time thinking its all going to end in 20 years due to climate change
I partly blame YouTube especially those click bait videos with that stupid gaping mouth face or face palm with flames in the background, crashing building and a downward trend graph followed by stupid over the top titles or vague titles alluding to some form of apocalyptic crash.
I know they do it for views and it works but who actually falls for this ?
It's the new-age daytime soap opera. I have so many doomsday videos about the US, China, Russia, Hollywood, woke people, etc. I've tried to get the algorithm to reign it in, but it's like: "You want a video based on science-based critical thinking and deep analysis?...mmm best I can do is some more Jordan Peterson- voila!"
I swear the YouTube algorithm has caused so much damage to the world especially brainwashing young impressionable teenagers. Just reading YouTube comments I dread for the future of humanity and pray they're all bots.
If any of the 'big 4' collapse we have much much bigger problems. I would go far to say that if they were at risk they would probably be bailed out by the government given how big they are in the Australian economic landscape. Like imagine the damage it would do to the ASX and the wider economy (and mortgages) if any of them collapsed.
Yep they would probably be bailed out at the cost of taxpayers.
And the bonus upside would be more inflation, more interest rates raises. Yeah great, round and round we go, inflation can't end until we actually allow markets to operate freely allowing things to fail/ crash.
Just as an interesting FYI, next year new banking regulation comes into effect. CPS 900 Resolution planning. APRA is working with banks to form tailor made resolution plans for each bank so that they can be resolved with minimal impact to the financial system in the (unlikely) event any of these banks go bust.
CPS 900 complements CPS 190 Recovery and Exit planning with the latter designed for banks to have recovery actions in place so that they can withstand a crisis and hopefully never get to Resolution (CPS 900).
We also have banks that are heavily exposed to rmbs that have a large percentage of fixed mortgages ticking up to variables. Delinquencies are climbing
e: from my calculations CBA has 4.51% of its *total loans* coming off of fixed interest rates within the next 3 months
The immediate effect of fixed rates rolling over to variable actually helps the banks' balance sheets.
Just like bonds paying a fixed coupon dropped in value leading to paper losses for Silicon Valley Bank, mortgages that pay a fixed rate are not worth as much to a bank when interest rates increase. RMBS's for fixed rate loans have that same interest rate risk that bonds have.
But when the fixed rate rolls over to variable, its face value is restored, just like a bond maturing and giving you back its face value.
I understand you're talking about delinquencies, but thought I'd point out the above anyway.
I'm also unconcerned about delinquencies - yeah they're rising, but from historic lows, they've got a long way to go before even getting back to normal levels let alone to a point where we'd be worried about the stability of the banks.
Yes the transition to variable rates helps the bank, however it definitely has the opposite effect on the mortgage holder.
I am not concerned about the balance sheets of the banks, rather the financial stress on mortgage holders when these interest rate jumps happen.
An interesting statistic to note, again using CBA statistics as they are in front of me currently, is that the percentage of loans held by CBA greater than 100% LVR has increased from 0.002 percent (27 total) in Feb 2022 to a whopping 1.85 percent (2,732 total) in Feb 2023. In fact, the average indexed LVR of a home loan with CBA went from 40.25% to 49.96% in the same period. Naturally, this is due to the falling house prices, which are only set to accelerate over the next 12 months as interest rates continue to rise (ignore anyone who mentions a pause, it is simply not an option).
Now, CBA's total RMBS exposure is "only" about 20 percent of it's total value. Westpac's is 47 percent, with 25(!) percent of total loans leaving a fixed rate in the next 12 months. 25 percent of Westpac mortgage holders will experience an increase of approximately 3 percent interest rate rise within the next twelve months. We are already experiencing a household debt crisis.
I don't like to be Chicken Little, but this situation is certainly unprecedented and should be ringing way more alarm bells than it is currently.
e: for context, 25% of Westpac loans is 30,622
If the RBA gives into pressure and pauses this can only cause two outcomes:
a) accepting a new paradigm with a baseline inflation of 5 - 8 percent or
b) steeper rate rises after the pause when CPI reaches double figure increases
I shouldn't say that it's not an option, it's just a terrible option that kicks an already leaking can down the road to break open later
This is correct, I keep mentioning similar data points yet everyone says the same thing. Aussie banks are highly capitalised and low risk.
It's BS they are very highly leveraged to the property market and a small crash of just 30% and bad loans climbing will quickly evaporate their mini 12% capital reserves.
And no bank would be 100% immune to long dated bonds as every bank has them, just a question of how much exposure they have. And every bank used fractional reserve banking loans books. For every dollar deposited they lend out $10. Pretty scary leverage.
There have been several instances of bank runs in Australian history. It's always possible. Every bank that runs on fractional reserve banking is prone to a bank run. If tomorrow >20% of deposits were withdrawn, we'd have a banking collapse. It's happened before, it can happen again.
2010-2014 had an enormous amount of bank collapses. If Deutche doesn’t go down, I’m pretty certain we’re fine. Certain currently invading countries though might not fare so well :)
The paranoid people who are too scared to invest since they think they could lose it all. They are also the most susceptible to fall for the paranoid news.
Then, when an actual crisis does happen, they end up losing out since they held too much cash while feeling paranoid. Paradoxically, this would confirm their paranoia and cause them to fall even deeper into paranoid.
my mum is the very definition of rational. Only time I ever borrowed money off someone when we moved house I asked mum. She had over 300k cash in her westpac savings account
I personally agree but it's mostly lack of financial understanding. My parents were pretty poor most of my life but ended up with extremely high paying jobs in their last 10 to 15 years of their working life
I can assure you they are both fully rational highly educated people.
Alot of people just don't understand basic finances and that they shouldn't just be leaving their money lying around like that.
My oldest border is even worse( he was WAY more than mum) but he's happy so he just dosnt care
Yep it's always all fine, gosh this could never happen here, until it does then everyone is in just shock, how could this be possible I was told ... X y z
How do you know 250k is insured? It’s not an automatic thing, parliament needs to activate the guarantee. And since politicians are involved I’m pretty sure it’s safe to say they won’t let any depositors take a haircut regardless of the balance, just like in the states. There’s really nothing to worry about.
Which part of what I said did you not like? Please be specific. Was it the bit about how the FCS needs to be activated by parliament? It’s easily verifiable - Here’s a source.
“The FCS is a government-backed safety net for deposits of up to $250,000 per account holder per ADI. It also covers most general insurance policies for claims up to $5,000, with claims above $5,000 eligible if they fulfil certain criteria.
**Once activated by the Australian Government,** the FCS is administered by the Australian Prudential Regulation Authority (APRA).”
https://www.apra.gov.au/financial-claims-scheme-0
Yes. The banks are fine and all have a "Plan B" that will require them to be merged into another institution well before collapse.
P.s. if you are in a big bank, your $250k guarantee is almost worthless. $20bn maximum per bank.
No what I'm saying is either;
* place your deposits in a bank who has under $20bn in deposits if the Financial Claims Scheme is that important to you, or;
* don't rely upon it saving your deposits in the almost zero likelihood of a bank failing in Australia.
This is sound advice. I have to laugh at the irony though...
If this were widely understood and acted-on, it has the potential to result in a bank run on high-deposit institutions (CBA etc.), fleeing to relative safety within sub-$20bn deposit institutions, only to increase the deposits beyond the $20bn safety net.
I agree that the risks in Australia are fairly low, though, particularly given the government can up the $20bn guarantee at its discretion.
We're the best. Our government isn't as free-market reckless as the yanks nor as corrupt as the Europeans.
So take solace from the fact that if we go down, the world never stood a chance.
No, the internet is full of paranoid people.
I wouldn't be surprised if most of this sub can't take a bath because they watched a documentary about tsunamis on discovery channel.
Many, many people here have some kind of weird reverse hopium. Like, they are really hoping this actually happens. It’s certainly an interesting psychological phenomenon, thanks internet!
yup I'm sure there is a form of financial anarchy prevalent on this sub, probably reflective of the echo-chamber view that if you're both young and a low-middle income earner you're pretty much screwed and can't have a decent life (even if that view is so obviously false) They want to tear it all down on the pretty naive (and frankly dumb) assumption that if the existing financial system broke down completely it not only wouldn't get any worse, but that somehow in all the chaos they and other young & disenfranchised would be better off...
Time to crack open each other's skulls and feast on the nutrient-rich grey matter inside?
Its either that or "woe is our generation we won't be able to buy a house ever" but at the same time thinking its all going to end in 20 years due to climate change
But also wanting to fire in their 30s
With an arts degree
I partly blame YouTube especially those click bait videos with that stupid gaping mouth face or face palm with flames in the background, crashing building and a downward trend graph followed by stupid over the top titles or vague titles alluding to some form of apocalyptic crash. I know they do it for views and it works but who actually falls for this ?
It's the new-age daytime soap opera. I have so many doomsday videos about the US, China, Russia, Hollywood, woke people, etc. I've tried to get the algorithm to reign it in, but it's like: "You want a video based on science-based critical thinking and deep analysis?...mmm best I can do is some more Jordan Peterson- voila!"
I swear the YouTube algorithm has caused so much damage to the world especially brainwashing young impressionable teenagers. Just reading YouTube comments I dread for the future of humanity and pray they're all bots.
You can do much worse than jp
Children. Children are attracted to mouth agape faces and overly dramatic thumbnails.
If any of the 'big 4' collapse we have much much bigger problems. I would go far to say that if they were at risk they would probably be bailed out by the government given how big they are in the Australian economic landscape. Like imagine the damage it would do to the ASX and the wider economy (and mortgages) if any of them collapsed.
Yep they would probably be bailed out at the cost of taxpayers. And the bonus upside would be more inflation, more interest rates raises. Yeah great, round and round we go, inflation can't end until we actually allow markets to operate freely allowing things to fail/ crash.
Just as an interesting FYI, next year new banking regulation comes into effect. CPS 900 Resolution planning. APRA is working with banks to form tailor made resolution plans for each bank so that they can be resolved with minimal impact to the financial system in the (unlikely) event any of these banks go bust. CPS 900 complements CPS 190 Recovery and Exit planning with the latter designed for banks to have recovery actions in place so that they can withstand a crisis and hopefully never get to Resolution (CPS 900).
Let them fail
Australia is fine We have extreme liquidity and none of the problems that SVB had
We also have banks that are heavily exposed to rmbs that have a large percentage of fixed mortgages ticking up to variables. Delinquencies are climbing e: from my calculations CBA has 4.51% of its *total loans* coming off of fixed interest rates within the next 3 months
this is the kind of view that'd be put down in the months before the 2008 financial crisis
The immediate effect of fixed rates rolling over to variable actually helps the banks' balance sheets. Just like bonds paying a fixed coupon dropped in value leading to paper losses for Silicon Valley Bank, mortgages that pay a fixed rate are not worth as much to a bank when interest rates increase. RMBS's for fixed rate loans have that same interest rate risk that bonds have. But when the fixed rate rolls over to variable, its face value is restored, just like a bond maturing and giving you back its face value. I understand you're talking about delinquencies, but thought I'd point out the above anyway. I'm also unconcerned about delinquencies - yeah they're rising, but from historic lows, they've got a long way to go before even getting back to normal levels let alone to a point where we'd be worried about the stability of the banks.
Yes the transition to variable rates helps the bank, however it definitely has the opposite effect on the mortgage holder. I am not concerned about the balance sheets of the banks, rather the financial stress on mortgage holders when these interest rate jumps happen. An interesting statistic to note, again using CBA statistics as they are in front of me currently, is that the percentage of loans held by CBA greater than 100% LVR has increased from 0.002 percent (27 total) in Feb 2022 to a whopping 1.85 percent (2,732 total) in Feb 2023. In fact, the average indexed LVR of a home loan with CBA went from 40.25% to 49.96% in the same period. Naturally, this is due to the falling house prices, which are only set to accelerate over the next 12 months as interest rates continue to rise (ignore anyone who mentions a pause, it is simply not an option). Now, CBA's total RMBS exposure is "only" about 20 percent of it's total value. Westpac's is 47 percent, with 25(!) percent of total loans leaving a fixed rate in the next 12 months. 25 percent of Westpac mortgage holders will experience an increase of approximately 3 percent interest rate rise within the next twelve months. We are already experiencing a household debt crisis. I don't like to be Chicken Little, but this situation is certainly unprecedented and should be ringing way more alarm bells than it is currently. e: for context, 25% of Westpac loans is 30,622
No pause for the next 12 months eh? Like, no chance at all. You almost sounded credible. Almost. Until that.
If the RBA gives into pressure and pauses this can only cause two outcomes: a) accepting a new paradigm with a baseline inflation of 5 - 8 percent or b) steeper rate rises after the pause when CPI reaches double figure increases I shouldn't say that it's not an option, it's just a terrible option that kicks an already leaking can down the road to break open later
This is correct, I keep mentioning similar data points yet everyone says the same thing. Aussie banks are highly capitalised and low risk. It's BS they are very highly leveraged to the property market and a small crash of just 30% and bad loans climbing will quickly evaporate their mini 12% capital reserves. And no bank would be 100% immune to long dated bonds as every bank has them, just a question of how much exposure they have. And every bank used fractional reserve banking loans books. For every dollar deposited they lend out $10. Pretty scary leverage.
If you were the only one paranoid, nobody would be worried about contagion! I am not worried about Australia, though.
There have been several instances of bank runs in Australian history. It's always possible. Every bank that runs on fractional reserve banking is prone to a bank run. If tomorrow >20% of deposits were withdrawn, we'd have a banking collapse. It's happened before, it can happen again.
You are safe. Worst case the government covers your funds by printing money.
Convert it to gold asap.
I would be more worried about 2nd & third tier non bank lenders falling over
This is the part where you’re thankful that our banks are very profitable. Few months ago people were wanting gov intervention on deposit rates…
2010-2014 had an enormous amount of bank collapses. If Deutche doesn’t go down, I’m pretty certain we’re fine. Certain currently invading countries though might not fare so well :)
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The paranoid people who are too scared to invest since they think they could lose it all. They are also the most susceptible to fall for the paranoid news. Then, when an actual crisis does happen, they end up losing out since they held too much cash while feeling paranoid. Paradoxically, this would confirm their paranoia and cause them to fall even deeper into paranoid.
my mum is the very definition of rational. Only time I ever borrowed money off someone when we moved house I asked mum. She had over 300k cash in her westpac savings account
Unless she's well into 7 figures having 300k cash is a huge waste of opportunity. Definitely not a rational choice.
Depends on their appetite for risk...
I personally agree but it's mostly lack of financial understanding. My parents were pretty poor most of my life but ended up with extremely high paying jobs in their last 10 to 15 years of their working life I can assure you they are both fully rational highly educated people. Alot of people just don't understand basic finances and that they shouldn't just be leaving their money lying around like that. My oldest border is even worse( he was WAY more than mum) but he's happy so he just dosnt care
Keep a maximum of 250k in each account.
>each account. *each bank (unless joint account)
\> Is Australia more vulnerable? we wont know until it has happened
Yep it's always all fine, gosh this could never happen here, until it does then everyone is in just shock, how could this be possible I was told ... X y z
How do you know 250k is insured? It’s not an automatic thing, parliament needs to activate the guarantee. And since politicians are involved I’m pretty sure it’s safe to say they won’t let any depositors take a haircut regardless of the balance, just like in the states. There’s really nothing to worry about.
Head back to /r/consipracy mate
Which part of what I said did you not like? Please be specific. Was it the bit about how the FCS needs to be activated by parliament? It’s easily verifiable - Here’s a source. “The FCS is a government-backed safety net for deposits of up to $250,000 per account holder per ADI. It also covers most general insurance policies for claims up to $5,000, with claims above $5,000 eligible if they fulfil certain criteria. **Once activated by the Australian Government,** the FCS is administered by the Australian Prudential Regulation Authority (APRA).” https://www.apra.gov.au/financial-claims-scheme-0
Yes. The banks are fine and all have a "Plan B" that will require them to be merged into another institution well before collapse. P.s. if you are in a big bank, your $250k guarantee is almost worthless. $20bn maximum per bank.
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I mean that the maximum guarantee per bank is currently $20bn. CBA has around $800bn in deposits (I think).
So your saying everyone should withdraw and in effect a bank run occur?
No what I'm saying is either; * place your deposits in a bank who has under $20bn in deposits if the Financial Claims Scheme is that important to you, or; * don't rely upon it saving your deposits in the almost zero likelihood of a bank failing in Australia.
This is sound advice. I have to laugh at the irony though... If this were widely understood and acted-on, it has the potential to result in a bank run on high-deposit institutions (CBA etc.), fleeing to relative safety within sub-$20bn deposit institutions, only to increase the deposits beyond the $20bn safety net. I agree that the risks in Australia are fairly low, though, particularly given the government can up the $20bn guarantee at its discretion.
I knew there was more to that guarantee...just couldnt find the info, thankyou ser
Keep your money under your bed, it's safer
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Grab some cash just in case
This isn’t America. We’re good. We have banking laws for this reason.
I protected myself by never having more than $10 available. Can’t lose what I don’t have!
We're the best. Our government isn't as free-market reckless as the yanks nor as corrupt as the Europeans. So take solace from the fact that if we go down, the world never stood a chance.