by Alison Ryan
The Reserve Bank’s dramatic interest rate decision this week appears to ignore the economic reality facing many households. In announcing a steep 0.5 per cent rise in the official cash rate, the RBA Governor Philip Lowe made the following claims: “Inflation is expected to increase further, but then decline back towards the 2-3 per cent range next year. … The Australian economy is resilient… Household and business balance sheets are generally in good shape… One source of uncertainty about the economic outlook is how household spending evolves, given the increasing pressure on Australian households’ budgets from higher inflation. The household saving rate also remains higher than it was before the pandemic and many households have built up large financial buffers.” (Emphasis added.)
(To see how much this statement is worth, consider that in his November and December 2021 statements on monetary policy, Lowe had given a strong indication that interest rates wouldn’t rise until after 2023; based on that, many Australians borrowed money and have now been smashed by two rises that have taken the cash rate from 0.10 per cent to 0.85 per cent.)
The RBA is one of the institutions, along with successive governments and the Australian Prudential Regulation Authority (APRA), which deliberately inflated a housing bubble in Australia from the year 2000 onwards. To boost the profits of the banks, and to cover up the effects of shrinking manufacturing and rural industries, they encouraged the banks to focus their lending on housing at the expense of all else—especially housing affordability.
One of the measures of housing affordability is so-called mortgage stress, which is a measure the RBA has long ignored. It’s hanging its decision on the claim that many households have built up large financial buffers, but Digital Finance Analytics’ Martin North reports from his comprehensive survey of more than 50,000 households—the biggest survey in Australia—that more than 43 per cent of households, 1.5 million households in total, were mortgage stressed before the recent rate rises. As North explained to Channel Nine’s 8 June Today program, these households were already foregoing expenses such as dental, children’s clothes, etc., to prioritise paying their mortgages. “If interest rates go up another one per cent, that’s a 15 per cent increase in the monthly repayment on the mortgage, so we’re going to see more people really struggling”, he warned.
We’ve seen this disconnect between financial reality and the delusions of financial authorities before—at the time of the 2008 global financial crisis in the United States. US authorities denied the danger of the financial derivatives banks had written on their mortgages; consequently, their decision to let Lehman Brothers collapse set off a chain reaction in its derivatives contracts that blew up the financial world.
In the 2008 GFC, the trigger was the rise in mortgage defaults that started in 2007. In Australia in 2007, a secret APRA report predicted a spike in mortgage defaults to 7 per cent of mortgages, which would trigger an Australian banking crisis and recession; only the massive bank bailouts and housing subsidies of 2008 averted that scenario.
Fourteen years later, the bubble is bigger, households have much more debt, inflation is rampant, and, globally, insiders like JPMorgan Chase CEO Jamie Dimon are warning that an economic “hurricane is right out there, down the road, coming our way”. If the RBA has miscalculated, it may decide in a few months to reverse interest rates, but it may be too late—it may already have triggered an unstoppable chain reaction to a crash of Australia’s debt-laden financial system. The RBA’s latest data shows Australian banks have almost $44 trillion in exposure to financial derivatives— the greatest danger to Australia’s banks and their customers.
When any bank in Australia lends for any purpose, it creates the money that it lends out of nothing and charges interest on it, which causes the size of the money supply in Australia to increase by the amount of principal loaned.
The bank debits its loans asset account for the amount lent to signify the debt owing to it and it credits its deposits liability account to provide its customer with the amount it has lent to them so that the customer can utilise those funds in the bank account that the customer holds with the bank.
When a customer of any bank in Australia repays principal of their loan and pays interest on their loan, the bank debits its deposits liability account for the amount of principal repaid and interest paid, which reduces the customer’s bank account by the same amount, credits its loans asset account for the amount of principal repaid and credits its revenue account for the amount of interest paid.
These interest payments are used to pay the salaries of bank employees and other expenses, with the remainder constituting the bank’s profit, out of which dividends are paid to the shareholders of the bank so that they can share in this interest revenue also.
The Reserve Bank of Australia was established in 1959 via the Reserve Bank Act. It commenced operation early the next year on 14th January, 1960, more than 60 years ago. The purpose of the Reserve Bank of Australia has always been to maximise the interest revenue collected by the banks in Australia under its authority, which were first publicly owned then later privately owned by shareholders.
In 2015, in Australia, which had a population of about 24 million people at the time, about $30 billion dollars was paid to the staff who run the banks, as well as for other expenses, and another $30 billion was earned in profits for the shareholders of these privately-owned banks, all courtesy of the fraud of interest charged on money created out of nothing and lent to the citizenry. That’s a total of $60 billion in one year paid in interest to the banks by Australian citizens on money that the banks created out of nothing and lent to them. It’s the equivalent of $3,185 paid in 2015 by every adult citizen of Australia aged 18 years and over to the banks in interest. Around 78.5% of the population of 24 million in 2015 was aged 18 years and over, being around 18,840,000 citizens.
97% of the money in circulation in Australia, constituting the money supply, is money created by the banks when they lend for any purpose. The other 3% is physical notes and coins. The majority of this 97% arises from mortgage lending. The majority of the money that banks create is the result of mortgage lending. Mortgage lending constitutes the majority of bank lending.
Philip Lowe is the current Governor of the Reserve Bank of Australia.
Philip Lowe joined the Reserve Bank of Australia as a clerk in 1980 soon after finishing secondary school.
That was more than 40 years ago.
Apart from working for the Bank for International Settlements (BIS) in Switzerland from 2000 to 2002, the only place where Philip Lowe has worked since finishing secondary school is the Reserve Bank of Australia.
https://en.wikipedia.org/wiki/Philip_Lowe
There is no need for banks in Australia to charge interest on the money that they create when they lend.
When banks in Australia lend for any purpose, they create the money that they lend out of nothing and charge interest on it, which causes the size of the money supply in Australia to increase by the amount of principal loaned.
When the principal that banks in Australia have loaned is repaid, the size of the money supply decreases by the amount of principal repaid.
The reason why the Reserve Bank of Australia is currently increasing interest rates is to discourage Australian citizens and Australian entities from borrowing in order to decrease the amount of money that is created as a result of banks lending to them and thereby decrease the size of the money supply in Australia in an effort to reduce inflation.
(When the Reserve Bank of Australia thinks that there is not enough money in circulation in Australia, it decreases interest rates to encourage Australian citizens and Australian entities to borrow in order to increase the amount of money that is created as a result of banks lending to them and thereby increase the size of the money supply in Australia.)
However there is no need for banks in Australia to charge interest on the money that they lend and there is no need for the Reserve Bank of Australia to increase and decrease interest rates in order to respectively decrease and increase the size of the money supply in Australia.
The method that should be used to increase and decrease the size of the money supply in Australia is increasing and decreasing the amount of principal that the banks are allowed to lend to Australian citizens, Australian businesses (such as sole traders, partnerships and companies) and Australian not-for-profit entities (such as churches) for different types of loans, expressed as a multiples of the incomes of Australian citizens, multiples of the profits of Australian businesses (such as sole traders, partnerships and companies) and multiples of the operating surpluses of Australian not-for-profit entities (such as churches). These multiples should be different for different types of lending, such as mortgages, personal loans, business loans to sole traders, partnerships and companies and loans to not-for profit entities.
A publicly-owned federal entity named the “Australian Bank” should be established to administer the operation of the banks in place of the Reserve Bank of Australia. The Reserve Bank of Australia should be abolished.
All banks, such as the Commonwealth Bank, Westpac, National Australia Bank and the Australia and New Zealand Banking Group, should be ordered to stop charging interest on the money they create out of nothing when they lend and to operate on a not-for-profit basis. However, it will be necessary for all banks to charge a rate of less than 1% on all money that they lend in order to cover the incidence of borrowers defaulting on loans. The banks should cover their operating costs by charging transaction fees and account-keeping fees, which should be restricted to the actual costs incurred by the banks to process the transactions of Australian citizens and Australian entities and to administer the accounts of Australian citizens and Australian entities.
The licences of the banks to trade in Australia should gradually be revoked by the Australian federal government. They should be brought under public ownership so that their branches become branches of the Australian Bank as required to service the banking needs of Australian citizens and Australian entities.
Hi maggoo, Excellent comment.
Ozzies have built up a large money reserve, have they? What with? There have been redundancies, unlawful sackings, unbelievable masses of businesses gone to the wall taking with them all the employees who worked for them leaving every single man and woman on unemployment and in some cases, they can not even have access to this welfare payment that they paid for throughout their working lives. Have those that could access welfare payment managed to save their dole money? How? They still had to pay mortgages or rent. Still had to pay car rego and third party which was not reduced at all. Still had to pay rates which actually increased – as has rented properties. Still had to eat. Still had to pay for drinking water. You know, subsistence stuff. How and where is this money? I know of not one single man or woman who is doing well or has a buffer – of any sort – due to the “pandemic”. So, more needs to be divulged as to all these Ozzies who are doing it pretty well. Where are they? How did they manage to keep doing well as before the “pandemic”. Seems we can learn from them. So show them to us, APHRA. Oh yes, ol’ Scotty’s brother works there, doesn’t he. He’s the one who ordered all the doctors to shut their mouths about the experimental jab with having their medical licences taken from them.
@tonyryan43 ‘…Forget legal challenges and protests. You were programmed to respond this way to ensure your passive march to the slaughter house …”
Then learn how National Socialists of The German Third Reich fought the parasitical international jewish bankers and freed themselves.
Everything on time and going to plan, just wait until next year, – that’s when Australia’s panic cycle begins. The majority will be looking back thinking man, things were so pleasant in 2022.
Most of us Cairns News readers know that the COMMONWEALTH OF AUSTRALIA is a corp registered in Washington DC, therefore it seems likely the RBA is registered there too or branch of the US FED
Hi Fed Up! Well I can certainly vouch for Grants toothpaste – been using for quite a few years. (Better than Red Seal). They used to make a propolis one too which I loved – but haven’t been able to find for a long time.
Encouraging people to buy into heavily inflated property when there was easy money, low interest rates and unpredictable employment during the ‘pandemic’ was a trap you could see coming.
Who didn’t know the music would stop?
Inflationary pressure on the horizon was a no brainer for as long as we had a Government spending like a drunken sailor.
Their unfettered indulgences have stolen from future generations.
That will be their legacy.
https://twitter.com/RebeccaApril10/status/1537030904732078082?s=20&t=-uJAZxgsn7jfum0bzXMESg
Brush your teeth with Grants tooth paste. Australian owned and has no deep state lergies swimming around so I am led to believe….at least it has no fluoride
Support Australian Made products
Let me know if its on the cabal list of the old saying that does not seem to go away…”avoid like the plague”… or should that be Covid19 with a bit of money pox thrown it….one and the same…. Avoid like a Fauci man made virus
betty mac: “They will keep these dirty tricks coming until we can take no more, then the Great Reset will claim to ‘save’ us…the idiots and non-thinkers will say “Yes please” and we will be totally finished as a democratic country.”
100% THE TRUTH!
The time to stand up and fight against such crap was YESTERDAY! Not today or tomorrow but YESTERDAY! Yet, there’s still nobody who loves Australia and its people enough to start the ball rolling. Sadder than sad! 🙁
Read what Bob and Betty say. Carefully.
Then just take my word for it, the RBA Governor, Lowe, is employed by the Bank for International Settlements in Basle Switzerland.
So too is the Board of the RBA and also Treasury.
Look at it another way. Treasury and the RBA are owned by the Rothschilds. Ten years ago, they did not even have an office in Australia. Today they have at least seven, with BIS above the door. This is to facilitate the takeover of Australia.
What about the private banks?
OK. Down the road you can see Macquarrie Bank. That is owned by Hill Simon Bank, of London, which is part of the Bank of England, which is Rothschild.
Now you get to see the picture.
Directing traffic to the banks is the WTO, owned by the investment bankers, as is the World Bank and the International Monetary Fund, and the WEF.
We are surrounded.
However, the Ponzi scheme that collapsed in 1929 and 2008, is about to topple again. What to do? Why, kill you all off, starting with the age pensioners because their pensions were flogged by the politicians to pay for their election promises. This is true in Australia and the US, and I am guessing this is so in all western nations. So Remdesivir and fatal amounts of oxygen got rid of much of that problem and jabs will do the rest.
How to stop it? gGet rid of the problem. Permanently. How many times do I have to say it? Forget legal challenges and protests. You were programmed to respond this way to ensure your passive march to the slaughter house. But, that is your choice.
The mortgage is not a contract, it is, effectively, a Promissory Note, and the bank is cashed up a few days after you sign the mortgage, which they illegally securitise.
There is only one signature on the mortgage document-yours, so it is not a valid contract, as offer and acceptance is not part of the deal.
And the bank will not be able to show you the mortgage, because they are no in possession of it-as it has been sent to some far flung recipient.
And if they can’t produce the mortgage document, how can they establish and prove a debt?
About the mortgage:
I may be wrong but I see this radical, dangerous move by the banks as part of the plan to bring Oz to its knees….we were almost there after 2 years of unnecessary hell but they weren’t happy with that….we weren’t down and out.
Our banks are tied to the International Bank which in turn is part of the Great Reset/WEF/UN ETC.
They will keep these dirty tricks coming until we can take no more, then the Great Reset will claim to ‘save’ us…the idiots and non-thinkers will say “Yes please” and we will be totally finished as a democratic country.
We will all be placed on the digital credit system, a la China, our entire possessions…car, home…everything ….will be taken by this filth and we will virtually be slaves to the elitist mafia.
Communism will have won!
Wake up, Australia!