"General Hate for the Big Four Banks!"

My Best mate Jonny has had the first word on my blog in response to my last post. One quote I found interesting in his response was "I find the general hate for the big 4 banks around somewhat mistifying." Hence the title of this next post.

Indeed using the internet or watching a TV, we will see that banks worldwide are failing and "are being bailed out (given free money!) by" governments who use our tax as they see fit. Be mindful that our taxes once paid are no longer ours. It would be interesting to see how and why this situation has exactly come to pass in these economies. The result has been insolvent banks in either case. But having access to the internet and a TV also brings other information to our attention. The very fact
that our banks are quite clearly a long way from being insolvent. They posted yet another round of fat profits for the last quarter. A long way from being insolvent I think.

Now with that in mind why is there such hate out there for the banks. Put simply as long as the banks keep the same margin in place between the reserve bank's set rate and their own rates that they charge, their profits will remain on balance with now. So in effect passing on the full rate cut changes only the savings to the consumer. And on the opposite side of that is, they don't pass on the full rate cut and keep more back for temselves, thus increasing the margin. I'm sure right now it is so much clearer why the hate is growing. Still mystifying? :)

In a final note our rates have a long way to go down before they reach the low levels of nearly zero like America. And more importantly the reducing of rates before they badly need to be lowered would help to prop up our system. With the banks passing on all the cuts as they happen, it will not impact much if at all on their profits (keeping them profitable), and it would spur on the markets that need a boost, by freeing up funds of the consumer. This in turn helps consumers pay off their debts sooner, avoiding bad debts and allowing for new debt to enter the system.

Banks aren't so badly hated for making profits, because as we all know this system requires it and so we need them to continue. The hate begins to rise when these banks begin to hold extra margin back for them selves further lining their pockets with ever higher profits. Leaving their customers with less chance to pay the debt. This will become bad debt if the process is allowed to continue. Hmm maybe we're onto something on how the Americas got into trouble?

Till next time!