RED ALERT
Banking sector set for US-style meltdown
The historically large housing price and large personal debt bubbles have created the preconditions for a banking and housing market crash that Australian banks are unlikely to survive without recourse to tax-payer funds.
“Australia has the biggest house price bubble in its history, a bubble that has been funded by Australia’s historically-largest private debt bubble (which is predominantly mortgage debt),” Baker said.
Add another national financial bubble to the ever growing list worldwide. This not going to be good one day. Indeed it is building into a domino that has the potential to snowball out of control.
Investors' Insights
May 14, 2014
Banking sector set for US-style meltdown
The historically large housing price and large personal debt bubbles have created the preconditions for a banking and housing market crash that Australian banks are unlikely to survive without recourse to tax-payer funds.
In his submission to the Financial Services Inquiry (FSI), Brisbane-based planner Bruce Baker stated the preconditions were the same as those which led to the “near collapse of the US banking system” in 2008.
“Australia has the biggest house price bubble in its history, a bubble that has been funded by Australia’s historically-largest private debt bubble (which is predominantly mortgage debt),” Baker said.
He also claimed that “Australia is not sufficiently prepared to deal with such a crisis” and that “our banking system is unlikely to cope any better than the USA’s banking system in the face of an historic house crash”.
“The data suggests that it is quite likely that the coming Australian house price crash will be bigger than what APRA has prepared for - ie, bigger than a 30 per cent fall. From an economic perspective, this should be cause for great concern as this is a major risk to the Australian economy and Australia’s financial system,” he said.
Why so many bubbles?
