Today, a Sydney Morning Herald analysis of a Reserve Bank of Australia report discovered that “The big four Australian banks [ANZ, Commonwealth, NAB, and Westpac] have used the cover of the global financial crisis to charge borrowers more than the increase in their own costs, resulting in big profits for the lenders and much higher interest bills for many customers… The analysis reveals that a borrower with a three-year fixed-rate home loan of A$300,000 ($370,500) pays a personal contribution to extra bank profit of between A$75 and A$125 of the monthly mortgage bill.”
Christopher Zinn, a spokesman for the consumer advocacy group Choice, further added, “It’s well documented that the large banks profited in various ways from the financial downturn, including taking market share from smaller competitors, and increasing their lending profit margins.”
Though banks were hit with a 1.3% to 1.4% increase in funding costs, they increased interest rates on fixed rate mortgages by 1.7% to 1.8%; on business loans by 2% or more; and on personal loans by more than 3.4%. By gouging fixed rate mortgage holders, and business and personal loan holders, the Australian banks were able to lessen the increase in ARMs to 1.1%, an increase less than their increase in funding costs.
Steve Munchenberg, the chief executive of the Australian Bankers Association stated that these huge increase in interest rates were necessary to compensate for the additional riskier profiles of their customers. But Munchenberg’s argument is circular and without merit because banks were responsible for introducing more risk into the global financial system by lobbying for the creation of complex derivative products that were never intended to benefit the consumer but only to fatten the bottom line of banks. When these products blew up because consumers/institutions either:
(1) never fully understood what they were buying due to the complexity of these products; or
(2) never fully understood what they were buying due to the deliberate manner in which bankers misrepresented the safety of such products to their customers,
banking executives rationalize their gouging of customers because of the excessive risk that they themselves injected into the marketplace.
But the REAL story behind this headline is that banks have been gouging customers daily for decades before this financial crisis. Interest rates charged to customers should not have to be well above a bank’s funding cost to be considered gouging. In reality, given the fraudulent nature of our monetary system, any interest rate charged on virtually zero labor should be considered gouging. And the truth of our monetary system is that nearly every loan a bank creates is merely a digital entry on a computer that requires zero labor and one in which the paper cash that constitutes that loan is never even printed by a Central Bank nor ever physically possessed by the commercial bank that generated the loan. Ninety pecent or more of the global monetary base and supply consists of a digital world of digital bytes assigned to various debtors and creditors that enables banks to charge excessive interest rates at all times on their unsuspecting marks at a cost of virtually zero labor for them and 100% deceit for their customers. If you’ve ever had that gnawing feeling that something was wrong with the banking system on a very fundamental level but could never figure out exactly what is so wrong about the system, then focus on the big picture. Focus on the minutiae, and you draw energy away from the larger issues that should be commanding your attention. Focus on the minutiae and you may win the short-term battle but you will definitely lose the long-term war.
If you’ve been right about the big picture for the past five years, you’ve likely avoided huge losses and potentially have even made some huge gains during the first phase of this monetary crisis. And continuing to be right about the big picture will mean that your financial health will continue to flourish even when phase 2 of the global monetary crisis kicks into top gear. The minutiae distracts people from understanding the reality of the system so that’s why the media loves to entangle the public in the minutiae. For example, the recent up 2% on Monday, down 2% on Tuesday rollercoaster ride of manipulated stock markets confuses and distracts investors from understanding the big picture of the huge bubble underlying most major global stock markets today. And the minutiae of stories about banks gouging their customers with excessive fees distracts citizens from understanding the much more important big picture of the fractional reserve lending scam.
About the author: JS Kim is the Chief Investment Strategist and Managing Director of maalamalama, LLC, a fiercely independent wealth consultancy company that guides investors in the best ways to invest in gold and silver through the progression of this global financial crisis. Since its inception in June, 2007, until August 26, 2010 his Crisis Investment Opportunities newsletter has returned a cumulative profit of 120.62%. JS also maintains an investment blog, the Underground Investor, in which he presents financial knowledge rarely covered by the mainstream media.
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