‘Only households’ bear the burden of bad banking

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Lead Editorial

8 November 2023
Vol. 25 No. 45

They’ve done it again. The Reserve Bank of Australia, under new Governor Michelle Bullock, has whacked indebted Australian households with another quarter per cent interest rate rise. This is now the 13th rate rise since early 2022; families with a $700,000 mortgage who were paying $3,000 a month in January 2022 are now paying more than $5,000 a month.

But don’t worry, Bullock is only crushing households under this rate rise to save them from a worse fate—inflation! “We do know that there are portions of the Australian public that are hurting; we do understand that”, Michelle Bullock said at Senate Estimates 26 October. “We only have one tool, though, and I’ll come back to a point that you made earlier, which is that inflation hurts the poorest the most.”

If this sounds like the twisted logic of Israel’s Benjamin Netanyahu bombing thousands of children in Gaza to save them from Hamas terrorists, it is. There’s an evil logic that unites war and finance, which is related to social Darwinism—survival of the fittest, or might makes right. The ever-raging fight over banking, going back to inaugural US Treasury Secretary Alexander Hamilton, is about who does banking serve—the powerful, or the people? Those factions in nations which fought for national banks, i.e. government-owned, public banks, as the Australian Citizens Party does today, like the “old” Australian Labor Party before us, did so to make banking serve the people; the opposing “liberal”, now neoliberal faction, always sought to block or sabotage national banks to ensure banking served the powerful. In recent decades, the neoliberal faction reigned supreme in the Western, trans-Atlantic economies, and they succeeded in rigging the system to always favour the bankers over the people. From the 1980s onwards, this ideology unleashed the banks into a feeding frenzy of financial speculation in stocks, real estate, and derivatives. Such speculation was always insane from the standpoint of financial prudence, but the bankers didn’t care that they risked bankrupting themselves, because they knew the system was rigged to “privatise profits and socialise losses”, i.e. prop them up—they were too big to fail. In 2014, Deputy Governor of the Bank of England Paul Tucker gave a speech at the European Summer Symposium in Economic Theory in Gerzensee, Switzerland, advocating the new policy of “bail-in” to prop up failing banks with their depositors’ funds, of which he was a principal architect. Tucker was blunt that the burden for supporting the system must be borne by households: “Ultimately there are only households”, he said.

This logic is why millions of Australian households are suffering today. The same all-wise RBA that crushed them on Melbourne Cup Day spent more than two decades fueling the banks’ speculative frenzy in real estate which has burdened Australia with a property bubble and the economic cancer of unaffordable housing. Yet now that the RBA’s policies, like many of its international counterparts, have let the inflation genie out of its bottle, the high priests of finance at the RBA are making households wear the cost of containing it.

Bullock lied though, when she said the RBA only has “one tool”, meaning interest rates. The RBA is a government-owned bank, and in legislation it still has other tools, including the ability to direct the banks to limit what they lend into overheated sectors of the economy that are fueling inflation. If the RBA used that tool, it could achieve its objective of reducing the monetary expansion in the economy which fuels inflation, without raising interest rates to crush already indebted households. But that would require the government bank to assert authority over the private banks, i.e. act like a national bank. That’s a no-no in their books, but our fight is to recruit the people to demand it.

In this issue:

• ‘Only households’ bear the burden of bad banking
• ASIC charges Sterling directors, but only compensation can save the victims from homelessness
• ASIC lies to duck responsibility and not enforce the law
• Albanese visit mends fences with China
• A briefing for Prime Minister Albanese for his discussion with President Xi
• Learn from New Zealand and Japan on postal banking
• IMF demands austerity, Australia jumps
• Reject war, ‘choose humanity’
• Russian Defence Minister warns of Asia-Pacific NATO expansion
• New Speaker of the House allied with extreme warmongers in Israel
• People want a Post Office Bank!
• Slain Israeli PM Gen. Yitzhak Rabin on ‘the courage to change axioms’
• ALMANAC - Jeff Sachs: China model for Africa—IMF model’s failure

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