Monday, August 27, 2012

The Dark World of Banking

Honest and helpful banking is at risk of being destroyed by bank's desperation to make profits.

There was a time when little old ladies would front-up to a real bank branch with real paper and talk to a real bloke. The trust relationship was solid, at least when banks loaned out that cash with careful consideration to the collateral against it and the peoples money it was using. Especially when banks weren't part of the fractional reserve system, which has created large inequalities in the value of collateral versus the money available to loan.

The trust and confidence mantra, that our contract and law society is based on, is crumbling as banks take increasing risk to make larger profts. The derivative market was one such blast of complete folly. It caused the latest global financial crisis.

Anyway, here are some of the insidious plans, and plans gone wild, adopted by banks to weasel the last bit of wealth from it's customers.

In New Zealand, banks have been found to have sold derivative products to local farmers in what amounts to fraud. It has been reported that "Risk and derivative experts say banks, including ANZ National Bank and Westpac, should not have sold complex interest rate swaps to farmers."

A contract is based on trust. Banks cut off their noses to spite their faces if they ignore this.

And this from today's press: "Home loan tip: time to fix rates - Bank economists suggest it is time to fix at least part of your home loan."

Now why would this be? Maybe they sense that rates are about to drop because no one wants their printed worthless money. Is this a blatant attempt to get the public to lock in rates while they are high! Perhaps. I'm no banker, maybe rates will go up and they have your best interest at heart.

And let us not forget the LIBOR scandal. It seems the main stream press has. The one scandal in the last 40 years, that could fatally dent confidence in the banking system, has disappeared under a cloud of complexity. Use complex terms for a simple financial scheme, cause confusion, and the already stressed public won't have the fight left to bring the culprits to justice.

Then there is the total reliance on technology. Now with computers if something can go wrong it will do at the worst possible time.

Recently, the computers that service the British banks, NatWest, RBS and Ulster Bank threw a tizzy.

Transfers into and out of peoples accounts didn't occur. A report says; "People who didn't get their wages; travellers stranded overseas without cash; people unable even to buy basics like food. When a bank lets its customers down this badly there are some very angry casualties."

A mere software problem dealing to your wealth. What is it they say about houses being built on sand?

Moreover, there is the problem of security. A security auditor for a large accounting firm said, at a recent security seminar, that he is able to break into 90% of business systems within 60 seconds.

Does your money feel safe now?

Oh, and finally, there is this latest scam by banks in New Zealand (no doubt in your part of the world as well). "Banks dangle early credit card carrot". "Credit cards generate about $631 million in total interest revenue for the banks each year. On top of that would be revenue from credit card fees and any share of credit card commissions paid by merchants when accepting credit card payments. With so much money at stake it is not surprising that competition among the banks for credit card business is intense."

So why not offer a cheap interest rate of 2.99% to draw the insusceptible in. All with your best interests in mind of course. Yeah, right, to help us buy stuff we cannot afford with printed new money that we pay interest on. How many people realise that credit crad balances are created out of thin air when you buy something? Then they charge you interest on that!

Call me a little angry, but I'm no fool.

Gold in New Zealand dollars: $2067.10 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $38.15 per oz
Previous all-time high: $59.19 per oz (30 Apr, 2011)
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