Monday, February 7, 2011

Financial Primitivism

In regards to the crossed check issue, it's apparently a non-issue anymore, since no existing Australian bank will cash a check for cash these days. Everything has at 5-day waiting period.

But in the process of researching this, I discovered that Australia and New Zealand are the only 2 (out of 30) members of the OECD that do not have government deposit insurance.

That's right: if an Aussie bank decides to gamble all your money on a coin toss, and loses, you don't get anything. All of your money - every penny you put into your bank account - is just gone, and no one will give it back.

I've seen lots of libertarian-style arguments that deposit insurance only creates moral hazard, as in the banks will then do foolish things since they know they are protected, so it's up to the consumers to prudently pick their banks. This is akin to the libertarian ideal that we don't need meat regulation, because if you buy tainted meat and die from it, you'll never make that mistake again and the seller will go out of business. I've seen a few arguments that, you know, every other civilized country has it and maybe we should join them.

And of course the argument that Australia doesn't need it because it's banking system is "special." Apparently banks are expected to keep half their deposits in cash (instead of the 10 or 20% in the US), so I guess you might only lose half your money.

This place is ripe for the picking. I predict 3-5 years before Wall Street swoops in, bankrupts the entire nation with some hare-brained Ponzi scheme, and then sails off laughing at the rubes in their yachts' rear-view mirrors.

If this is socialism, it's socialism as done by amateurs.

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