A review of things you need to know before you go home Monday; some TD rates rise, RBNZ to review capital adequacy levels, Co-op Bank appoints new CEO, Lyttleton to go cruising, swaps and NZD slip

Chinese investment in Australia surged 11.7 percent last year to A$15.4 billion ($11.5 billion) amid booming demand for agricultural assets and infrastructure, according to a report released Monday.

A record 103 deals were signed with Chinese companies in 2016, with 76 percent of those reached with private firms, KPMG and the University of Sydney said in the report “Demystifying Chinese Investment in Australia.”

Australia, with a population of 24 million people and a land mass larger than India, relies on foreign investment to spur growth. While Prime Minister Malcolm Turnbull’s government blocked two key purchases by Chinese companies last year, citing national security, the report shows that the vast majority of deals are approved. Read more

The RBNZ has announced a review of capital adequacy for NZ banks. Now the unease will turn bank to banks. But we are unlikely to see a return even to the unjustifiably generous 50% rule.

Highly unlikely, given large international banks have sought and gained approval around a 10% risk weight factor. Read more

Even those demanding to be in receipt of fabricated mortgage debt seek to contribute a diminishing share of rising residential property purchase prices. Read more

Why do sovereign credit regulators and their captured accountant co-conspirators allow this situation to persist, given money creation itself is an unchallenged redefinition of undischarged bank liability fabrication?

What banks do is to simply reclassify their accounts payable items arising from the act of lending as ‘customer deposits’, and the general public, when receiving payment in the form of a transfer of bank deposits, believes that a form of money had been paid into the bank.

No balance is drawn down to make a payment to the borrower.

The bank does not actually make any money available to the borrower: No transfer of funds from anywhere to the customer or indeed the customer’s account takes place. There is no equal reduction in the balance of another account to defray the borrower. Instead, the bank simply re-classified its liabilities, changing the ‘accounts payable’ obligation arising from the bank loan contract to another liability category called ‘customer deposits’.

While the borrower is given the impression that the bank had transferred money from its capital, reserves or other accounts to the borrower’s account (as indeed major theories of banking, the financial intermediation and fractional reserve theories, erroneously claim), in reality this is not the case. Neither the bank nor the customer deposited any money, nor were any funds from anywhere outside the bank utilised to make the deposit in the borrower’s account. Indeed, there was no depositing of any funds.

The bank’s liability is simply re-named a ‘bank deposit’. .

Banks create money when they grant a loan: they invent a fictitious customer deposit, which the central bank and all users of our monetary system, consider to be ‘money’, indistinguishable from ‘real’ deposits not newly invented by the banks. Thus banks do not just grant credit, they create credit, and simultaneously they create money.

Instead of discharging their liability to pay out loans, the banks merely reclassify their liabilities originating from loan contracts from what should be an ‘accounts payable’ item to ‘customer deposit’ Read more

Adequate Capital? In the last 4 years "deposits and other borrowing" held by the banks increased by about $86B (about 25%), but total local currency liabilities of the Reserve Bank increased by only $2.4B (about 12%). Bank equity capital increased by $7.9B (27%). So over the last 4 years it would seem that banks themselves created $5.5B of the capital they now call equity to support the $86B of incremental deposits.
The ratio of incremental reserve bank currency to incremental deposits being 2.8%.
Concepts like "intermediation" and "fractional reserve" do not seem to be working here.

"Adequate Capital"
A year or two ago, I warned that the banks all over the world were up to their pre GFC tricks and were creatively massaging their risk weightings to bypass the Basel requirements. Pre Christmas, it was as plain on the nose on your face that the reserve bank should have been forcing the banks to divert their huge profits into increase their capital adequacy. Lets hope that the RB does not waste any time and acts decisively. Better late than never.