Transcription
Holy smokes everyone, a major event is planned for April 29th that is leading the Australian major banks to panic. But before I go over the major event that is planned for April 29th, this absolutely unprecedented, I need to explain to you how the Australian banking system really works and how when you deposit your money in the bank, it is no longer your money. I'm also going to go over the laws that allow the banks to take your money when they start to go under. And I'm also going to go over the major global institution that actually controls all the central banks around the world. So everyone, you're definitely going to want to pay attention to this video. I'm going to give you the actual facts, the actual laws that make it legal for banks to do this in this video. I'm actually going to give you the history behind this huge global institution that many people don't even know exists. So everyone, let's not waste any time. Let's get straight into the news, facts, and the data.
Well, okay, first things first but again, before I go over this major event planned for April 29th, I need you to understand there is actually a bail-in law where it makes it legal for Australian banks to take your money. So this is called the Financial Sector Legislation Amendment Crisis Resolution Powers and Other Measures Act of 2018. Now, what exactly does this legislation do? Well, it empowers the Australian Prudential Regulatory Authority, that's APRA, to manage failing financial institutions by converting or writing off certain liabilities like hybrid securities or bonds to prevent collapse rather than using existing taxpayer bailouts. But I'll get into in a moment why taxpayers will also have to bail out these banks as well. Now, the purpose for these laws are designed to align global banks for international settlements, the BIS, BIS, that's the big institution I'll get into in a moment, to have their framework set in place forcing creditors to absorb losses instead of taxpayers. Now, this allows APRA to convert or write off other instruments which some legal interpretations argue could encompass deposit accounts if terms are altered.
Now, let me put this in plain English for you to understand because the banks definitely want this to make it seem like it's so complicated that you cannot understand, but it's actually very, very simple. When you deposit your money in a bank, you become an unsecured creditor in legal terms. And a bank deposit is considered a loan from you to the bank. The bank takes ownership of the cash and can use it for its own purposes such as lending it out while promising to pay it back upon your demand. But this is just a promise. What happens if everybody tries to withdraw all their money at once, which could be happening very, very soon, which I'll get into in a moment. Well, that's when we get bank failures.
Now, for those of you that may be thinking well, Australian banks are very, very strong. They have strong balance sheets. That is true at the moment. Really, this banking system is a house of cards and all it relies on is trust. When that trust is broken, which is happening right now, or when some wind comes and blows on these house of cards, it all comes tumbling down. But I know what else you may be thinking, well, don't worry because all deposits are insured up to $250,000. And yes, that is true. But has this ever been tested during a real crisis when a major banking institution like one of the big four banks have gone under? No. And for example, Westpac, which is the second biggest banking institution in Australia, has over $300 billion in deposits. Do you think this scheme will be able to cover $300 billion if all of a sudden these deposits had to be bailed in? Well, no people, they wouldn't. They won't simply have the cash. For example, the total debt the Australian government has accrued over time over throughout its history is $1 trillion. They're simply not going to have $300 billion to fund this.
Now, for my American viewers, this may sound very familiar of the Dodd-Frank Act that was created after 2008 financial crisis in 2010. And it actually is very similar. And the reason why that is is because of that global banking institution I talked about, the BIS, the Bank of International Settlements. This is the central bank for the central banks and they actually forced all these central banks to put these policies in place after the financial crisis. So for those of you that don't know who the Bank of International Settlement is and how it was created, well, it was created in 1930 through the Hague Conference driven by international bankers and central bank officials. Now, its original plan was to manage the German war reparations. Now, key figures included American banker Owen D. Young and J.P. Morgan and many other influential central bankers. Now, the Constitute Charter was signed on January 20th, 1930 by representatives from Belgium, France, Germany, Italy, Japan, and the UK and Switzerland. Now, the BIS was established in Basel, Switzerland under the Constitute Charter and is recognized as the world's oldest international financial institution. So again, this was a global institution that created these bail-in laws that allow banks in case of a crisis to bail in deposits. That's the TLDR.
But the reason why I'm making this video right now is because of that major event that is planned for April 28th and that is called the Great Cash Out Day. of what's being planned for next Tuesday. It's called Cash Out Day and the idea is that millions of Australians withdraw money from banks or ATMs simultaneously. The campaign is designed to voice opposition to what we're told is a shift towards a cashless society. What exactly are you worried about? Is there a problem here? There's a decline in the places we can get cash. Banks are squeezing our access to cash and the number of retailers who accept cash is also on the decline. This is really about our right to access cash in our local community from an ATM or a bank branch and our right to use cash to buy the stuff that we need to live. What is exactly the problem with just using the digital version because although I do like to carry cash, it is pretty handy just to have it on your phone and not be carrying all those coins in your pocket as well. Is it a privacy issue and if so, what on earth are you worried about? Yes, it's about the convenience of tapping your card. We all do it and it's not going away. Nobody's talking about banning cashless transactions. What we're concerned about is our ability to access cash, our publicly owned money, if we want to.
Now, this is where he may actually not be aware of what I just told you. When you deposit money in the bank, it is actually legally no longer yours and the bank can do whatever it wants with it and you are now an unsecured creditor. So it's really about our right to choose cash if we feel like it. Jason, have you considered the potential negative consequences of this Cash Out Day? Isn't this like a run on the banks and in the current climate, surely that sort of panic is the last thing we need. I think the banks we need to send a message to the banks and this day is becoming accepted on the calendar as the day Aussies stand up and say, "We want access to cash." And yes, it's a trust issue. Australians must be able to withdraw cash from their banks in order to trust their banks. So that's exactly right and that's what I was talking about. This whole banking system is built on trust and once that trust is gone, that's when it all comes crumbling down. And like he said, there's been many times when there's been bushfires or there's been outages where people haven't been able to use their cards. So we should always be able to use cash as a backup or if people want to use cash as not as a backup but their first option, they should legally be allowed to do that.
Now, I know what you may be thinking, well, Michael, look, there's never been a banking crisis in Australia's history. We're all going to be fine. Well, actually no. It wasn't long ago when Australia actually had its last banking crisis during the 1990s, the recession we had to have where actually the Bank of Victoria and the Bank of South Australia went bust. So what this actually caused was major financial losses exceeding $9 billion between 1990 and 1992. And in today's terms, that may not seem like a lot of money and this shows you how inflation really devalues the price of money. Well, it was driven by reckless 1980s lending particularly in commercial property which collapsed following high interest rates. Kind of sounds familiar. We just had low interest rates, reckless lending, and now interest rates are going up. Now, key phases included the State Bank of Victoria and the State Bank of South Australia. Now, this was caused by bad debt specifically subsidies from Tricontinental. Now, this caused a massive, huge taxpayer burden. The state governments South Australia and Victoria had to bail out their banks resulting in significant taxpayer debt and in South Australia leading to major privatization of public assets, the same in Victoria. And what are we seeing in Victoria at the moment? Well, we're seeing the state government going bankrupt with it being one of the most indebted states when you factor in state debt to GDP in all of the developed G20 nations. And today, people, we're seeing all the recipes of what caused the banking crisis in the 1990s start to repeat. And on top of this with this bank run planned for April 28th, or should I just say people just doing what they normally would do, taking cash out, we could see big big stress on the bank sector depending on how many people try to withdraw their money at once.
But really in my opinion, what I think would be the biggest risk for Australian banks would be if we saw a huge property market crash because Australian property is the biggest asset class, dwarfing the ASX, dwarfing superannuation. It is now valued at 12 trillion dollars. And I know what you may be wondering, well how much is actually Australian deposits? Well, we can see total Australian deposits in the banking sector is 2.8 trillion dollars. Now, for example, CBA, they have over 300 billion. Westpac has over 300 billion in assets or in deposits, should I say? Now, this doesn't mean that all of that 12 trillion dollars is actually under a mortgage, only about 2.8 trillion of that is actually in debt of mortgages. But we can see that it's still worth more than the total amount of bank deposits in Australia. Now, I actually run some scenarios on how much house prices would have to fall for there to be a big banking crisis. And in their scenarios, they said property would have to fall between 30 to 40% for the banks to be in big big trouble. Maybe 10, 20%, maybe 25%. There'll probably be some small lenders that would probably go under, but it would have to be over 30% for the banks to be in big trouble. Now, also the ABC did a report and they said that the price crash is more dependent on unemployment. And that's the reason why even though we've had interest rates go up, we've seen a lot of stress on the property market, it's been the unemployment rate holding steady and been high immigration, which has prevented a property market crash. Because we all know in Australia, Australians would do absolutely anything besides selling their property. They will live on two minute noodles if they have to. They will sell their cars, they will cut every expense besides selling their property. But again, during that 1990 scenario, property prices in Melbourne fell 19% and that was enough at that time to cause a huge crisis in Victoria.
So everyone, I'm not saying that there's definitely going to be a banking crisis on the 28th. We may just see some hiccups, but I'm just trying to make the public aware when you deposit your money, it is no longer your money. The banks have every legal right to bail in your deposits, to take your money when there is a banking crisis. If there's just a small lender go down, well, the government could probably handle that. But even though there is insurance for deposits up to 250,000, if we did see a full national or global banking crisis, the government won't be able to bail out everyone.
So I know what you're thinking, well, how can we protect ourselves? Well, it's very simple. You don't want to have all your money with one banking institution. You don't want to have, you know, all your wealth in cash in the bank. You want to diversify. You want to obviously hold some land. I'm sure most people probably own a property. They've diversified in the property that way, even though prices are very very high at the moment. And you may want to own some physical gold. You may want to have food storage because food may actually outperform the S&P 500 with how expensive food is getting right now. You want to get solar panels on the roof because energy is only going to continue to get more expensive. You just basically want to become as self-reliant as you possibly can.
But everyone, what do you think about all of this? Let me know down below. Now, for my loyal viewers and subscribers still watching, you're awesome. Thanks for watching till the end. I'll see you all in the next video.