In other words -to be very precise - your quote from an other GIGA Zerohedge article doesn't even touch on your earlier 'problem with derivatives'.
'Moreover, Australia's banking system itself is highly dependent on foreign short term funding sources." Really? For what? If the Australian government issues long-term bonds instead of short to medium term bonds in AUD - what happens to Standing Man's GIGA banking model?
Australian banks borrow from cheapest capital market source - be it Europe or US and hedge the currency exposure. It is a competitive advantage and financial arbitrage - also known as banking!
Do you want me to spend time to answer conjecture upon conjecture?
*In other words, we now have additional evidence of the growing vulnerability of Australia specifically. As we already pointed out in our musings about how “financial contagion” might spread from China in spite of its closed capital account, Australia is a pivotal region.
*Moreover, Australia's banking system itself is highly dependent on foreign short term funding sources. Although the chart above doesn't tell us anything about the maturities of the claims on China, we would not be surprised if many or even most of the loans to China had much longer maturities than the foreign funding Australian banks get from (mainly) Europe.
