Hello UT and new poster on the thread - all excellent points.
UT I never said tens of thousands of loans in default although you may have come up with a feasible number at minimum. Given the new loans at the top of a propped up bubble thanks to Government policies in response to the GFC. Not denigrating all of them just in relation to housing.
The lax lending controls driven by greed / need for profit has left this overhang of negative equity and even if investors, developers and builders alone default in volume because their negative gearing policy is now hurting them then this can tip over very easily. We have not even hit the unemployment cycle yet and due to rising rates (thanks RBA) electricity, oil and food etc - price inflation - the volume of arrears is increasing.
I am not suggesting Armageddon however the banks will have to contain this somehow. The banks in the US did and so will the big 4 here too. At our expense as well. We already financed the banks in the GFC with guarantees - Macquarie went out and borrowed $20B and purchased 30 year bonds thanks to policy.
US banks are still declaring non-performing loans 3 years later and writing them off as they can afford to - off earnings playing the yield curve. Defer the cost and rip off the clients, invest with cheap finance from the Fed and buy Treasuries that are suspect - and cover your backside later policy. And pay yourself a bonus when you claw back losses written off! Nice if you can get it.
Don't lose sleep ...be prepared that is all I am saying. This is monetary history repeating and at the long cycle end of possibilities. Big 70 year+ cycles here not little multi-decade stuff.
Cheers and always look on the bright side of life :-) CW
