They’re so huge compared to Australia, they’re “Too Big To Save”
By Lindsay David, Australia, author of Print: The Central Bankers Bubble, founder of LF Economics:
Australia’s Big 4 put the American Big 4 to shame
JP Morgan, Bank of America, Citigroup, and Wells Fargo are the four largest banks in the United States. The total assets on their balance sheets combined equaled the equivalent of 48.3% of total American GDP in 2014.
That sounds like a crazy number until you compare that to the total assets of the Big four Australian banks: ANZ, Commonwealth (CBA), National Australia Bank (NAB), and Westpac (WBC) hold relative to Australian GDP
This was not always the case.
Using the CBA as an example, its balance sheet has grown at a stifling pace relative to the size of the Australian economy.
So how does a bank like the CBA go from holding assets the equivalent of 14% of Australian GDP in 1999 to 51% of GDP by 2014? The answer to that question is simple:
By taking on more risk.
It did so via a get-rich-quick scheme by getting a nation to depend on using leverage to flip houses as it’s wealth creation model).
It’s funny how the balance sheets of four primarily domestic-focused retail banks have become so much larger over the period when house prices have significantly outpaced all other economic fundamentals.
So the next question:
How do you save four banks holding assets on their balance sheets the equivalent of almost 220% of Australian GDP if the Australian economy goes belly up? By Lindsay David, Australia Boom to Bust Blog, author of Print: The Central Bankers Bubble
Australia’s households are the third most indebted in the world, relative to GDP, after having passed the Netherlands in 2014. Aussies are now closing in on the leader of the pack, Denmark, and second place, Switzerland. And it’s all based on one factor, the Great Australian Household Debt Trap. Read… Australia’s “Largest Housing Bubble on Record” in 4 Charts