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Thursday
Jul162015

Are Bankers About To "Face The Music"?

Anyone who has read my posts on the dairy industry will have some idea of my contempt for the  bankers who have financed young farmers into totally unsustainable debt. I won't repeat the arguments. Suffice to say that the general gloom was reflected in an interview today on National Radio with the Rural Manager of the Bank of New Zealand.

There is now every reason to believe that they are about to take a severe 'haircut' as the properties on which they have foreclosed come back on the market at more realistic prices, and so they should. But they will as always endeavoiur to 'socialise their losses' through Government support, and 'relief.'

The pressure will come on Government within days for over-financed farmers to be 'bailed-out,' while the bankers remain anonymous in the background. They will of course seek to maximise their advantage by getting Government to 'bail' the farmers in order to minimise their own losses.

I do not believe that the bankers are deserving of any consideration in this situation. Farmers are the real losers even if many did make bad investment decisions, and it is inevitable that hundreds will lose their equity, such as it is, and join the ranks of the unemployed.   It is the banks, with their bulging coffers of cheap foreign funds that are to blame; and I do not make that charge lightly.

It is time for a change, and banks (mostly Australian!), need to be forced to sacrifice their excessive profits for as long as necessary to get those who they unjustly placed in this position - the over-financed farmers, with over-valued assets through the coming crisis.

This situation was totally predictable, despite the bleating we have heard today from aggrieved Fonterra shareholders. What the Hell did they and the  banks think they were doing - have they never heard of commodity cycles?

And is Fonterra blameless in all this? - of course not - if its intelligence as the largest exporter in the World was so deficient then they have simply 'lost the plot.' Its overpaid top echelon are now behaving like possums in the headlights, and it is demonstrating the nature of huge co-operatives the World over - bloated and reactive. 

We are about to suffer the consequences of having so many eggs in this particular basket. Stephen Joyce's complancency beggars belief.

 

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