Yesterday the ANZ reported another huge profit even with very large write downs and provisions for bad debts. A mere $510m for the six months to date is not too shabby though we can expect 2008 to be much harder going as loan demand (and supply) falls and consumers pare back on expenditure. We are already seeing signs of that with credit card spending falling along with credit card balances increasing.

But what really stands out is the $3.2bln the banks made in New Zealand in 2007. That is a lot of dough, the majority of which comes from the ability to create money into existence via interest bearing loans.

In the last 10 years loans have risen from $127bln to $323bln an increase of 154%….in 10 years!!!

In that time house prices (from QV data) have risen 178%.

It’s good to see Kiwibank taking a bigger part of this market because at least the profits stay with the taxpayer. And of course the right to create money is a sovereign one so why not have a “national” bank. That’s something worth thinking about.

I’ve been watching developments in Zimbabwe with a mixture of hope and resignation: hoping that Mugabe would step aside and retire somewhere cosy and resigned that he would never be able to relinquish power.

It was nearly a year ago that I wrote this post on him. Coincidentally I saw the Last King of Scotland again recently and was struck by something very clear: all these dictators want one thing and that is love. Yes I’m serious they want to be loved, to be accepted and they will do anything to get it. However, they end up not getting it and lash out destroying anything in their path and so the descent in sociopathy begins.

Mugabe has tried so hard to make the Motherland love him, no not Zimbabwe but Great Britain. But that love never came and so he reacted with violence against his own people, with suitable groups identified as the enemy. We’ve seen it all before.

Like Amin, he’d love to go out on top….loved not loathed but his end was written many moons ago. Like all the others before him he will die miserably in some place of exile surrounded by a few loyal servants who have long resigned themselves to his fate.

Amin went to Saudi Arabia but it’s hard to know where Mugabe will end up. Maybe with his mate Mbeki in South Africa? I think not.

I like the quote from Reed Brody at Human Rights Watch, “If you kill one person, you go to jail; if you kill 20, you go to an institution for the insane; if you kill 20,00, you get political asylum.”

As they say in New Zealand, sweet as.

What will the U.N. do? What will South Africa do? The time has come to act before the killing really gets into gear.

Following a huge campaign the death sentence on Pervez Kambaksh was lifted and we finally heard from him about his experience at the hands of the Afghani justice system.

Stories about the Taliban’s treatment of women and those who try to help them are legendary in their barbarism.

Now we hear about the treatment of women in Saudi Arabia. It’s one thing to treat women with violence (we have plenty enough of that terrible behaviour in the non-Islamic world) but the dis-empowerment via lack of rights and education is really unacceptable at the most basic level. It means there really is no escape from a life of slavery.

This extremist form of Islam does a dis-service to mainstream Islam and shows how vast and wide that congregation is in terms of beliefs and practices.

You wont hear anyone in power being critical of Saudi Arabia because their strategic position is so important and of course they buy a lot of weapons and sell a lot of oil. The hypocrisy of human rights and trade is summarised nicely here.

This year it’s the 60th Anniversary of the UN Declaration on Human Rights. The UN better start pulling its finger out before it gets done under the trades description act.

Following on from their generous bail out of Northern Rock, the UK Government, otherwise know as the taxpayer, has opened its arms to any old piece of paper banks have sitting around on their balance sheet.

Or to be more accurate, the Bank of England will accept mortgage backed securities in return for government bonds. Nice trade if you cant get it. The amounts mentioned are 50 to 200bln pounds (where the hell is my pound key?) but basically it’s a free for all.

Now we can expect to see banks reaching for the refinancing button in order to take advantage of this. RBS has already put its hand up for 10 to 12bln of fresh capital plus a 6bln write down.

Ok so its just more mess. The markets may rally on this hoping it can help clear the looming crisis in the mortgage market but the numbers are really starting to mount up and this is just very bad news indeed.

The key issue here is the capital adequacy of the banking system. It’s proven to be the achilles heel which is why the authorities have had no option but to underwrite the system.

Given this exposure of the fragility of the banking system it is time to ask questions about capital adequacy and the way banks are regulated and allowed to operate.

Merrills realeased another $9bln from trading losses and decided to fire 4000 people who probably never made a trade in their life. That brings the total for 3 quarters to $29bln, a not insignificant sum.

Citigroup was in there as well with another $5bln loss for the quarter and another 9000 jobs to go in addition to the 13000 already on the streets.  Naturally the stock rallied…phew only $5bln!

It’s interesting to see how far this continues because this isn’t a good show at all. The numbers just keep getting bigger and bigger. Citigroup still has $60bln worth of exposure to sub-prime and other loans. What worries me is the 7.7% Tier 1 capital adequacy ratio.

That is what this is all about. Leverage to the hilt and be damned. Banks have become nothing more than licenced fronts for gambling.  Fair enough but that isn’t why people deposit their money in them.

Safe as houses? Well that depends what the house is worth.

The P2P phenomenon which started with online communities and has now spread to lending money, couch surfing and music swapping has another possible application: currency exchange.

The reason I mention this is because of the highway robbery some currency exchange outlets are carrying out. To give you an example:

Last week I took a trip to Sydney. I bought some A$ at Christchurch airport through the BNZ. Their rates are always very good usually a spread of around 2-2.5%. Now that’s still pretty big but remember these rates are change maybe once a day max and the markets can be moving as much as that. I bought some US$ at 0.7929 knowing the market was actually trading at 0.7945 so i was getting an almost at market rate.

But when I arrived in Sydney I checked out the rates available at Travelex. These guys are offering outrageous prices (unfortunately they are at Auckland airport also).

Their spreads on A$ to NZ$, US$ and GBP were 20%, 15.6% and 22.4%.

Who are these guys kidding. In market vernacular I could drive a bus through that spread (more like a fleet of them).

So what to do? Well we have P2P lending now established in many commonwealth countries. So how about extending that to provide a currency service within the new distributed network.

It’s food for thought.