A presumably disgusted Australian banking insider, going by the online nom de guerre “Deep T.”, analyses publicly available data for the Australian banking system and concludes that a massive financial systemic crisis Down Under is a question of when, not if.

We had written about this doom before here on Baobab, under Australian, Canadian and Chinese Property Bubbles. Deep T’s analysis, which was reposted here on Naked Capitalism, lays bare all the ingredients of the toxic brew:

1. Accounting rules that allow Australian banks to revalue their loan books so as to reduce the capital set aside and take on fresh mortgages when the value of existing collateral goes up – a self reinforcing feedback loop as home prices bubble upwards! The higher home values go, the more credit can be created out of thin air to bid up, yes, you guessed it, the rising home values.

2. AU$ 30 billion in bank capital supporting AU$ 1,157 billion in mortgages, meaning that any writeoffs over 3% will wipe out bank capital. Who allowed this to happen and how?

3. A decline in unsecured foreign borrowings by Australian banks, offset by an increase of foreign deposits to Australian banks. The deposit credit risk is backed by the Australian sovereign, so foreign money keeps flowing in chasing the 6.1% yields of Australian CD’s. And it will keep flowing in since the high yield goes to the money jockeys, but all the risk remains with the hapless Australian taxpayers, inflating the debt bubble until the very last minute before the music stops.

4. Various government bonuses and schemes to entice homebuyers to acquire otherwise unaffordable homes and loans. We have written about this before in Australia’s First Greater Fool Bonus.

5. A massive property bubble, with prices having risen six times since 1986. By contrast, in the U.S. property bubble prices had peaked at three and a half times their 1986 values, and are now at two and a half times 1986 values – and falling further. This bubble almost ended three times in the last three years, but each time the government intervened to kick the can down the road, guaranteeing financial mass destruction when the pool of greater fools finally runs dry.