The RBA and Australian economy has an issue, the value of the Australian Dollar is too high. Could the RBA print up some fiat currency and buy Gold in some type of open market operation to reduce the value of the AUD in a relatively sterile way? That is, without causing any inflationary effects? Basically neutralising the negative effects of all the foreign demand for the AUD at the moment, such as the Swiss and Russians buying it up to diversify their reserves or weaken their currency and all the international funds seeking out a return on their cash via the AUD?
This is like the third or fourth time this same question has come up in the past week or two. No - the RBA should not print money for any reason. We want them to have sound money. Precious metal based money supply is the insurance policy against the possibility of currency debasement (i.e. it forces sound money) but it is not the only method (simply not printing new fiat is ideal but no government sticks to such a policy). For every seller of crappy debased fiat, there's a buyer. Why the hell would we want to encourage buying?
If the RBA announced a QE - the value would drop faster than they could buy the gold - so its like trying to pull yourself up from your own boot straps. Gold is the ENEMY of socialist governments - some people dont understand that
Well, the RBA prints currency all the time. rbaggio's money supply growth thread has it tracking at 6.6% more currency per year right now! Today. No ifs, buts or maybes. But we are on the receiving end of other nations currency debasement (money printing) policies that are impacting our economy through increasing the value of the Australian currency. The RBA cannot manage this using interest rate policies without reducing rates to effectively zero, because while ever there is a spread foreign currencies will continue to buy it with their own printed money. Instead of being the hapless victim of these foreign economic vandals, I'm wondering if buying gold wouldn't sterilise the effects of demand for the AUD. Because gold is traded in USD though, I guess what would happen is that Australia would just be exporting its problem to the USA whilever we accumulate gold this way. But I think it would sterilise the impact of foreign countries buying the AUD as a means of debasing their currencies. So, hypothetically, why shouldn't the RBA trade those foreign currencies for gold? Effectively importing gold for every Franc, Rubel, USD or Euro that buys the AUD and turning the currency appreciation problem around at the border.
Delist the AUD from float and Australia adopts Bitcoin, or trades in WorldofWarcraft character imporovment artifacts before you laugh, answer me this ... is there really any difference?
I get where you're coming from but it just makes the problems worse IMO. As discussed in Hawkeye's recent FRB thread, most of the debasement happens through the commercial banks rather than the RBA directly. When the RBA actively accumulates shitty currency cartel fiat (rather than speculating like they have done a few times in the past) then they have crossed a new bridge and then maybe I'd prefer they spent it (perhaps on gold). (Ironically the act of spending will raise the A$ again.) In practice they will be stealing other people's gold by stealth rather than outright via the Govt, which is just as immoral.
I understand gold is anathema to the RBA and socialist governments who despise fiscal constraints and this is a hypothetical question as the RBA and Australian governments are not free agents but controlled participants in the Federal Reserve system. Is there another point you're trying to make? I was seeking some insight into the central bank forex trading process that might derail this idea of turning foreign currency demand for the AUD into gold. China seems to be pulling it off!
Besides that I'd rather see the abolishment of the RBA and their cronies instead of a strengthening of their power base, no other point. Why would we want to follow China's example? They have been depriving the wealth and liberty of their citizens for decades. Their accumulation of gold via their trade imbalance is principally about the existence of the trade imbalance which has been artificially induced by their welfare depriving, interventionist policies.
Well, I'm not entirely sure about this but my feeling is that unless you are doing QE, the money printing itself is negligible. The entire purpose of printing money is to buy debt from the market. The RBA alone has this right. Buying debt reduces the interest rate, which should lead to an increase in credit, as people are generally willing to borrow more when rates are lower, and the supply of credit increases and therefore prices and inflation increase and the value of the dollar goes down. As for gold, isn't having gold backing your currency likely to make it higher in regards to other currencies? That's how it worked with the Swiss. What is the objective here?
Fair point - i.e. that the rate of inflation via the RBA printing for gold will be less normal. But if the world moves back toward gold as a basis for money then whoever is holding it will spontaneously experience a large purchasing power gain (and consequently its power base). Why do we want to encourage the RBA (and the associated banking system) to increase its hold on the monetary economy? I'd have to think about it more, but if people were arguing for the RBA to bring gold back onto its balance sheet for the purpose of liquidating itself along with legal tender laws etc (aka the Rothbard plan) then I may view it differently. Ironically the credible suggestion of such a plan will no doubt pull the rug out from under any such plan. Edit: Actually, I might take that inflation assumption back. The A$ from the RBA will simply go via the gold owners before being deposited as a demand deposit in the normal banking system (one way or another). Hence, the $$$ are the same except that the RBA owns gold on its books that it has obtained immorally via stealth.
:lol: you guys are on some serious drugs . @silversanchez is there a difference ? well you cant mine AUD on the internet for a start. Bitcoin is not an accepted method of currency outside of the internet .Bitcoin is too volatile for a currency .Imagine the dollar gaining ground like bitcoin has in the last 12 months it would have put half of the remaining local employees out of work I could go on but you get the drift . I think i know where your coming from as in its just a method of payment created from nothing but i also believe thats where it ends
That will be the question in the coming years. Will a new global, digital currency supplant old, traditional monopolies? What will people (the market) go for?
... and what will they be forced to use instead? Edit: To be clear, I mean "what will the vested interest powers that be force people to use" instead of what the market will choose in the modern economy.
In a recent address to Adelaide University on February 26 this year, Guy Debelle, Assistant Governor (Financial Markets) of the RBA had this to say about the Australia Exchange rate and the impact of QE by foreign countries on the Australian economy. So it seems that the RBA is content to suffer the effects of global demand for the AUD while reducing interest rates, even though they know a higher doller is effecting exports and manufacturing and lower interest rates risk a debt fuelled asset price explosion like Switzerland, Canada and Hong Kong. Whereas, if they sold AUD to buy Gold on international markets they would be reducing the aggregate demand for the AUD without exporting any problems to other countries, effectively turning the destructive QE policies of foreign countries into free gold.
So our godlike central planners are basically saying they don't know what to do with their one and only tool (the Xerox machine) because they can't predict the effect of their distortions in the presence of other people's distortions. Further, the "beneficial" distortions that they create always have offsetting and potentially greater negative impacts elsewhere. Glenn, Guy and Gerry know this and have mentioned it numerous times in their speeches over the years (which I think is a big reason why they have a tendency to opt for less intervention than more). Offsetting the unnatural downward nominal rigidities burdening the economy from the activities of our brilliant elected Government is the only real reason to act on average. But they are using a blunt tool on the very heart of capitalism against random distortions scattered variously throughout the economy. This is a crappy analogy, but dicking about with the heart of the patient to try and affect blood flow to a gangrenous limb is a bad, bad approach. Better to let the stench from the gangrenous limb to become so overpowering that it is noticed and chopped off and can be regenerated naturally (let's assume the patients a lizard ). I'm possibly sounding a bit hardline about this (possibly), but many of us stack because of the dicking about with the monetary system. A system that is fundamental to civil liberties and the effective division of labour and the consequent massive welfare improvements. We should not advocate it on the premise that two wrongs make a right.
