Discussion in 'Markets & Economies' started by mmm....shiney!, Dec 7, 2019.
The Reserve Bank IS the joke
Governor Lowe reiterated the RBA's position in a Senate hearing. Note that this was before the recent rate cut decision, it outlines that the RBA's board has not changed its position on UMP.
https://parlinfo.aph.gov.au/parlInf...ng Committee on Economics_2020_02_07_7481.pdf
Sounds like he's left some wriggle room there? Not the same as Totally out of the question
I would consider that we are facing some extraordinary circumstances, or perhaps soon will be. Did you drink the Kool Aid shiney?
NIRP aside, Lowe's comments are a demonstration of how un-independent central banks have become. They are part of the political stage whether we want them to be or not.
I'll be interested to see how far into the political morass Powell goes, he's got more brains than Yellen and Bernanke but he's got the Orange Buffoon to deal with. Philip Lowe has no qualms about politicising the RBA on the other hand, as evidenced by repeatedly referring to the function that fiscal policy should eventually play when the RBA has exhausted its current UMP.
I'll be monitoring RBA releases for any clues I can get that indicate a shift in policy one way or another.
In the meantime, this may be worth watching, from the link above:
So if RE prices rise beyond what he considers a level that is beneficial ie providing liquidity to household balance sheets to a point that they become non-beneficial ie a point where we see the ratio of income to RE values begin to rise beyond whatever the RBA considers "too much of a good thing", will this be a signal to raise rates? Will this be the first stage in an inflationary period? And remember on the whole I think central planning policy tools are reactive, rather than pre-emptive as the economic indicators they use in the main are drawn from historical data. Which means inflation could get a head start on the RBA and they may well be faced with chasing it rather than controlling it.
Absolutely. My base case involved heavy currency debasement and a big uptick in inflation. Inflation has been so low for so long that I think for the average Joe it is a bit of a blind spot. They can't afford to raise rates - especially with an unfolding crisis going on - so they will let inflation run.
That makes a case for exchange traded treasury inflation bonds doesn’t it? I think if someone was considering them then you’d have to be smart enough to use them as a hedge maybe.
Counts me out.
That's get me all nostalgic for 22% interest rates again.
It would if we could trust the CPI numbers.
At the risk of being accused of wearing a tinfoil hat, check out shadowstats :-
The way CPI has been "calculated" has already changed a couple of times over recent decades.
True CPI......................check price of milk............19.5% increase in 12 months where I live
On March 19 Lowe laid out the 4 more policies in the RBA's recent announcement about how it would try to support the economy. Of particular note was the rise in interest rates on balances that third-party payment service providers and banks hold with the RBA overnight in Exchange Settlement accounts. These accounts are used by banks etc to exchange payments made on transactions that occurred during the day.
These entities are now earning 0.1% on balances held:
So, another dagger through the heart of the argument that we'll get negative interest rates, that's 2 now.
Surprise surprise, these guys have one play book that they reuse ever time. No economic growth without structural reform
Central banks playbook
Step 1, Encourage people to take on massive amount of debt and leverage the system.
Step 2, Create an economic problem.
Step 3, Threaten an economic Armageddon unless new reform is implemented.
Step 4, implement whatever you like.
Step 5, Open the money taps and make it rain.
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