RBA Governor’s speech 26/11/19

Discussion in 'Markets & Economies' started by mmm....shiney!, Dec 7, 2019.

  1. mongrelmaple

    mongrelmaple Well-Known Member Silver Stacker

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    The Reserve Bank IS the joke :D
     
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  2. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    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.

    In particular:

    https://parlinfo.aph.gov.au/parlInf...ng Committee on Economics_2020_02_07_7481.pdf
     
  3. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    Sounds like he's left some wriggle room there? Not the same as Totally out of the question

    Yet....

    I would consider that we are facing some extraordinary circumstances, or perhaps soon will be. Did you drink the Kool Aid shiney?
     
  4. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    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.
     
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  5. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    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.
     
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  6. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    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.
     
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  7. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    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.
     
  8. Oddjob

    Oddjob Well-Known Member Silver Stacker

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    That's get me all nostalgic for 22% interest rates again.:D
     
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  9. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    It would if we could trust the CPI numbers.

    At the risk of being accused of wearing a tinfoil hat, check out shadowstats :-

    http://www.shadowstats.com/alternate_data/inflation-charts

    The way CPI has been "calculated" has already changed a couple of times over recent decades.
     
  10. betterinvestmentthanshare

    betterinvestmentthanshare Active Member

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    True CPI......................check price of milk............19.5% increase in 12 months where I live
     
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  11. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    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.

    ES accounts:

    snip

    https://www.rba.gov.au/media-releases/1999/mr-99-02-role.html

    These entities are now earning 0.1% on balances held:

    https://rba.gov.au/speeches/2020/sp-gov-2020-03-19.html

    So, another dagger through the heart of the argument that we'll get negative interest rates, that's 2 now.
     
  12. leo25

    leo25 Well-Known Member Silver Stacker

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    Surprise surprise, these guys have one play book that they reuse ever time. No economic growth without structural reform


    https://www.abc.net.au/news/2020-06...nk-governor-warns-coronavirus-shadow/12379074

    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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