RBA Governor's speech 15/10

Discussion in 'Markets & Economies' started by mmm....shiney!, Oct 18, 2020.

  1. mmm....shiney!

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

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    Philip Lowe is laying the groundwork for a drop in interest rates. Not yet a backflip on negative rates as I really don't think we'll see them.

    https://rba.gov.au/speeches/2020/pdf/sp-gov-2020-10-15.pdf
     
  2. leo25

    leo25 Well-Known Member Silver Stacker

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    Unless they change the way the system works, they will most likely implement a dual interest rate system like in Europe.

    So depositors will always stay above zero, but banks can borrow at a negative rate if it's for economic growth loans. (window guidance)
     
    Last edited: Oct 18, 2020
    dollars, mmm....shiney! and 66rounds like this.
  3. mmm....shiney!

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

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    The RBA is not in any way independent of the political process, with the Governor - an unelected bureaucrat not directly accountable to the citizens of Australia regularly making comment on public policy. And what is even more disturbing in my opinion is his habit of commenting on State fiscal matters. Now I don't mind if his public comments are accurate, but when his public comments actually support damaging the real economy's capacity to enhance wealth, that's when he strays onto the field of "money for the boys".

    There's this clanger:

    https://rba.gov.au/speeches/2020/pdf/sp-gov-2020-10-15.pdf

    Yep, they can borrow at record low rates. Yep, they have a role to use fiscal policy to support the shortfall in the economy as a result of the shrinking private sector. But they shouldn't do it through borrowing.

    Lowe refuses to accept that the Federal government is not revenue constrained and therefore doesn't have to sell bonds in order to raise cash, whilst at the same time he's actively encouraging the States who are revenue constrained to increase their level of debt. That mounting level of debt is a burden to the taxpayers and the repayments will represent returns that will come directly out of the private sector's wallets in the future. When the States engage in increasing their debt, the outcome is the same as if the private sector did likewise because the States revenues are constrained by the capacity of the real economy to repay that debt.

    The Feds should be giving the States money to spend free of charge - without strings attached. The function of the State then would be to consult with local governments and communities to decide where this money is to be spent and then manage the budgets of the projects. The Feds under such a system are simply cash cows.
     
  4. 66rounds

    66rounds Well-Known Member Silver Stacker

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    From solely economic perspective, what's your opinion on scrapping state gov all together?
     
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  5. mmm....shiney!

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

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    I can't separate economics (the management of our economic systems) and politics (the management of our social systems) so my opinion will not be solely economically based.

    But to answer your question, I'd rather see the Federal government scrapped than the States as it will result in the decentralisation (there's the politics) of the management of our economic systems (there's the economics). And then we can work on scrapping the states. ;)
     
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  6. 66rounds

    66rounds Well-Known Member Silver Stacker

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    I see, so would states then have to run their own monopoly currencies?
     
  7. mmm....shiney!

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

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    They’d have to have sovereignty over the money supply if they were to replicate the current system.
     
  8. leo25

    leo25 Well-Known Member Silver Stacker

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    The way things are going, maybe Western Australia might give it a crack. :D
     
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  9. mattyman174

    mattyman174 Member

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    They have been threatening cessation from the commonwealth since forever lol.
     

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