Australia and money supply growth

Slam said:
The Australian Money supply has to expand to match the other countries that are also devaluing their dollar. Otherwise if our currency supply stalls the end result would be a much much stronger Australian dollar (its already much stronger). Which may also mean we are expanding but not as fast as other countries.

I believe the expansion has been a result of increased borrowings for property. Or indirectly the result of banks borrowing from overseas converting to Australian dollars then using the FRB system to lend out.

Its nice to actually see the figures, this proves that there is monetary inflation. The price-inflation CPI is only a result of monetary inflation, I think we should be feeling the effects of this price inflation soon. I'm sure most of you are starting to realise the increases in the price of food and fuel recently.

One point to note is, the banks are crying poor and eager to raise interest rates. They blame it on the increased cost of funding. I say that is all bullshit. The US is giving away money on near zero rates, same with Japan. I can't see how they can blame it on that. I'm sure big US banks would want to lend to Australia, we have resources and possibly a much less likely chance of default before the US defaulting first.

So the main reason they say borrowing cost more is because of the exchange rate, the Australian dollar has strengthen. When they were borrowing US dollars, 2-3 years ago. They can exchange the 70 US cents for 1 Australian. Borrowing overseas was worthwhile, because they can buy more Australian dollars and with FRB able to lend more out. The times have changed, they are now borrowing near 1:1, with a chance that if the Australian dollar slips back down to 70 US cent. They will have to pay more back to service that debt. Hence they are crying poor and want to hedge against that risk. Also look at the record profits over the last few years, I believe the Strengthening of the AUD has something to do with this. But think about the loans they have to pay off now, its actually cheaper in USD terms, the AUD has strengthened.

Now the M3 money supply has also expanded as a result of borrowings from overseas. When they borrow and buy AUD, this acts like a deposit to the bank. Hence they can automatically loan money into existence from this pool.

So the fking Yanks have exported their problems worldwide, why do you think china is having inflation problems, everywhere in the world is having inflation problems. The money supply is just expanding everywhere due to the global economy and the ability to just borrow from any bank that will lend you money.

Slam
Click to expand...

Great post and outlook I hadn't thought of.
 
Federal police have charged two Reserve Bank of Australia currency firms, Securency and Note Printing Australia, along with several of the company's former senior managers with paying massive bribes to foreign officials in order to win banknote supply contracts.

In a series of dawn raids, AFP agents swooped on houses across Melbourne, arresting six former senior executives of Securency and Note Printing Australia, companies which are respectively half and fully owned and overseen by the Reserve Bank of Australia.

. . .

The criminal charges relate to bribes allegedly paid between 1999 and 2005, although the AFP is still investigating multimillion dollar kickbacks allegedly paid between 2005 and 2010.

Note Printing Australia's board of directors during the period covered by today's charges were all serving and former senior RBA officials, including former RBA deputy governor Graeme Thompson

. . .

Read more: http://www.theage.com.au/business/former-securency-bosses-arrested-20110701-1gtr8.html
Click to expand...

Can you believe it, the RBA bribing people. I wonder where they got the money for that?
:lol:

"Please Mr Stevens sir, I want some more. "

[youtube]http://www.youtube.com/watch?v=M4CVZnGJIzQ[/youtube]
 
Latest money supply expansion figures:

Over the month of May, M3 rose by 0.9 per cent and broad money increased by 0.9 per cent. Over the year to May, broad money grew by 8.4 percent.
 
So I have to be earning 8.4% interest on my savings just to keep pace with the growth in the money supply?

So if I'm getting 4.9% on my Business Savings Account, does that mean the relative value of the Cash in Bank line in my balance sheet is depreciating at 3.5%?

Can I claim this as a tax deduction?
:lol:
 
Gino said:
So I have to be earning 8.4% interest on my savings just to keep pace with the growth in the money supply?

So if I'm getting 4.9% on my Business Savings Account, does that mean the relative value of the Cash in Bank line in my balance sheet is depreciating at 3.5%?

Can I claim this as a tax deduction?
:lol:
Click to expand...

i think you also need to take into account the increase in GDP.. but dont forget income tax on that 4.9%!
 
Slam said:
The Australian Money supply has to expand to match the other countries that are also devaluing their dollar. Otherwise if our currency supply stalls the end result would be a much much stronger Australian dollar (its already much stronger). Which may also mean we are expanding but not as fast as other countries.

I believe the expansion has been a result of increased borrowings for property. Or indirectly the result of banks borrowing from overseas converting to Australian dollars then using the FRB system to lend out.

Its nice to actually see the figures, this proves that there is monetary inflation. The price-inflation CPI is only a result of monetary inflation, I think we should be feeling the effects of this price inflation soon. I'm sure most of you are starting to realise the increases in the price of food and fuel recently.

One point to note is, the banks are crying poor and eager to raise interest rates. They blame it on the increased cost of funding. I say that is all bullshit. The US is giving away money on near zero rates, same with Japan. I can't see how they can blame it on that. I'm sure big US banks would want to lend to Australia, we have resources and possibly a much less likely chance of default before the US defaulting first.

So the main reason they say borrowing cost more is because of the exchange rate, the Australian dollar has strengthen. When they were borrowing US dollars, 2-3 years ago. They can exchange the 70 US cents for 1 Australian. Borrowing overseas was worthwhile, because they can buy more Australian dollars and with FRB able to lend more out. The times have changed, they are now borrowing near 1:1, with a chance that if the Australian dollar slips back down to 70 US cent. They will have to pay more back to service that debt. Hence they are crying poor and want to hedge against that risk. Also look at the record profits over the last few years, I believe the Strengthening of the AUD has something to do with this. But think about the loans they have to pay off now, its actually cheaper in USD terms, the AUD has strengthened.

Now the M3 money supply has also expanded as a result of borrowings from overseas. When they borrow and buy AUD, this acts like a deposit to the bank. Hence they can automatically loan money into existence from this pool.

So the fking Yanks have exported their problems worldwide, why do you think china is having inflation problems, everywhere in the world is having inflation problems. The money supply is just expanding everywhere due to the global economy and the ability to just borrow from any bank that will lend you money.

Slam
Click to expand...

+1

This post has helped me understand economics a little bit more.
 
I'm not sure I entirely understand this, but maybe someone can clarify a couple point.

I gather the OP of the thread is saying that inflation / money supply is accelerating in $A.
So I downloaded the historical data and graphed it expecting to see such trend in the graph. I got this for broad money.

1453_abroad_money.jpg


and this for m3
1453_am3.jpg


So as you can see, both graph are under the long term trend line. So wouldn't this indicate that we are not yet experiencing a acceleration of money supply in Aus?
 
My point of this thread was to highlight that there are now a lot more Aussie dollars (credit) in the money supply. Average money supply growth is over 8% pa over the past couple of years.

But what has the official inflation rate been in Australia? 3% pa? And what about economic growth? 3-4%?

So the amount of credit in the system has been growing at over TWICE the rate of economic growth.

I believe this is highly inflationary.

(And this is apart from the fact that our economic growth is purely down to the mining sector. If there was no mining, i reckon we'd be screwed. How's our secondary and tertiary sectors doing? Manufacturing? Retail? Building?)
 
glam said:
I'm not sure I entirely understand this, but maybe someone can clarify a couple point.

I gather the OP of the thread is saying that inflation / money supply is accelerating in $A.
So I downloaded the historical data and graphed it expecting to see such trend in the graph. I got this for broad money.

http://forums.silverstackers.com/uploads/1453_abroad_money.jpg

and this for m3
http://forums.silverstackers.com/uploads/1453_am3.jpg

So as you can see, both graph are under the long term trend line. So wouldn't this indicate that we are not yet experiencing a acceleration of money supply in Aus?
Click to expand...

he, he, he . . . is that linear growth on a logarithmic scale?
:lol:

Looks plain sedentary that way.
 
rbaggio said:
My point of this thread was to highlight that there are now a lot more Aussie dollars (credit) in the money supply. Average money supply growth is over 8% pa over the past couple of years.

But what has the official inflation rate been in Australia? 3% pa? And what about economic growth? 3-4%?

So the amount of credit in the system has been growing at over TWICE the rate of economic growth.

I believe this is highly inflationary.

(And this is apart from the fact that our economic growth is purely down to the mining sector. If there was no mining, i reckon we'd be screwed. How's our secondary and tertiary sectors doing? Manufacturing? Retail? Building?)
Click to expand...

I have to agree 100% that without mining sector, Australia would be same boat as many of the other counties that have found themselves in massive debt spiral.

Woundn't we expect money supply growth to be sum of inflation 3% and economic growth 3-4%.
I'll have to do some more thinking about this. Like I said, I don't really have a good understanding of how this all works.
 
glam said:
rbaggio said:
My point of this thread was to highlight that there are now a lot more Aussie dollars (credit) in the money supply. Average money supply growth is over 8% pa over the past couple of years.

But what has the official inflation rate been in Australia? 3% pa? And what about economic growth? 3-4%?

So the amount of credit in the system has been growing at over TWICE the rate of economic growth.

I believe this is highly inflationary.

(And this is apart from the fact that our economic growth is purely down to the mining sector. If there was no mining, i reckon we'd be screwed. How's our secondary and tertiary sectors doing? Manufacturing? Retail? Building?)
Click to expand...

I have to agree 100% that without mining sector, Australia would be same boat as many of the other counties that have found themselves in massive debt spiral.

Woundn't we expect money supply growth to be sum of inflation 3% and economic growth 3-4%.
I'll have to do some more thinking about this. Like I said, I don't really have a good understanding of how this all works.
Click to expand...

Inflation is a symptom. A symptom of too many dollars chasing too few goods.

http://economics.about.com/od/helpforeconomicsstudents/f/inflation.htm
 
glam said:
rbaggio said:
My point of this thread was to highlight that there are now a lot more Aussie dollars (credit) in the money supply. Average money supply growth is over 8% pa over the past couple of years.

But what has the official inflation rate been in Australia? 3% pa? And what about economic growth? 3-4%?

So the amount of credit in the system has been growing at over TWICE the rate of economic growth.

I believe this is highly inflationary.

(And this is apart from the fact that our economic growth is purely down to the mining sector. If there was no mining, i reckon we'd be screwed. How's our secondary and tertiary sectors doing? Manufacturing? Retail? Building?)
Click to expand...

I have to agree 100% that without mining sector, Australia would be same boat as many of the other counties that have found themselves in massive debt spiral.

Woundn't we expect money supply growth to be sum of inflation 3% and economic growth 3-4%.
I'll have to do some more thinking about this. Like I said, I don't really have a good understanding of how this all works.
Click to expand...

Shouldnt money grow with population also? I'm not convinced yet that this money growth is a big issue, other than the inflation component of course - I dont think we should have any inflation. Those charts tend to indicate it is growing at a consistent rate
 
aleks said:
The old logarithmic scale in the shoe trick.....
Click to expand...

LOL - Would you believe the RBA is only growing the money supply by a consistent amount? Would you believe it? No?

Well, would you believe the money supply is growing at a consistent rate? Don't think so, huh?

How about a compounding and variable growth rate that reduces the value of the currency to zero over time, stealing the value of your savings by giving it to the people who get to use the newly printed money at full value before the dillution effects are realised?

aud.png

Source: http://dollardaze.org

[youtube]http://www.youtube.com/watch?v=F-QA2rkpBSY[/youtube]
 
Our population was only 19 odd million in 2003 and our GDP hasn't doubled since then either.
 
Has our productive capacity doubled in the last seven years?

Hah our stock market hasn't even doubled in the last seven years.
 
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