High Aussie Dollar and exporters

Alfie

Alfie

Active Member
Hi forum
Armchair economist here, many of our manufacturers are/have gone to the wall due to our high dollar. what would happen the government and RBA did the following to drop the value of the Aussie dollar against other currencies by:

1) RBA drops interest rates in 25 basis points lots in short succession to get to 100 basis point drop
2) RBA buys bonds, or lowers reserve requirements to increase the supply of money by 5%
3) Government pegs AUD to Chinese Renminbi

What have I done?
Did I blow up the economy?
Hhas the trust in the $AUD vanished?

Caveat here, I know nothing, nothing!
Cheers
Alfie
 
The most effective way for this government to drop the Aussie dollar into freefall would be for it to win the next election.
 
A massive fall in the value of the AUD would cause skyrocketing inflation.

PS: I'm a hammock economist. ;)
 
Jonesy said:
The most effective way for this government to drop the Aussie dollar into freefall would be for it to win the next election.
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I know that comment was a little tongue in cheek jonesy, but in reality I'm not sure that would happen. Our government is in daily damage control yet the AUD has managed to remain above parity, if it won the election then that may confirm some sense of solidarity and we may see the AUD remain where it is or indeed even rise a bit. A win for the opposition may see even greater certainty eneter the market, pushing the AUD up and over USD1.10.
 
The AUD has broken its historical link to commodity prices due in part to foreign central banks buying the AUD to manipulate their currency value's lower. The Swiss, for instance, have decided to peg their currency to the Euro and have been buying AUD (along with other currencies) to maintain their peg.

IMO, the government should be making the most of the high currency and buying strategic assets for the benefit and common wealth of all Australians in the future, such as gold.

If they want to improve economic productivity and the business environment, all they need to do is stop all one-sided free-trade agreements and unethical imports from countries whose cost of production is subsidised by the misery of millions of people kept in poverty by dictatorial regimes. That would increase domestic demand for Australian manufacturing and level the playing field against the totalitarian regimes that abuse their peoples.

But the government (any party) are US/UN muppets as demonstrated over and over and they will not do anything in the strategic interests of Australia because doing so opposes the global governance aspirations of the US/UN.
 
Gino said:
IMO, the government should be making the most of the high currency and buying strategic assets for the benefit and common wealth of all Australians in the future, such as gold.
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Very well said. This is one action that would have a long term benefit to Australia. They could start by selling our UK gold and use that money to buy Aussie gold as it comes out of the ground. We could have our own commodity boom without the help of Asia.

All this from a toilet seat economist!
 
Alfie said:
Hi forum
Armchair economist here, many of our manufacturers are/have gone to the wall due to our high dollar. what would happen the government and RBA did the following to drop the value of the Aussie dollar against other currencies by:

1) RBA drops interest rates in 25 basis points lots in short succession to get to 100 basis point drop
2) RBA buys bonds, or lowers reserve requirements to increase the supply of money by 5%
3) Government pegs AUD to Chinese Renminbi

What have I done?
Did I blow up the economy?
Hhas the trust in the $AUD vanished?

Caveat here, I know nothing, nothing!
Cheers
Alfie
Click to expand...

Simple terms, the Australian economy is a big beast with a lot of inertia and flexibility to roll with the punches that can be knocked around before eventually being knocked out ("blown up"). The flexibility is eroded by regulations and Government intervention.

Money is the grease between the transactions of goods and services (half of every transaction is money) and combined with time preferences provides signals to every single person in the market about where to move scarce resources around the economy. RBA interventions in money supply are fundamentally about disrupting the most basic signals either for deliberately benefitting a small section of the economy or through some misguided perception that central planning can actually achieve greater medium-long term gains than every one looking after their own welfare (i.e. they know what's in your interests better than you do).

In reality, false price signals from dicking about with money supply simply fuels bubbles, misallocates resources and steals income and welfare from one part of the community to another. It is never necessary and should never be condoned. They should not change their money supply to manipulate interest rates or exchange rates one way or the other. They should simply cease to exist (and preferably take out the associated banking cartel at the same time).

Edit: Was missing a "not".
 
I'd thank you bordie but to a casual observer it would look like we are having an online love affair with the number of "Thank yous" we blow to each other. :lol:
 
Money is the grease between the transactions of goods and services (half of every transaction is money) and combined with time preferences provides signals to every single person in the market about where to move scarce resources around the economy. RBA interventions in money supply are fundamentally about disrupting the most basic signals either for deliberately benefitting a small section of the economy or through some misguided perception that central planning can actually achieve greater medium-long term gains than every one looking after their own welfare (i.e. they know what's in your interests better than you do).
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This sounds like a dislike of Keynesian style of economics, stimulating parts of an economy artificially, If it is, I totally agree, my question is more about doing what other countries are currently doing (inflating through various means creating bubbles further down an economic cycle)
I like laissez faire style of ecomomics too, in fact the the whole Austrian School of economics sounds great, just seems no one is using it at present
Have I been a naughty boy, did I just blow up the economy?
 
bordsilver said:
Simple terms, the Australian economy is a big beast with a lot of inertia and flexibility to roll with the punches that can be knocked around before eventually being knocked out ("blown up"). The flexibility is eroded by regulations and Government intervention.

Money is the grease between the transactions of goods and services (half of every transaction is money) and combined with time preferences provides signals to every single person in the market about where to move scarce resources around the economy. RBA interventions in money supply are fundamentally about disrupting the most basic signals either for deliberately benefitting a small section of the economy or through some misguided perception that central planning can actually achieve greater medium-long term gains than every one looking after their own welfare (i.e. they know what's in your interests better than you do).

In reality, false price signals from dicking about with money supply simply fuels bubbles, misallocates resources and steals income and welfare from one part of the community to another. It is never necessary and should never be condoned. They should not change their money supply to manipulate interest rates or exchange rates one way or the other. They should simply cease to exist (and preferably take out the associated banking cartel at the same time).

Edit: Was missing a "not".
Click to expand...

Great post. It takes resources from where they are needed and assigns them to where they are not. Or in other words, transfers wealth from the poor to the rich.
 
Alfie said:
This sounds like a dislike of Keynesian style of economics, stimulating parts of an economy artificially
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I haven't read Keynes, but sometimes I wonder if his name is used wrongly, whether it's to condone this behaviour or condemn it.

Really, it is against cronyism fundamentally. All we say is let's have an open free fair market where no participants are favoured over others.
 
I ponder how a powerhouse such as Germany doesnt suffer the same problem as the aussie car makers when the euro is a consistant 40% higher value than the aussie?

QUALITY?
 
hiho said:
I ponder how a powerhouse such as Germany doesnt suffer the same problem as the aussie car makers when the eur is a consistant 40% higher value than the aussie?

QUALITY?
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Vassal states and how much manufacturing of beemers and mercs actually happens in Der Vaterland?
 
r0dman said:
bordsilver said:
We're both compulsive public thankers.
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Is that the new PC term for you guys?
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I'm a Mac user. ;)

I'm worried I'm a bit of a forum tart. hiho and I used to thank each other for nearly every post we made, now bordie is here....well. :rolleyes:
 
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