Fiscal vs Monetary Policy: RBA Independance and Inflation Target not Sacrosanct? Chris Joye; Inflation targeting facing unprecedented challenge. Can the Reserve Bank of Australia abandon inflation target?
Tweet Topic Started: 3 Aug 2011, 10:16 AM (6,290 Views)
UNEMPLOYMENT IS 5%! I'm pretty sure that ticks the RBA's box of "full employment".
What are people smoking in this country? :excited:
Retail sales are down a little bit, house prices are flat for 12 months and you think you're in RECESSION? Please.. has anyone travelled to the Europe or the US lately?
Can't believe I'm saying this but I'm completely with Chris Joye at the moment. The country is being damaged in the long run by the bias of several members of the RBA board. They'll hold off on rates, inflation will get out of hand and we'll end up with a real recession because because they're worried about their own company's next earnings result...
UNEMPLOYMENT IS 5%! I'm pretty sure that ticks the RBA's box of "full employment".
What are people smoking in this country? :excited:
Retail sales are down a little bit, house prices are flat for 12 months and you think you're in RECESSION? Please.. has anyone travelled to the Europe or the US lately?
Can't believe I'm saying this but I'm completely with Chris Joye at the moment. The country is being damaged in the long run by the bias of several members of the RBA board. They'll hold off on rates, inflation will get out of hand and we'll end up with a real recession because because they're worried about their own company's next earnings result...
Catweaesel scratch its furry head. Less than the 6 month ago, a Chris the Joye doing many the claim about a RBA being among a best central manipulator in a world. Now it do what it want and a Little Lord Fauntleroy throw its toys out of cot.
Very High Inflation is here for the next decade at least.
It is the natural consequence of all the money printing in the Anglosphere.
The RBA understands this.
Bears who dream of massive deflation are sleeping again.
Any monies sitting in bank accounts is effectively being reduced as each month goes by due to high inflation.
As for prices falling (including Real Estate), think the opposite, inflation will ensure prices go up.
My advice to the bears is as follows re any monies you have in the bank.
Dont do this ...
"One senior investment banker is more blunt: "People are scared that the government doesn't know what the fuck it's doing." He tells a story about an acquaintance who took out €30,000, wrapped it in a bag and stashed it in his garage. "The bag had previously had some food inside," he says. "So it attracted rats, who ate the notes."
UNEMPLOYMENT IS 5%! I'm pretty sure that ticks the RBA's box of "full employment".
What are people smoking in this country? :excited:
Retail sales are down a little bit, house prices are flat for 12 months and you think you're in RECESSION? Please.. has anyone travelled to the Europe or the US lately?
Can't believe I'm saying this but I'm completely with Chris Joye at the moment. The country is being damaged in the long run by the bias of several members of the RBA board. They'll hold off on rates, inflation will get out of hand and we'll end up with a real recession because because they're worried about their own company's next earnings result...
We are the country with population growth of 1-2% so any growth below that percentage means recession
Inflation isn't mutually exclusive to asset deflation.
my prediction: high inflation for the next 7 years. at the same time asset deflation.
also, why would you take money out of the bank and not put it in something that stores wealth (i.e. - gold?) sounds like this 'investment banking acquaintance' wasn't very smart.
that said, i don't believe gold will hit 5000 as some pundits have called - simply because the whole world is fucked. If everyone inflates their way out of their debts, there's no crisis caused by lack of confidence in any country's money supply. gold doesn't protect against inflation - gold protects against crises.
What BP fails to note is that while his property values are treading water, inflation is reducing their value.
But he is right in that inflation will get worse. The Aussie dollar is dropping like a stone, and that is all that is keeping inflation away at the moment. It may just be a blip, but if this gathers momentum, we could see inflation sky rocketing, and rates going through the roof to combat it. If you think imports are expensive now, how will they look if the Aussie drops 20%?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
UNEMPLOYMENT IS 5%! I'm pretty sure that ticks the RBA's box of "full employment".
What are people smoking in this country? :excited:
Retail sales are down a little bit, house prices are flat for 12 months and you think you're in RECESSION? Please.. has anyone travelled to the Europe or the US lately?
Can't believe I'm saying this but I'm completely with Chris Joye at the moment. The country is being damaged in the long run by the bias of several members of the RBA board. They'll hold off on rates, inflation will get out of hand and we'll end up with a real recession because because they're worried about their own company's next earnings result...
In what universe is 5% unemployment "full employment"? Apart from the ideological world of a Non Accelerating Inflation Rate of Unemployment.
Current total labour underutilisation - unemployment plus underemployment - is running at around 12% in Australia.
Famous hedge fund investor says RBA bowed to political pressure
He could have added six conflicted private sector Board members too. The AFR reports today that infamous hedge fund investor, Jim Rogers, believes the RBA bowed to political pressure by not raising rates in the face of very high inflation. If only he knew the half of it. As I have argued for a long time here, the RBA is evidently worried about the consumer and political backlash associated with having to hike rates to address inflation (if the backlash is big now with 8% disposable income growth, 4.9% unemployment, and 7.5% mortgage rates, what will it be like when growth slows and unemployment rises?). The RBA seems willing to accept core inflation running at 3-4% pa if the only alternative is lower growth and higher unemployment. Here is Jim Rogers quoted by the AFR today:
“If I was the RBA, I would have raised interest rates,” the hedge fund pioneer and commodities enthusiast told The Australian Financial Review yesterday. “There is inflation in the world and if you don’t kill it quickly it starts taking on a life of its own and things get more out of control . . . the RBA knows that but I think they are bowing to political pressure.”
You can already see high inflation entrenching itself as an acceptable part of Australian life. Most of the major media commentators--perhaps Terry McCrann excluded--argue (incorrectly) that if only you exclude this variable or that item, inflation does not look so bad. Get set to read a lot more of this nonsense. One popular example was removing the "deposit and loan facilities" item. Yet doing this only cut core inflation from +3.7% to +3.4% (the target is +2.5%).
Another common refrain is, Look at inflation on a "year-ended" basis. The core numbers then come in at +2.7% pa, which is just above the target. That means placing equal weight on the very low inflation rates measured in the third and fourth quarters of 2010 as the very high inflation rates reported in the first two quarters of 2011.
It is as stupid as answering the question, "How fast is my car travelling now?", by measuring the average speed since you got into your car.
The RBA does not do this, even though they encourage the media to focus on year-ended numbers. To understand the true pulse of inflation, they annualise the last quarter and the last six months' worth of data. On both counts, the two underlying benchmarks of inflation in Australia, which strip out all the unusual numbers, are running way above the RBA's target even after we have benefited from a 20% currency appreciation and supposedly weak economic growth.
Happy days: markets now pricing *three* rate cuts by May next year!
It is going to be very entertaining seeing what sort of contortions the RBA is going to pull with the historical "market pricing" assumption underpinning its inflation and growth assumptions. Assuming three rate cuts in under a year--as the financial markets believe is most likely (see chart below)--will drive higher growth and inflation way beyond the RBA's target band. My guess is that the RBA will not take the financial markets on: they will drop their historical market pricing assumption and either assume no changes in rates (or both as the Bank of England does), or keep the old assumption of two rate hikes. Who knows, frankly. The RBA is near-impossible to understand month-to-month right now, with the staff purportedly pushing to hike rates in May (as I have consistently argued was appropriate) and getting rolled by the RBA's very dovish and highly conflicted Board, which has members whose businesses are screaming out for rate cuts. This is something that needs to be resolved by policymakers in the long-term--the doves are compromising the RBA's independence. I think the staff would have liked to hike this week (hence Peter Martin's claim about an "open recommendation") but for the fact that the only two other noted hawks on the Board--Donald McGauchie and Warwick McKibbin--have now been replaced by doves. So that stacks 6 doves against two hawks and one unknown in the Treasury Secretary.
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