RBA insider interviews: Mckibbin and Pagan

In his series of television interviews with macroeconomists, Jan Libich has interviewed Adrian Pagan and Warwick McKibbin, both former RBA board members with extensive experience of  policy process here in Australia.

Adrian talks about how decisions are actually made by the RBA, the real world of monetary policy, showing that it is far less of a pristine and precise process than one might think. Warwick talks about his take on the causes and consequences of the 2008 financial crisis.


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  1. Thanks flawse. From the link, this observation immediately struck me –

    “To trace something unknown back to something known is alleviating, soothing, gratifying and gives moreover a feeling of power. Danger, disquiet, anxiety attend the unknown – the first instinct is to eliminate these distressing states. First principle: any explanation is better than none… The cause-creating drive is thus conditioned and excited by the feeling of fear …”– Friedrich Nietzsche

    Speaks volumes wrt those who take comfort in believing that the global spread of debt-at-usury monetary systems, controlled by “independent” central banks, and overarchingly controlled by globalist entities such as the BIS, is somehow an accident of economic evolution, and the machinations thereof somehow attributable to mere ignorance on the part of those holding the reins.

  2. Warwick McKibbin repeats the housing shortage meme. I ask, where is the hard data that indicates we have a shortage?

    Before the bubble burst, Real estate spruikers in California also insisted they had a housing shortage. We now know how that worked out.

    • I stopped listening at that point. I admit other stuff came up but as soon as I hear it I know people are talking BS. Really surprised at McKibbin.

    • There are always homes for sale. We have a surplus of overpriced homes that are not worth buying at today’s prices.

  3. A central bank makes decisions for commercial banks and then disguises those decisions as being made for the benefit of the public. Interpretation of a central bank reporting as follows:

    1) Housing shortage – we must talk about the housing market to sustain commercial bank balance sheets
    2) Economic positive spin – keep borrowing folks
    3) Disregard the need for LVR caps – it will hurt the short term profitability of commercial banks plus the government will step in with taxpayer money if there is any difficulty
    4) Total disregard of monitoring of debt growth in an economy – if we look at debt and restrict it, the commercial banks will be less profitable (in the short term)
    5) Inability to see any economic crisis or bubbles – see point four, if we look at the real culprit (rapid debt growth), it will cause commercial banks to be less profitable, debt must be ignored
    6) Interest rate decisions – commercial bank balance sheet protection

    There are probably plenty of other examples. When we see the Reserve Bank for what it is which is a mechanism to enrich commercial banks – the reporting then makes sense and is extremely consistent.

    I wonder whether they have any explanation for why we are in a perpetual debt crisis.

        • I wonder what the staff training involves for newly appointed Reserve Bank board academics?


          Subject no.1 – debt does not mater (repeated 10 times)
          Subject no.2 – don’t forget subject 1
          Subject no.3 – house prices only ever go up
          Subject no.4 – an economy always travels well until there is a blatant blow up. At that point we can write pages and pages of academic studies detailing how it was impossible to see coming and throw in every possible obscure factor to support our argument
          Subject no.4 – big banks are systemically important to an economy and much more than people (repeat 3 times)
          Subject no.5 – just make sure everyone are happy little indebted vegemites – they won’t know the difference (repeated a couple of times)

          Sorry to be so cynical.

  4. McKibbon:

    in 2006 we did a little study “and what we found was that the US would go into a recession [when the housing bubble burst] but the rest of the world would have a little mild downturn.”


    “If interest rates are roughly 1 percent then you are having serious misallocations of capital,” BUT “Japan has been growing rapidly per capita over the last of the two ‘lost decades'” with interest rates of …. 1% or lower.

    A Mundell Flemming world can very quickly become a non Mundell Flemming world: Malaysia in the financial crisis being an example.

    “Printing money shifts spending from one period to another. It brings spending from the future to the present.”

    “the UK did a massive fiscal stimulus.”

    The UK did not do a massive stimulus. (http://www.brookings.edu/~/media/Research/Files/Articles/2009/3/g20%20stimulus%20prasad/03_g20_stimulus_prasad_table.PDF)

    “Low skilled white males should have been losing their jobs. Instead the government pumped up the economy so the building industry survived, so that the motor industry survived when the could not compete with China.”
    Sure the construction industry went bananas, but is that much worse than putting them on the dole. And Detroit can and does compete with China, as does that other high wage nation of low skilled white males Germany.

    I can’t listen to any more. What is the point of 15 000 equations if you cannot even identify basic facts.

    JK Galbraith said something about history being the thing that teaches you to be humble.

    • No great surprise then, that what we witness all around us today is the ever more prevalent incidence of human beings boasting an abject and indeed often willful ignorance of history in concert with an excess of egoic self-interest.

  5. If these delusional articulations were about any subject other than Economics, they would legally be locked in a Psychiatric Ward and rightfully so. It would protect them, and protect the world from them.