From Chris Joye:
Here’s the scary thing about the Reserve Bank of Australia’s decision to cut the cash rate to just 1.75 per cent. At a time of trend or better economic growth, historically low unemployment and soaring house prices, it’s 90 per cent confident that by the end of 2017, underlying inflation will be between 0.75 per cent and 3.25 per cent. That is, it has high conviction we could be experiencing either disinflation or inflation crises. Put more bluntly, the RBA has no idea.
…When informed of the decision, one of the RBA’s staunchest and most respected media supporters bellowed: “They’ve lost the plot.”
Another long-time fan of Glenn Stevens who is a multi-billion-dollar hedge fund manager, called me days later saying: “These guys are mad – they’re blowing the mother-of-all property bubbles.” (We used the same words years ago.)
…This represents a bona-fide crisis of capitalism and the western liberal-democratic business model…We’ve forgotten that it is the creative destruction that capitalism unleashes – and the corrective downturns that crush bad businesses and create room for better companies to rise in their stead – that is the key to powering productivity and prosperity. The same principle applies in evolutionary biology: adversity breeds stronger species by culling weak members.
Yes, we have. But we’re not the only ones that have so if we don’t crush the interest rate spread and get the dollar down we’ll be hollowed out anyway.
It’s only mad if it skips away and APRA does nothing.
