Australian dollar hammered as RBA goes full Bernanke

The Australian dollar has been hit this morning:

Bonds are tearing it up:

XJO is stalled:

Why? This from the RBA’s Michelle Bullock in a supposedly reassuring speech about house prices:

Currently, the risks here appear to be elevated but contained.

But, of course, this is eerily similar to another central banker in 2007, Ben Bernanke:

…the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.

Central bankers that do not understand history are doomed to repeat it.

Or, perhaps the AUD is weak owing to this, in Dalian:

As Vale is set to reopen Brucutu…Big Iron no likee:

Big Gas is up:

Big Gold warming to the Fed:

Big Banks weak:

Big Realty mixed:

If iron ore breaks then housing prices and AUD are toast.


David Llewellyn-Smith is chief strategist at the MB Fund and MB Super which is long international equities and local bonds that will benefit from a weakening Australian economy and dollar so he is definitely talking his book.

If the ideas above interest you then contact us below. 

Comments

  1. Jumping jack flash

    I read something like that, about how the problem is contained, just the other day and I immediately thought of Bernanke.

    But who could blame them? We are pretty much using the US’ textbooks, with a bit of a lag…

    Arguably, the fact we even have a gargantuan, economy-destroying debt bubble attached to property prices is straight out of the US’ book on “how to create a mechanism for infinite debt and live happily ever after, filthy rich”

    And the way we will handle it as it all crashes will be straight out of their book “how to fix the imploding economy caused by the infinite debt machine when it all turns to the proverbial”, too.

    Such titillating titles. Such riveting reading.
    With large print and lots of pictures and bullet points so our super-intelligent, godlike leaders can follow them easily.

    After Howard, Stephens and now Lowe picked them up, they couldn’t put them down.

    • Ditto. From my limited experience observing, they move in occasional jerks, not even every day and certainly not constantly like equities, due to low trading volumes and whatever pricing mechanisms the market makers use. But I expect over time they should perform like regular bonds.

  2. I read this speech carefully and was quite shocked by it #!{ issue isn’t whether the banking system has problems no, it’s what the banking system might look like in 2-3 years on current trends. If property prices keep tumbling the outlook for banks and credit intermediation is grim.