Australian dollar takes out 55s…

See the latest Australian dollar analysis here:

Macro Morning

Headed to zero today it seems:

Very nearly 54s with low at 55.11. But just wait a minute…

David Llewellyn-Smith
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Comments

      • jonathan grant

        Yep as low as it wants. It’s just lucky we have all the energy and food we need within our own country. But if the AUD goes low enough won’t it have to all be socialized?

      • It isn’t just tradeables inflation. It is almost everything these days. Everything from gas to milk can be exported or sold internally.

        Your farmer will prefer to export his produce and get paid more in US dollars than sell it locally. Same with almost everything.

        The falling AUD will cause inflation and the RBA’s first duty is to control inflation. Raising interest rates will do this.

        • Dan – this is the most critical function of the RBA – above all else. It is however lost on those bamboozled by the new fandangled tools of quantitative easing which, to them, are the cures for everything – DESPITE the fact QE is specifically what caused all the problems and specifically is what is exacerbating the problems – hence why EU and US are abandoning while those around here keep on cheering it – no idea.

          Inflation will come – not just in the form of higher export prices for producers + import prices for non-Australian produced goods but also and above all scarcity.

          Society will be flooded with cash – that is absolutely coming – make no mistake – and coupled with scarcity and a global economy all competing to hand out more money – inflation is absolutely guaranteed.

          And what then ?

          Yup – interest rate rises – even though its a dumb move – like qaunt easing – its the only move they have.

          Price controls will be required.

          MB is way behind on this.

          • Agree, IB, can’t do this successfully without putting price controls on suppliers and merchants. That is what we have a government for, to nationalise companies in the national interest. At the end of the day, they assume all the sovereign risk, which is why we are going to get some form of helicopter money, oh except for those dope smoking dole bludgers

        • DingwallMEMBER

          The RBA won’t act UNTIL they see inflation…………… rear view mirror. They will also have to consider all the storms going on at the same time.

    • Even StevenMEMBER

      Why rescue the AUD? Are you concerned about tradeables inflation (i.e. imported goods rising in price?). I think that will be a good thing and will support local manufacturing.

    • Don’t wonder – it could happen.

      The main thing that determined the AUD was always the terms of trade and our trade performance.

      With the prices of commodities falling through the floor the AUD will follow.

      If we find ourselves in CAD territory again….. a matter of months, weeks, minutes… who will be lining up to lend us money to fund our appetite for imports we once produced ourselves.

      Now of course we could have spent the last 10 years weaning ourselves off unproductive capital inflows but apparently that is the kind of approach that only Money Cranks recommend.

      Now that we have little unproductive industry left and the prices of our exports are collapsing we had better get used to giving up our imported toys or giving up more interest to foreigners or more title to our remaining productive assets.

      One of the craziest things i have been reading on this site for many months is the gleeful way people have prayed for a lower AUD.

      A lower AUD is nothing to be proud of.

      A higher AUD is always a good thing providing it is the result of productive output that is attractive to foreigners.

      Our problem has been an AUD inflated with unproductive capital inflows. It was always within our power to block those but unfortunately the neoliberal free market fanatics simply would not countenance any restrictions on capital flows.

      Achieving a lower AUD as a consequence of a collapsing international economy is nothing to be proud of.

      It is the height of madness to welcome it.

      • Jumping jack flash

        THIS!

        Is it time to enact the tried and true solution to economic depression? National industry?

        Enough of the debt and cheapening of the debt using zanier and zanier schemes and tricks and then trying to get everyone to buy some more debt when everyone clearly has had enough, or is ineligible for debt.
        All of this to create more debt to get us out of the mess that too much debt caused in the first place!

        Is it time to actually produce something useful with our abundant natural resources and skills to earn money for our country, employ our people, feed our nation, and repay our debts?

        But no, not these bunch of clowns. They will fiddle at the edges of the status quo while the whole place goes up in smoke.

      • Don’t worry, when people are paying $2.50 for a litre of unleaded and $5 for a litre of milk they’ll brush it off and bask in the glow of a ‘competitive currency’. Wages meanwhile will be stagnant.

        You couldn’t make this up.

          • As the fellow above mentions, oil won’t stay that low for long:
            – one, supply will get decimated (US fracking and other global operations)
            – capital flowing out of the sector means not much exploration and field development going forward
            – Money printing will boost the prices of most / all commodities going forward (demand shock notwithstanding)

        • You wouldn’t need to make it up… that’s the reality of life for most of the developing world. They’ll all be glad to welcome their newest member, which already has an economy to suit.

      • I think its the loss of hope that we would ever change our economic operation unless something catastrophic happened which is causing the cheering on. No one would wish we got to this situation.

      • DingwallMEMBER

        I do agree we should not be proud. But in my view it takes a crisis to get this horribly unproductive, ersatz economy to begin the process to become a healthy one. This should be the opportunity and we must take it ……….. but, unfortunately, I think in 10-20 years this will be forgotten ……….. house prices will be bubbling again, house investment will still be promoted by all and sundry, and we will be importing ALL of our TP and hygiene needs as we continue to squeeze out manufacturing and innovation for more houses.

        Australia … the lucky country.

  1. So I’m confused… main driver?… why now after such a delay?… Does this means big players exiting and AUD bonds also getting flushed? Or is RBA about to do something stupid?

    • apparently scummo has been mumbling to the people this morning, too busy to check that though. RBA is scheduled for another hour and a half. could get rocky.

  2. Aussie 10 year has backed up to 1.5%! Is this all USD related? Surely the market is pricing RBA QE and the long bonds will be a first target? why the massive yield reversal in Aussie sovereign?

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