Bring on QE and lot’s of it!

The AFR has finally discovered a somewhat more balanced debate about imminent RBA quantitative easing but it has more work to do. On the weekend, the usual suspects had a good whinge:

“Further rate cuts would be counter productive to the economy,” Professor McKibbin said, “Why keep cutting rates when we know it does nothing but redistribute wealth from lenders to borrowers?”

…Wilson Asset Management fund manager Geoff Wilson also dismissed further rate cuts saying the collapse in deposit rates would force people into even riskier investments.

…On Thursday, ANZ Banking Group chief executive Shayne Elliott said the bank was already flush with abundant cheap funds and that further measures would hurt their profitability.

…Treasurer Josh Frydenberg declined to comment on the pressure of lower rates, however Labor’s financial services spokesman Stephen Jones said further cuts should not be made.

“It’s going to hurt self-funded retirees and it’s not obvious that it’s going to lead to any extra demand in the economy.”

…Liberal MP and retiree advocate Tim Wilson said rate cuts on deposits had to at the very least help borrowers.

Newcastle Permanent group treasurer Brian Reid, who runs a home loan book with lower arrears than the big four banks, said further cuts by the Reserve Bank and a QE program would create problems.

“It does impact quite significantly now especially if the deposits are their major source of income,” Mr Reid said.

That is a conga line of rent-seekers:

  • Bankers don’t want QE to squash their margins.
  • Pollies and fundies are talking to an angry retiree voting bases.
  • Wazza McKibbin is the exception but he has supported QE in the past as a form of currency intervention which is what this is about.

A second article at the AFR made the point:

Matthew Peter, chief economist at QIC, says foreign investment in Australian bonds is strong, as bond auctions have shown…If the RBA starts to increase money supply and purchase bonds, and is effective in driving down longer-term interest rates, then the attraction of Australian bonds is diminished, which reduces capital inflows and counters the upward pressure on the exchange rate.

Quite right. What is missing, as usual, is the broader canvas. Is QE useful not just to interest groups but Australia? On that front, the mercurial Chris Joye is a gale of fresh air:

Sometimes bankers should really shut their well-fed mouths and focus on serving the community.

After delivering ordinary financial results, ANZ’s chief executive Shayne Elliott has bandied around the nonsense that the Reserve Bank of Australia has exhausted its monetary policy ammunition and should not bother trying to address its legislated objective of delivering full employment at a time when Australia’s effective unemployment rate – including people working zero hours on JobKeeper – is about 9.5 per cent (or 14 per cent in Victoria).

Is Elliott suggesting the RBA should not help our exporters and import-competing businesses by countering the upward pressure on the Aussie dollar that results from all the other global central banks buying their government bonds, which makes our 10-year interest rates look unusually attractive to offshore investors (who bid up our exchange rate when they buy our government bonds)?

Amen to that. Which points to an even wider canvas entirely absent from the AFR and its whingers:

  • Household debt is exhausted as a source of economic growth. Even when we get rising house prices these days the multipliers into consumption are minimal.
  • This leads to the conclusion that to grow much at all we will need strong fiscal support and a structural shift to tradable sectors.
  • Strong fiscal support was NOT forthcoming in the bizarre, supply-side Depressionberg Unstimulus so even more of the heavy lifting falls upon tradable sectors.
  • And, we have embarked upon the great Chinese decoupling, meaning much of that tradable growth will have to be non-commodities and post-China.

In short, Australia confronts an unprecedented growth challenge into the coming cycle and, thanks to Depressionberg Unstimulus and lack of reform, the only way out is to dramatically lift competitiveness with a much lower Australian dollar. Without QE, the currency will instead rise as the rest of the world pours on the money supply:

To put it bluntly, savers have to take it for the team. And why not? Most of them are old and have enjoyed four decades of good fortune on just about every front. The macro regime that delivered their gains – free education, expansive welfare, falling taxes, endlessly rising house prices – hollowed out the tradable economy and now it needs to be repaired in the national interest.

And what about asset prices?  Again at the AFR:

A growing divergence between residential property prices and rents could mean the Reserve Bank’s unprecedented rate cuts and expected quantitative easing are laying the groundwork for the country’s next property bubble.

The International Monetary Fund’s standard definition of a bubble is “a positive deviation of the market price from its fundamental value”.

Is the RBA is about to blow a housing bubble? Come now. That happened twenty years ago and it’s been a constant battle to keep it inflated ever since. Truth be told, there are no foreign or local investors creating inequities in the property market right now so if first home buyers want to blow themselves up in the stupid Aussie tradition that that’s their business. More importantly:

  • The RBA is NOT directly responsible for financial stability in the QE era. As we saw in the last cycle, whether dated institutional arrangements, economists or journos want to admit it or not financial stability is now the prime responsibility of APRA as the RBA fights combined wars on deflation and currency.
  • It was APRA that intervened in house prices in the last cycle and will be APRA that does again in this one if required. There are lots of unanswered questions about how this works but, on behalf of the banks, the AFR prefers to hide these questions behind rentier whinging.

In conclusion, bring on the QE and lots of it!

David Llewellyn-Smith

Comments

  1. ErmingtonPlumbingMEMBER

    How does an average run of the mill plumber get his hands on some of this QE when it arrives?

    • That’s the question I have too.
      Lots of bring on the QE but all I see in the USA is the very wealthy getting more wealthy as they tend to be the ones clipping the ticket on wherever it is this new money goes and owning the stocks it seems to be poured into.

      • ErmingtonPlumbingMEMBER

        Yes bottom up printing press money would be a lot fairer that this trickle down shyte.

        • Yeah, Steve Keen’s debt jubilee would be the way to go.

          First we nail household debt.
          Then we nail corporate debt.
          Then we make changes to make sure we don’t distort the economy away from productivity ever again.

          Of course, we’re more likely to be wiped off the face of the planet by a solid gold meteorite than have the Profs proposition come to pass.

          I suggest taking up smoking Winnie blues and staying in high vis.

    • I think a better question goes something along the lines of
      How does the work of an ordinary Plumber result in increased exports at any exchange rate?
      This speaks to the more important question of the Australian workforces’ complete lack of globally marketable skills.
      We can no longer expect our surviving manufacturers to somehow expand into global markets because they’ve long ago retreated to the safety of our little protected playground, they’ve simply given up on being exporters. The markets where we do export manufactured goods are often markets where price plays almost no role in product choice (Medical Implantable devices for instance) when Price plays no role exchange rates also play no role and deliver no advantage.
      Any expansion of first stage transformation of raw minerals into something marginally more valuable requires cheap energy and we’ve already exported that energy.

      Sure we could expand our Agricultural exports but that comes at a cost to the environment. In most areas of Ag we are already beyond the maximum long term carry capacity of Australia’s land and water expanding this will just destroy our country at an accelerated pace.
      So what can we export, I’d politely suggest Plumbers …there are plenty of sewers in Asia that could use a good clean out.

    • Make sure your earnings are hidden as best you can. Declare little income, offset your costs and you’ll qualify for any new means tested welfare plus any other asset write off opportunity. Fancy a new ute? Excavator?

    • Buy some Bitcoin.
      The 2008 money printing is what it was designed to protect against. There are can only ever be 21 Million BTC.

    • You don’t. QE pumps up asset prices, increasing wealthy inequality.

      But the economic ‘models’ suggest QE produces an economic nirvana (you just have to trust it will happen, even if there is no empirical evidence to support such theories).

      If the ordinary man wants to benefit from QE, I would suggest borrowing a lot of money and buying stocks (and praying there isn’t a margin call at some point). In the meanwhile, your standard of living will continue its long decline.

      • kierans777MEMBER

        +1 mate.

        Given what we’re seeing in the US, why would anyone think that QE is a good idea? This is the economic equivalent of “let it rip” while watching the consequences of such a strategy elsewhere in the world. Trump got a leg up partly due to the stupidity of the US Fed and others during the GFC that hollowed out the middle class and punished prudent people. These people got angry and consequently voted for a guy they thought would fix it (of course Trump was never going to drain the swamp, but that’s the narrative he was selling). We need a debt jubilee, and the jailing of some banksters. That will see the swamp drain itself.

      • And what is the marginal return going to be on all this QE? The same as the last lot, but even ‘better’? As I commented at the weekend the last 12 years worth of QE has produced $1 of Productive Return on $12 of ‘stimulation’. When do we see it doesn’t work? When $12 QE produces 10 cents? The bill is going to be paid one way or another; sooner or later, and the best ‘sooner’ is always,now.

        • Display NameMEMBER

          Good point. Chine gets less and less return from ever increasing amounts of stimulus. Likewise Europe. I think we are damned if we QE and damned if we dont. Stimulus is a road to nowhere. I cannot see how rates ever increase again now without a reset. How do banks make a profit at super low rates? They don’t. More Zombies kept alive to feed the beast that is a half alive economy.

          • China PlateMEMBER

            “road to nowhere”
            it’s the journey not the destination that is important
            once you get your head around that it becomes so much easier to accept

          • We’re on a road to nowhere
            Come on inside
            Taking that ride to nowhere
            We’ll take that ride
            I’m feeling okay this morning
            And you know
            We’re on the road to paradise
            Here we go, here we go

          • I think they know this, but its a case of ‘not on my watch’. They don’t want to go down in history as being the govt that presided over the worst fall in property since ……when?
            Remember the oft touted ‘Keating recession that we had to have’? Well 100 x worse is how they would be remembered if it happened on their watch!

        • Surely it comes down to what the money is used for. Upskilling the populace, improved manufacturing base, subsidising value add but capital intensive industries.

          If it plows straight into equities and housing then we are just accumulating more public debt which will eventually be lost and further diminish productive gains.

        • Or is that the correct pricing signal missing from all other manipulated (non) measures. $12 = 10cents.

      • 100% rent seekers. JobKeeper has many siting on their hands doing or only doing the odd cash job in case they failed to achieve the “reduced income” threshold.

  2. It is disappointing to read such enthusiasm for monetary witchcraft but then it was Halloween a few days ago.

    “.. Unstimulus and lack of reform, the only way out is to dramatically lift competitiveness with a much lower Australian dollar. Without QE, the currency will instead rise as the rest of the world pours on the money supply:..”

    Only way?

    Such nonsense.

    The ONLY point of QE is to deploy the RBA balance sheet money to paying high prices for assets owned by rich people and giving wealthy people easier access to bank credit so they can acquire assets that produce any sort of yield.

    It is completely bonkers to be complaining about the increasing concentrations of wealth and privileges of the wealthy while supporting the policies that produce the result.

    If you want a lower exchange rate because you think foreigners are manipulating theirs then argue for action that inhibits that manipulation directly.

    1. Restrict unproductive capital inflows.

    2. Export excess domestic capital that cannot be used productively locally.

    3. Impose tariffs on imports from countries that are trade cheats.

    If you want a larger RBA balance sheet why not end the private banks monopoly of it.

    https://theglass-pyramid.com/2020/08/15/myrba-the-quick-guide-and-helpful-links/

    A bit of democracy for the RBA beats another large dose of plutocracy.

    • For god’s sake. APRA!!!!!!
      APRA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
      APRA!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

      The only yhing that is bonkers pfh007 is mirepresenting my views to aid the hiding of the real culprit here.

      Australia doesn’t even et its own intertest rates. The market does and it’s going to keep going the way it is.

      APRA and the Budget are the keys to fighting inequality not the RBA.

      Talk about quixotic.

      • pfh007.comMEMBER

        I am not misrepresenting your views. I am merely pointing out the inconsistency in your views.

        Last week you were right on the money when you said

        “..Eventually, all of this credit poured into unproductive uses hollowed out the economy and asset prices became the only game in town, as your profits boomed…”

        https://www.macrobusiness.com.au/2020/10/anz-dials-whaaambulance-as-rba-cuts-it-lunch/

        You clearly understand the damage that has been done by cheap and easy bank credit. Yet today you seem oblivious to how QE will cause bucket loads more of the unproductive speculation and asset price pumping that you were criticizing just a few days ago.

        The justification you give is that QE might weaken the AUD.

        What an extraordinarily dangerous method of achieving that outcome. Leaving to one side that if you are going to call for open manipulation of the exchange rate with QE then you are walking away from the WTO anyway and the US will not stand for that.

        If you think the AUD is over valued the best form of actions is as I have outlined.

        1. Cut unproductive capital imports
        2. Increase capital exports for productive purposes
        3. Impose tariffs on trade cheats – with cheat being defined broadly to mean countries who gain an unfair advantage by exploiting their workers and folks with unsafe conditions and standards.

      • DLS – Lets assume APRA and the GOV wont make the necessary changes to counter the QE inequality. Does that change your QE position?

    • “and giving wealthy people easier access to bank credit“

      You keep stating this but are yet to explain why this is the case.

          • pfh007.comMEMBER

            Nothing like Sweeper rolling out his supply and demand orthodoxy as though “money” is just another commodity.

          • Down the page March 2020 is noting how lower rates will mean hoarders will have to spend their hoards as though it is obvious. Which it is and I agree with it.
            Then here you are arguing there will be greater access to credit like it is obvious.
            Can you not see the contradiction between the two positions? They can’t obviously both be right.

          • pfh007.comMEMBER

            Hoarders will have to spend their hoards? What hoards are you talking about?

            You mean the huge savings accounts of the wealthy as they sell their appreciating assets to other wealthy people who have paid for them with “credit” granted by their mates who are loan managers for private banks?

            How about we just stop giving rich people bucket loads of money created out of thin air by the banks?

            https://theglass-pyramid.com/2020/09/09/covid-19-the-perfect-time-for-trickle-up-economics-and-myrba/

            And instead, if we are going to expand the money supply give it directly to all citizens.

            https://theglass-pyramid.com/2020/08/13/money-creation-after-myrba/

            Tell us again about your supple and demand graphs for “money”.

            How will your “graph” cope with some democratic expansion of the money supply for a change.

          • supply and demand for credit not money.

            credit supply curve (loanable funds supply curve) is upward sloping.
            money supply curve is vertical

          • pfh007.comMEMBER

            The loanable funds supply curve.

            Oh dear.

            Take us through it once more Sweeper. When interest rates fall the demand for credit from borrowers, who are considered credit worthy, increases because the price has been reduced but there is a problem because ‘the hoarders’ are increasingly unwilling to move their deposits from one bank to the bank offering borrowers low rates because the interest ‘reward’ for the “hoarders” has become very puny.

            In fact many of the ‘the hoarders’ withdraw their money from the banks as cash and put it under their mattresses where it not only receives 0% interest but also is at risk of robbery or being lost (which lemon tree is my hoard under?).

            Other hoarders get so angry at the puny returns that they start buying up restaurant meals and new cars.

            Other hoarders decide they will look for better returns so buy up assets with some type of yield and in doing so transfer their deposits to the seller of the assets who then is puzzled to find that they are getting very low interest on their newly acquired “hoard” so they rush out to look for assets that offer a better return.

            I have missed anything in your loanable funds narrative?

          • Yeh a couple of things.

            1. “When interest rates fall the demand for credit from borrowers, who are considered credit worthy, increases”

            Demand means the demand curve or demand function. And it cannot be effected by a change in the price.
            Changes in income, expectations, the weather, corona can effect demand. But the price cannot.
            Other things being equal demand for credit when the cash rate is .25% is the same as it is when the cash rate is cut to .1%. Because a change in the price cannot shift the curve.

            What changes is qty of credit demanded increases. ie. there is a rightward movement along the existing demand curve when rates are cut.
            You may say this is semantics. But it actually isn’t and is a core reason for a lot of the confusion I see when talking about these topics & MMT as well.

            2.‘”the hoarders’ are increasingly unwilling to move their deposits from one bank to the bank offering borrowers low rates because the interest ‘reward’ for the “hoarders” has become very puny”

            It’s not about banks.
            present consumption becomes cheaper in terms of future consumption. So people spend, ie. they don’t lend.
            yes some pay withdraw cash at 0%, but that’s an indication the real rate is too high not too low.
            So just lower it further until hoards have to be spent.

            3.”Other hoarders get so angry at the puny returns that they start buying up restaurant meals and new cars”

            Agree

            4. “Other hoarders decide they will look for better returns so buy up assets with some type of yield and in doing so transfer their deposits to the seller of the assets who then is puzzled to find that they are getting very low interest on their newly acquired “hoard” so they rush out to look for assets that offer a better return”

            And this is a great result because it encourages real investment via Tobin’s Q

          • pfh007.comMEMBER

            Sweeper,

            1. “What changes is qty of credit demanded increases. ie. there is a rightward movement along the existing demand curve when rates are cut. You may say this is semantics. ..”

            Leaving aside the semantics you clearly agree that the quantity of credit demanded increases.

            2.‘ present consumption becomes cheaper in terms of future consumption. So people spend, ie. they don’t lend.

            Just because present consumption becomes cheaper doesn’t mean that people will consume. It all depends on who has been doing the hoarding. Plenty of hoarders just keep on hoarding as rates fall. Experience raises plenty of question marks about whether your theory works in practice.

            If you are interested in stimulating spending the best thing to do is to make the distinction between hoarding and investing very clear (zero percent MyRBA accounts will do this) and create money and give it out equitably. I am very confident that new money distributed across the population will find its way into plenty of spending. Those that want a return from lending or investing will have to actually take some risk.

            3.”Other hoarders get so angry at the puny returns that they start buying up restaurant meals and new cars”

            You agreed with my sarcasm. The reality is far from that and the policies of the RBA and the government reflect that. If low interest rates really did drive consumption we would have loads of it as a result of your recommended low interest rates but we don’t.

            What we need is money in the wallets of people who will spend it and relying on the credit creation by private banks model is a dud way of doing that. Government creating money either via spending or simply expanding the RBA balance sheet via deposits to the public will work much better.

            4. “Other hoarders decide they will look for better returns so buy up assets with some type of yield and in doing so transfer their deposits to the seller of the assets who then is puzzled to find that they are getting very low interest on their newly acquired “hoard” so they rush out to look for assets that offer a better return”

            And this is a great result because it encourages real investment via Tobin’s Q

            It would be a great result IF it encouraged real investment but it has not being doing that. Instead the unhappy hoarders start chasing the only game in town…asset price speculation.

            Why ?

            Because folks like you and HnH keep demanding that the RBA push on the stringer even harder than they already are and that string is tied to the great asset price / population ponzi model that is breaking down.

    • China PlateMEMBER

      very subjective there 007
      who defines what unproductive capital is. Is it black or white or a lot of grey in between.
      ditto point 2
      and thirdly, again who defines a tariff cheat, the WTO?

      • pfh007.comMEMBER

        China Plate

        There is plenty of lowing hanging fruit in the productive v unproductive space that does not require hours of debating how to distinguish between them at the margins

        https://theglass-pyramid.com/2016/12/24/tariffs-unproductive-capital-inflows-destroying-aussie-jobs-for-decades/

        As for who determines who is a trade cheat?

        Not the WTO for goodness sakes, they ARE the problem.

        We do. We make it clear to countries that we will impose a tariff on their goods to reflect the lack of protections for workers, the environment and their general public that allows them to produce goods and services cheaply.

        Why should our workers be forced to compete with the sweat shop serfs of authoritarian police states.

        We don’t allow imports from child labour factories or slave plantations so why shouldn’t we impose tariffs on countries that do not allow their workers to organise or do not provide schooling and health care to their people to save on costs.

  3. happy valleyMEMBER

    “To put it bluntly, savers have to take it for the team. And why not? Most of them are old and have enjoyed four decades of good fortune on just about every front.”

    Oldies like me, who are not long on cheap equities (ie inherited a blue chip portfolio from their oldies – but nonetheless, bleat on the basis they are supposedly taking risk and think they deserve their excess franking credit refunds), but risk averse and totally self-funded have been taking it for the team for years, all the way down from 6% pa interest rates on deposits in 2010 to less than 1% pa now (an 83% income cut). We also had to bear 17% pa mortgage rates in the early 1990s, albeit on smaller but not insubstantial mortgages at the time, and some of us were victims of the “recession we had to have” and have clawed our way back from that. Some of us have been there and done the scapheap of life in our mid to late 30s in the early 1990s and can easily relate to those who have now just been thrown onto the scrapheap through ScoVID-19.

    DL-S – why don’t you just cut to the chase and say battle-scarred old farts who’ve done the hard yards should just shuffle off their mortal coil, one way or another (nudge, nudge, wink, wink)?

      • happy valleyMEMBER

        They don’t equate to a life in clover and they are certainly are no longer compensation (at 1% pa or less and potentially negative) for the credit risk of bank deposits (more like 4% pa as they are quasi equity in view of a worthless government guarantee and prospects of depositor bail-in) unless of course, you are telling me our banks are unquestionably strong in which case I have a bank I can sell you.

    • why don’t you just cut to the chase and say battle-scarred old farts who’ve done the hard yards should just shuffle off their mortal coil, one way or another (nudge, nudge, wink, wink)?
      Excellent question, why don’t you?
      In one way or another the problem we are all trying to solve has to do with this planets carry capacity.
      If the young are to survive and have room to grow and have families of their own then oldies must at some point just shuffle off to Buffalo. It our time that is up.
      Of course there is the other option of a good old fashioned war with lots of good old fashioned starvation and death and maiming but that solution typically doesn’t spare the elderly any more than it spares the young.
      So as I said, Good question!

    • oh the 17% interest rate nonsense. on your 30k house that had the debt inflated to zero and price inflated to a million dollars.

      taking one for the team? taking it all and clawing for more.

      • And repaid on one income and with secure employment, they dont get it and never will. They have been blinded by their entitlement all while stuffing the planet and hoarding the resources. They think all will be okay as long as they are okay and not realizing if the planet and populace are not looked after they will also lose everything. Its a great example right now, the boomers cannot spend their savings on 3 overseas vacations a year so instead they plow it back into housing, jacking up the prices further in the worst recession/depression since WW2. Meanwhile, the young’s job security is further degraded, housing expenses continue to drain on their savings and quality of life goes down the shitter.

  4. So bring it on
    Bring it on
    Every neglected dream
    Bring it on
    Every little scheme
    Bring it on
    Every little fear
    And I’ll make them disappear

    • Unfortunately MB’s position is that it’s better for no one to save and for everyone to be made good by welfare when they need support (see recent Superannuation podcast) — so you will be waiting forever to see the suggestion that saving should be rewarded in any way.

  5. NOW Savers should take one for the team??
    Fk off. What has been happening for last 10 yrs then?
    What exactly does doing MORE to save the indebted get us?

    • You do understand that that which we have in excess is “savings”
      As such it is “savings” that should logically have a diminished return value.
      Ask yourself a simple question like, exactly how do my savings result in even one penny of increased Production capacity within the Australian economy? If the answer is that they don’t then it follows that savers should be charged for the demand on future resources that “savings” imply.

      • what crap. And how much does borrowing so much right now only to be on the dole when you retire sucking from the public coffers add to the economy?

        • Don’t get me wrong I’m not defending our Borrowing fetish (I guess we just want to become poorer quicker)
          Lets stick to the topic of “Savings”
          What are they?
          What is their purpose, in a well functioning economy?
          What is the purpose of modifying Interest rates to control consumption?
          What’s the difference between “productive” and “Unproductive” capital

          If “savings” are no longer the way that an economy’s Productive capacity is increased then “savings” have no purpose and as such should simply be expunged, but we can’t do that so we do the next best thing which is negative interest rates.
          Negative Interest rates create a cost associated with any increase in unproductive capital, it’s not crap, it’s just what needs to happen.

          • Lower rates = increased credit = increased savings, thereby exacerbating your perceived problem of excess savings. Why can’t people get the fact that all money is debt. IE all savings is someone’s (or govt’s) debt!

  6. Low rates harm both savers and FHBs. It’s tempting to say fck the Boomers but that does Millennials no good. Anyway, Boomers have property, often access to pensions, not just savings, they’ll be fine.

    • Low rates destroy the price discovery of everything. Thus we have arrived where only source of spending comes from where price doesn’t matter.
      Then they destroy the modelling of policy makers through wrong pricing behavior signals…. thus a doom feedback loop

  7. To put it bluntly, savers have to take it for the team. And why not? Most of them are old and have enjoyed four decades of good fortune on just about every front.

    reminds one of

    Taro Aso, the finance minister, said on Monday that the elderly should be allowed to “hurry up and die”

    • Where is the sympathy for the unemployed.
      “Savers” meaning hoarders are merely being asked to spend their hoards. Big deal. Isn’t that the purpose of saving to smooth consumption?
      Why save if you refuse to spend or invest it ever?
      Completely useless activity.
      Another way of looking at it is to say cutting rates injects new life into hoarders by finally giving their hoards a social purpose.

      • I’m sure you also bemoan the fact that we’re exceeding our planet’s carrying capacity while exhorting people to spend all their savings on air travel, expensive steaks and electronics.

          • I’m sure you realise that most “hoarders” don’t have a green conscience, so you’re actively advocating for more air travel, more new cars, and through all that, more climate change.

            Nice… all that towards the creation of a bubble economy that will end up imploding in inflationary fire.

          • “I’m sure you realise that most “hoarders” don’t have a green conscience”

            I agree with this. However I am also advocating that resources be transferred from the hoarders to the state via negative rates who will then be able to use it for climate change mitigation.

            The answer to people with no social conscience is to tax away their wealth and give it to someone with a social conscience.

          • Alright Sweeper, well, we don’t live under communism so good luck with taxing people’s wealth away because they’re not green.

          • We wouldn’t be having this discussion if we were living under communism because growth would be constrained on the supply side.
            The state would be rationing beef vouchers rather than encouraging hoarders to spend their hoards.

      • Jumping jack flash

        ““Savers” meaning hoarders are merely being asked to spend their hoards. Big deal. Isn’t that the purpose of saving to smooth consumption?””

        Nah, id say that most savers under the age of say, 50, have a wad of savings they hope to eventually exchange for some shiny debt. Myself included.

        Im not spending my future deposit. Sorry. Unless the banks and government, APRA, RBA, whoever, wake up and lower the ponzi buy-in fee.

  8. Savers have to take it for the team. Nice. Cos’ what we need is less savings and more debt.

    Gold, BTC, commodities

  9. Don’t the banks already have access to the RBA term funding facility? The also have the CLF that was set up in 2015. There is money there, but who wants it? 900k loans are deferred, people and businesses in the lead up to this are already loaded up in debt and those who didnt want easy money before covid certainly dont want it now. So you will have a situation where as rates go down savings rates go up and as the rba scratches their heads the 10y goes negative.

  10. “If first home buyers want to blow themselves up in the stupid Aussie tradition”

    Young Aussies have to play the cards theyre given, not those they want. Looking at a lifetime of rentals and hiding your cat when the real estate inspection happens – or jumping into the only game in town? Hardly a stupid decision

    Its quaint to think Au is going to manage a lower AUD to increase productive enterprise. It will be an asset fire sale and hasten our banana republicization. Who coulda?

    • ErmingtonPlumbingMEMBER

      If I had my way owner occupiers would pay no interest but property Speculators would and get no tax concessions what so ever.
      If housing shortages arise the Govie can build more social housing if the private sector won’t do it without subsidies.

  11. Comments above are reminiscent of the franking credit debate.
    “Retirees with 1.6m in super have earned their government funded yield top up”
    “Hoarders who refuse to spend their hoards so that people have jobs have earned their government protected yield”
    How? Where is it held in law that hoarders are entitled to a government protected yield which means they don’t have to spend their hoards?

    • Do you care about climate change or resource overexploitation and if so, how do you square this with your belief that people should spend every dollar that enters their hands because the government says so (by taking active measures to prevent yield from existing)?

      • Direction and quantum of spending are unrelated.
        As above to your same point hoarders with social consciences are free to deploy their hoards into sustainable ventures.

        • But they won’t so enjoy your climate change. Once again the younger generation is fcked by QE.

        • Display NameMEMBER

          With QE having ALREADY blown bubbles in pretty much every asset class there is nowhere safe to put cash anymore. Safe being predictable, reasonable returns. PEs are stupid high, 4 trillion+ in share buy backs in the US since the GFC. Take the FANGs out of the market and there is almost no growth. So all that US QE has done two fifths of fcuk all, bar create a bunch of zombies.

          • The safe place is as it was in inflationary Yugoslavia — buy yourself a sh1tload of washing machines and wait for the currency to implode.

          • “With QE having ALREADY blown bubbles in pretty much every asset class there is nowhere safe to put cash anymore”

            You say that like it’s a bug rather than a feature.
            Why should anyone be able to get a safe return?
            Anyway you can still get around 10% in Pakistani and Indonesian 30 yr debt.

          • Display NameMEMBER

            Sure its a feature, but this is not a sustainable path. Where is the end game? Central banks doubling their balance sheets every year to get 2% GDP growth? Anyone on the outside looking in would say the current system is broken.

            Why should anyone get a safe return. Because if you cant the system is inherently unstable. ie not sustainable. Long term planning is fraught with issues if there is no stability of return and we need a long term view for climate change.

            Pakistan is super high risk. Going to be destroyed by climate change in medium term. Indonesia. You would need specific skills or inside knowledge to invest there I suspect.

          • the safe return leads to instability by presenting a leakage from circular flow of income/expenditure.
            The end game is to raise the inflation target as they should have done 12 years ago.

          • Display NameMEMBER

            “the safe return leads to instability by presenting a leakage from circular flow of income/expenditure.”

            What does this word salad mean? I dont expect 10% return, but at the lower end of the risk spectrum there is be a stable return possible. Now it is almost zero.

            And why do we need to target inflation. Why is inflation necessary? Just because a central bank says so?

          • “but at the lower end of the risk spectrum there is be a stable return possible”

            Why? Is that in the Constitution?

          • Jumping jack flash

            “The end game is to raise the inflation target as they should have done 12 years ago.”

            They can raise the target to 35% but that wont help them when actual inflation is running at 0.4% because the need for debt is siphoning all the spare capacity out of the system

            They would LOVE inflation right now. They probably reminisce about those heady days of 2006 when inflation was “running away” and they knee-jerked rates up. Stupid move. The inflation was entirely necessary to keep the place running.

          • ErmingtonPlumbingMEMBER

            Why are the wealthy entitled to “ Safe, predictable, reasonable returns”
            Entitled to money for doing and producing nothing AND getting taxation discounts on this investment income that citizens who ACTUALLY WORK for their income don’t get!

          • Ermington asked:
            “Why are the wealthy entitled to “ Safe, predictable, reasonable returns””

            Great question. To which their is no logical or ethical answer.
            Another way of asking it:

            Why do working people defend the right of the already rich do-nothing class to earn a real yield for doing nothing providing nothing productive as a reward for keeping the economy depressed and people out of work?

            Real answer: Because working people are genuinely confused about saving, and if they’ve got a bit of money in the bank or have paid a bit off their mortgage they incorrectly think this is their greatest asset.
            But it isn’t their greatest asset. There greatest asset is their capacity to sell their labour in a first world labour market – ie. present value of current and future labour income.
            And the value of this asset increases (all else equal) with lower interest rates.
            Working people will never have the same interest as bond holders whose largest asset really is accumulated hoards.
            But they never seem to be able to see this.
            So we always have these silly debates. “No don’t cut rates because my interest income will buy me 30 less coffees p/y… which I will make up 10 times over in pay increases I wouldn’t have got if rates weren’t cut”

  12. I think before we do anything we should ask
    “How will it benefit the future of the nation?”
    “How will this benefit the future generation..?”

    What are we getting for it vs not doing it?

    I think it’s high time we stop padding the arse’s of people who don’t need it.
    Where is the end-game if we keep going down this path..?

    • Precisely. Savers are ‘hoarders’, keep cutting ‘teh rates’, race to the bottom, beggar they neighbor … It’s all starting to feel like End Times.

  13. Hey BlokeMEMBER

    Not convinced.

    “The RBA is NOT directly responsible for financial stability in the QE era.”

    Incorrect: https://www.rba.gov.au/fin-stability/

    “To put it bluntly, savers have to take it for the team. And why not? Most of them are old and have enjoyed four decades of good fortune on just about every front. The macro regime that delivered their gains – free education, expansive welfare, falling taxes, endlessly rising house prices – hollowed out the tradable economy and now it needs to be repaired in the national interest.”

    I don’t see the reason why savers have to take it for the team, nor why their age is relevant. FHB trying to save a deposit are also affected. Wasn’t too many years ago when I saw a 6% on my deposit savings.

    “Household debt is exhausted as a source of economic growth. Even when we get rising house prices these days the multipliers into consumption are minimal. This leads to the conclusion that to grow much at all we will need strong fiscal support and a structural shift to tradable sectors.”

    Not sure if growth is even possible without total debt to the banks increasing given the current setup of our financial system.

      • ErmingtonPlumbingMEMBER

        How are plutocrats like Gina Reinhard “ sacrificing“?

        Didn’t that lazy fat slug just double her net wealth to 29billion! recently

  14. Jumping jack flash

    “Further rate cuts would be counter productive to the economy,” Professor McKibbin said, “Why keep cutting rates when we know it does nothing but redistribute wealth from lenders to borrowers?”

    Really? He’s got it a bit arse-about

    QE is certainly required and then use it to fund a UBI.

    I dont agree with hitting savers again. We’ve been beat down for 20 years with back to back interest rate cuts that have culminated in the atrocity that we have now as an economy.

    Why dont we give the rate cuts a rest?
    After 20 years of cuts surely it is obvious they dont do anything except make debt more necessary to own, which absorbs more and more capacity from the economy each time, that could be used for discretionary spending.

    • ErmingtonPlumbingMEMBER

      I agree with your UBI call.
      Let stimulus from the bottom up stir the inflation necessary to to see interest rates raise for those savers with their newly diminished buying power.
      Lol bring it on!

      • Jumping jack flash

        With regards to inflation, it would literally be a drop in the ocean of debt.

        If it would cause inflation they’d do it tomorrow. The problem is the whole system is gummed up with debt and now nothing works the way they think it will because of it.

  15. TailorTrashMEMBER

    Well I’ll spend some of my savings to have a few more coffees……I’m sure that will do wonders for the strayan economy …..and when my savings are all gone
    what then ……join the unemployed baristas in the centre link queue?

  16. ErmingtonPlumbingMEMBER

    Skippys twin brother gives an interesting talk here about the kind of economic narrative “the Left” could/should embrace to combat the neoliberal dominance of the current economic orthodoxy concerning supply and demand and “Markets”.

    I would be interested to hear your opinions on this clip 007 and Sweeper,

    https://youtu.be/sMDrVR59mTQ