It has long been a personal bugbear of TAFKAS that the government agency that has done the greatest economic damage to Australia is not held to account. Worse, the media and economic policy intelligentsia listen to their every word and bow. This agency and its officials seem to be unable to do any wrong, despite continually doing wrong.
These are the people who inflated house and other asset prices by keeping interest rates too low for too long, then saw the problem. They then told the banks to ease off only to come back and tell them to stop being so stingy.
These are the people who, in an earlier and simpler time, brought Australia the recession they chose to give us and not as then Treasurer Paul Keating said, the recession we had to have.
These people are central bankers, and in Australia’s case, the Reserve Bank of Australia.
With this in mind, consider the following piece of wisdom from the IMF – the International Monetary Fund.
The IMF has just put out an article on How to Make Negative Interest Rates Work. Negative interest rates yep. That is when savers PAY borrowers to borrow. Get this:
Many central banks reduced policy interest rates to zero during the global financial crisis to boost growth. Ten years later, interest rates remain low in most countries. While the global economy has been recovering, future downturns are inevitable. Severe recessions have historically required 3–6 percentage points cut in policy rates. If another crisis happens, few countries would have that kind of room for monetary policy to respond.
The IMF’s advice – forget about living within your national economic means and forget structural economic reform. Just screw the savers again.
And how do they say to do it? Get rid of cash.
If only Ken Henry was still in Canberra to advise – Go hard. Go fast. Go cashless. So says the IMF:
In a cashless world, there would be no lower bound on interest rates. A central bank could reduce the policy rate from, say, 2 percent to minus 4 percent to counter a severe recession. The interest rate cut would transmit to bank deposits, loans, and bonds. Without cash, depositors would have to pay the negative interest rate to keep their money with the bank, making consumption and investment more attractive.
Much like the lack of bound on interest rates, there is no bound to the insanity of these people. But still not satisfied …
This would jolt lending, boost demand, and stimulate the economy.
They don’t even understand what they are talking about. By making interest rates negative, thus forcing people to take money OUT of the banks to spend, how the hell do they expect the banks to lend money? They won’t have any money to lend. Idiots. Plain idiots. But taxpayer funded idiots.
It is a recipe for destroying banking, payments systems and economies. But if the IMF says so ….
And just remember this the next time a government implements another cash/black economy task force (yes you Mr Turnbull, Mr Morrison and Ms O’Dwyer). In the near term it may be claimed to go after the tax avoiders, but next will come the savers.
Like a cancer …. never satisfied until it and its host is dead.