Wednesday, October 07, 2009
Sane Australia
Australia's central bank has decided to raise its prime rate to 3.25%. This isn't especially notable by itself except as a symptom of common sense. After all, the larger purpose of interest rates is to serve as a feedback mechanism, a natural cruise control for banks. Our Federal Reserve (enslaved to the Wall Street Mafia) has held its interest rate strongly and rigidly negative for several years, thus removing the natural feedback, encouraging borrowing and discouraging saving. The result was perfectly predictable, as Polistra has been saying for a long time.
A more notable fact within the Australia news item:
If anyone in DC had a non-negative IQ, if anyone were capable of observing reality, this comparison would cause a firestorm of study and investigation. Why did Australia, Israel, Norway and Brazil avoid the bubble and bust, while so many others suffered? Australia especially, since it's parallel to America in most aspects. Same origin and culture, same basic approach to economics. And why did Canada have no bank failures even though its economy is tightly linked to ours? And finally, how can we emulate these more successful countries?
Needless to say, this investigation and study won't happen. Our government and academics have upside-down brains. Show them the correct way to perform a job and they will do it backwards. Show them that flexible interest rates cause a healthy economy, and they will make zero interest a permanent law, even more unbreakable and untouchable than the Endangered Species Act. ¶ 7:39 AM
Australia's central bank has decided to raise its prime rate to 3.25%. This isn't especially notable by itself except as a symptom of common sense. After all, the larger purpose of interest rates is to serve as a feedback mechanism, a natural cruise control for banks. Our Federal Reserve (enslaved to the Wall Street Mafia) has held its interest rate strongly and rigidly negative for several years, thus removing the natural feedback, encouraging borrowing and discouraging saving. The result was perfectly predictable, as Polistra has been saying for a long time.
A more notable fact within the Australia news item:
Nations such as Australia, Israel, Norway and Brazil that remained relatively isolated from the economic turmoil of the past 12 months for various reasons now appear to be leaning toward tightening their interest-rate policies to head off inflation.
If anyone in DC had a non-negative IQ, if anyone were capable of observing reality, this comparison would cause a firestorm of study and investigation. Why did Australia, Israel, Norway and Brazil avoid the bubble and bust, while so many others suffered? Australia especially, since it's parallel to America in most aspects. Same origin and culture, same basic approach to economics. And why did Canada have no bank failures even though its economy is tightly linked to ours? And finally, how can we emulate these more successful countries?
Needless to say, this investigation and study won't happen. Our government and academics have upside-down brains. Show them the correct way to perform a job and they will do it backwards. Show them that flexible interest rates cause a healthy economy, and they will make zero interest a permanent law, even more unbreakable and untouchable than the Endangered Species Act. ¶ 7:39 AM
