QE Continues Down Under

imagesNot to be left out in the Ponzi game of Quantitative Easing (QE), Australia’s Reserve Bank (RBA) cut the official cash rate was down 25 basis points to 2%, the lowest ever. At 2%, the Aussie rate is still considered high amongst the QE kings of the western economies. That leaves room for the rate to be eased a few more rounds to match the near zero rates elsewhere. Aussies are rejoicing that the highly mortgaged people are having a few dollars more in the pocket to drink away.

Article Lead - wide995760046ggui7kimage.related.articleLeadwide.729x410.ggulda.png1430810388974.pngIn anticipation of RBA’s announcement, the Aussie dollar went for a wild coaster ride. It dipped initially to the day’s low of US77.88¢, then shot up to as high as US79.12¢ as investors digested the statement on the RBA’s decision to cut rates by 25 basis points to 2 per cent. This sort of movement must bring great joy to the financial gamblers who either have inside knowledge of imminent actions or are just too astute in financial moves. Joy to some, but pain to others, as the Sydney Morning Herald reports,

“The pensioners, aged 86 and 81, have watched the income from their three-month term deposits steadily drop over the past four years.

‘We’re losing a few hundred dollars a year, easy, because of the cut. It’s unbelievable how low interest rates on term deposits are. It’s like 2 per cent, and then there are account keeping fees,’ Mr Wood said.”

On the property front, the move will add greater volatility to the already heated property market. The Herald has more to say,

“In his statement Reserve Bank governor Glenn Stevens acknowledged that the board had considered the impact of Sydney’s booming property market.
Reserve Bank governor Glenn Stevens said the central bank was is “working with other regulators to assess and contain risks that may arise from the housing market”.

Reserve Bank governor Glenn Stevens said the central bank was is “working with other regulators to assess and contain risks that may arise from the housing market”.

“Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities,” Mr Stevens said.

“The Bank is working with other regulators to assess and contain risks that may arise from the housing market.”

Dr Wilson said this would “no doubt” lead to an improvement in affordability and could “only mean house price rises”.

With an unprecedented nine out of 10 homes selling at auction on Saturday Dr Wilson said it was clear that “there’s definitely more competition in the market than ever before”.

For this reason, senior manager for residential at research house BIS Shrapnel, Angie Zigomanis​, warned that a rate cut would be “dangerous” for the hot Sydney market.

“A growing level of affordability may encourage more people to buy in,” Mr Zigomanis said.”

The statement by Dr Wilson is absolutely baffling. While saying that prices of houses will definitely rise, he went on to assert that this means “more affordability” because interest rates are lower. If that is true, RBA should perhaps follow the zero interest rate Ponzi game and allow house prices to double or triple. By his argument, that becomes more affordable. Economics 101, oh maybe 102. Read “Debt is good”.


1 Samuel 22:2
And every one that was in distress, and every one that was in debt, and every one that was discontented, gathered themselves unto him; and he became a captain over them:


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