Skip to main content

Why Australia's Economy Is A House Of Cards - Zerohedge

As a quick refresher of how we got here, after the Global Financial Crisis, and consequent recession hit in 2007 thanks to delinquencies on subprime mortgages, the U.S. Federal Reserve began cutting the short-term interest rate, known as the ‘Federal Funds Rate’ (or the rate at which depository institutions trade balances held at Federal Reserve Banks with each other overnight), from 5.25% to 0%, the lowest rate in history.
When that didn’t work to curb rising unemployment and stop growth stagnating, central banks across the globe started printing money which they used to buy up financial securities in an effort to drive up prices. This process was called “quantitative easing” (“QE”), to confuse the average person in the street into thinking it wasn’t anything more than conjuring trillions of dollars out of thin air and using that money to buy things in an effort to drive their prices up.
Systematic buying of treasuries and mortgage bonds by central banks caused the face value of on those bonds to increase, and since bond yields fall as their prices rise, this buying had the effect of also driving long-term interest rates down to near zero
Source: Why Australia's Economy Is A House Of Cards

Comments

Post a Comment

Popular posts from this blog

How The Economic Machine Works by Ray Dalio - Bridgewater

Source: How The Economic Machine Works by Ray Dalio
Post a Comment
Read more

Letter: Why the geopolitics of international currency choice matters - FT

This coincidence must alert readers that a tempest is brewing on subjects noted: lurking inflation, increasing debt, suppressed interest rates and the shifting of hegemonic power.  There are only two important questions in investing that also apply to subjects impacting the future stability of the world — tell me why and tell me when.  Plender gives us the “why”, the ever-increasing “intolerable burden” of government debt and suppressed rates leveraging the global financial system. He gives us the tipping point.  What we await is “the when”, as in when do we know we have “tipped”.  Paul Hackett Madison,  NJ, US    Letter: Why the geopolitics of international currency choice matters
Post a Comment
Read more

Reading the runes on a Warsh Fed - Martin Wolf - Financial Times

Intellectually, at least, today’s Warsh appears the same as the one of 2010. In his IMF lecture delivered in April 2025, he stressed not only the Fed’s “institutional drift”, but also its recent “failure to satisfy an essential part of its statutory remit, price stability. It has also contributed to an explosion of federal spending. And the Fed’s outsized role and underperformance have weakened the important and worthy case for monetary policy independence.” He made other criticisms, the most pointed being that “the Fed has been the most important buyer of US Treasury debt — and other liabilities backed by the US government — since 2008”. He asserts: “Fiscal dominance — where the nation’s debts constrain monetary policymakers — was long thought by economists to be a possible end-state. My view is that monetary dominance — where the central bank becomes the ultimate arbiter of fiscal policy — is the clearer and more present danger.” For Warsh, then, easy money is the road to ruin.  ...
Post a Comment
Read more