What is the final destination for Oz – ZIRP or NIRP?

This comment was made at Macrobusiness  (link may be locked – but there is a free trial available)

If overseas central banks are exploring NIRP Australia could attract capital simply by being less NIRP.

Of course it is mental but then so is ZIRP.

What is baffling is how  people get around the bleeding obvious that if you cut the price of something close to zero and ‘normal’ people are not interested in buying it at that price, they probably have very good reasons for not doing so.

Rather than trying to shove the rotten product into their hands with larger price cuts, surely it is time to start thinking about another approach.

Clearly people don’t want money if it comes with a liability for an ongoing trailing commission to a bank (no matter how small) but that doesn’t mean they are no longer interested in money and acquiring the services and goods it allows.

That is the problem when the management of the money supply is out sourced to private banks.

They become the money supply bottleneck as a debt engorged population goes on a debt strike.

No need to run reckless fiscal policy that upsets the large proportion of the population who is very suspicious of spending decisions made by politicians.

Just run a deficit by increasing the tax free threshold.

The private banks ability to create money is drying up as ZIRP approaches – and is likely to run in reverse (when genuine deleveraging starts) – someone is going to have to create money instead and it may as well be the government in the process of doing the fundamental responsibilities of government with as little pork and waste as possible (it may be even less than they currently do as creating a deficit is the issue and that can be achieved by lower taxes).

We probably will not even have to do anything about capital inflows as the moment the government announces it is going to take such unconventional action the international debt peddlers will kick up a major stink as they fear such ideas spreading.

If foreign debt peddlers will not lend we will not need to deny ourselves their drug of addiction with an exercise of will power.

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