Glass Pyramid Exclusive

IMF Watch: RBA told to give the Debt Machine more juice!!


As regular receivers of Glass Pyramid transmissions would be aware, the RBA and its Debt Machine maintenance techniques are a regular source of wonder and amusement to those of us who live in glass pointy things.

According to one of the remaining bits of the Sydney Morning Herald () devoted to real news, the IMF has been wagging its finger at the Reserve Bank of Australia for shirking its Debt Machine duties recently.

The Reserve Bank has been warned it may have to keep cutting already historically low interest rates to prevent Australians from becoming fearful of falling wages and weaker employment prospects.

Most shocking of all is the news that some group called “private economists” are worried. One wonders if “private economist” is some new euphemism for “economists paid by the private banks to say what suits their business model”.

The stark message, delivered overnight by the International Monetary Fund, will put more pressure on the RBA which is already being questioned by private economists for its recent interest rate decisions, with some accusing the bank of behaving unpredictably.

Unfortunately the article is lacking a clear explanation of what the IMF is really asking the RBA to do.  Rather than simply state that the IMF wants the RBA to:

  • further lower the existing “bait rates” to drive even more punters (but largely wealthy speculators) into the warm embrace of debt merchants and even larger debt loads.
  • and by doing so hope that some fraction of this freshly baked private bank ‘endogenous money’ when driven into asset prices might leak out into the broader economy via crumbs from the speculators tables (wealth effect) or from wages/ fees / slices of the action paid to renovators, spruikers, lawyers, finance brokers, real estate agents, house fluffers, reality TV show producers etc.

we get the usual weasel words – from the usual suspects about the motivations of those seeking to drive the Debt Machine faster – that are designed to imply that the Debt Machine model benefits everyone and not just a select group of asset owners and the sucker fish industries that surround the markets for those assets.

  • “..encourage growth in demand…”
  • “..but looser monetary policy “is called for” if the effect of lower oil prices is transmitted to core inflation or inflation expectations..”
  • “..boost economic growth by lowering interest rates…”

The only ones missing were the classics  “providing stimulus”  and “supporting demand”.

The weasel words are necessary because sensible folk might recoil violently if someone stated the RBA strategy is to drive down the price of debt in the hope that debt Bungee Jumpers and unsuspecting innocent folk will over consume the stuff. Especially if it is explained to them that the taxpayer (and people with savings) will be asked to bail them out (with even lower bait rates) when they start to gag on their over consumption (as is presently the case).

Imagine if the RBA was driving down the price of a certain dark sugary soft drink in the hope that citizens across the nation would guzzle deeply and get even fatter than we are now. Imagine if you were asked to contribute to the cost of subsidising the sugar-fest.

Sorry IMF, the last thing Australia needs, to battle the deflation death rays emanating from that mountain of household debt (and rapidly growing public debt) that is the product of following the mantras of mainstream economists, is an even larger and faster supply of debt based money with interest trailing commissions.

Sure the logic of the IMF proposal is solid from within the perspective of Private Bank / Central Bank Debt Machine cartel CrazyTown thinking but there are plenty of alternative and effective methods of defusing a debt loaded dystopian future.

Why not give Frosti a call.  He has a few suggestions for you to chew on.

3 replies »

  1. Yes! Amazing how ANY reduction in prices is BAD! If fuel prices are lower and our costings lower this is BAD?????
    As an old teacher of mine used to say when you I said something stupid “Great Scot man!


    • I can’t help but add that you are absolutely correct. All we get from the RBA, Treasury, politicians et al, is this mealy mouthed drivel. A sage of some past time once said
      “Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.”
      (The quote is often attributed to mark Twain but, apparently, does not originate with that smart witted gentleman.)
      I’ve got to admit I’m finally convinced the answer is ‘by imbeciles who really mean it’

      “Private economists” is the financial world’s equivalent of the Public Affairs Show host’s “People say’


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