The first Tuesday of the month is the scheduled day for monetary policy twitchers to don their pin stripe camo and lurk expectantly on park benches in Upper Martin Place.

Their presence is easily identified by small piles of pigeon and ibis entrails – “it is very hard to get good entrails these days” is a common complaint heard.

Although great excitement accompanies this traditional rite of central banking – or more accurately, mutant privatised relic of centralized economic planning – great pains are taken to maintain the fiction that when it comes to matters monetary there is some kind of ‘free market’ in operation.

According to this convenient fiction, although the ‘independent’ central bank sets a target rate on interbank loans, the free market private banks are in other respects doing “God’s Work” and bringing savers and borrowers together with invisible fingers to generate abundance for all.

Which of course makes an article like this a curious specimen as it openly discusses the extent to which the ‘convenient fiction’ of a free market and the invisible hand should be subject to highly visible and highly interventionist regulatory credit allocation paw prints.

Regulating access to credit?

Picking the deserving, who will be allowed to borrow, in other words picking credit winners?

No wonder Mr Eslake sounds a bit uncomfortable.     This is thin edge of the wedge material.

If people realise that modern credit creation by private banks / ADI is nothing more than franchised privatised public money creation, and the idea that it is some kind of ‘free market’ is pure fantasy, then they might be inclined to ask why not just let the government create public money in the form of a modest budget deficit each year and leave the banks to find savers of that publicly created public money and bring them in happy union with borrowers.

At the very least they might argue that if the private banks keep this barbaric 19th century privilege, APRA should explicitly and clearly regulate who gets credit and for what purpose.

And why stop there? Why not set or influence the relative prices of different types of credit – oops they are doing that already!

Why not allow cheaper loans if they are secured by new construction and require more expensive loans if the security is existing residential property.  After all borrowing to expand the productive capacity of the economy beats borrowing to goose asset prices for a tax dodge hands down.

Isn’t that what distinguishing between owner occupier and investor residential lending is all about?

Not that such arguments find support in the saloons of our moochers in Canberra!. According to Scott Morrison speculating with debt on the price of existing assets is how the modern Aussie “gets ahead”.

The Wizard of Oz understood the importance of a thick curtain of concealment.

A few central bankers might be feeling a bit breezy if this type of article appears more frequently.

Keep up the good work Clancy!

Oh and for those waiting on entrails …..nothing ……the high priests have decided not to adjust the temperature on the monetary pot.