Comments on Bill Gross "Paranormal economic activity", 7/01/2012, http://www.businessspectator.com.au/bs.nsf/Article/global-economy-interest-rates-US-Federal-Reserve-E-pd20120105-Q7W3Q?OpenDocument&src=sph&src=rot
I think the flooding of money by ECB, BOE, and Fed will either be hoarded by those financiers that need deleveraging, or spill over to other more promising and less risky countries/markets by some international hedging operators, or both.
Maybe the Aussie stock markets and bond markets will be one of the destinations for those QE money supplies.
It will be self-fulfilling, if enough money is flowing into a better market, because the amount can be very large.
If I could get money from the US, UK, or EU, I would definitely invest in Australia, selecting a time when the A$ is a bit lower to come in and buy some shares and get out with a decent profit at a time when A$ is higher.
That would be a very excellent strategy.
The question Australians need to ask is why the Australian banks have been arguing that their financing costs from overseas financial markets are higher than the domestic money market where official interest rates are much higher than most of their counterparts overseas.
I was personally wondering that why there is no operators from Australia financiers to set up some bonds to be sold overseas and use the proceeds to provide cheaper loans in Australia.
Indeed, the Australian government perhaps should seize this opportunity to do so to benefit Australians by lowering the cost burdens for many Aussies who have mortgages or loans from the banks.
Showing posts with label $A. Show all posts
Showing posts with label $A. Show all posts
2011-04-21
Time to rethink exchange rate regime
Comments on “Aust dollar clears 107 US cents”, see NEWS – Currencies, http://www.businessspectator.com.au/bs.nsf/Article/Australian-dollar-clears-107-US-cents-record-high-pd20110421-G4SRZ?OpenDocument&src=hp2
Two points: 1. the $A has entered uncharted territory and no one knows how high it will go in the next year or so. It may go as high as $US1.10, 1.20 or even 1.50, though few people would dare to say the last figure. The point is no one is sure about it.
2. Given the pervasive effects of the high $A, is there a case for some RBA intervention to keep it lower? Why does the RBA continue its conventional operations and stay away from intervention while the US Fed has been doing unconventional quantitative easing? Isn't time for the RBA to catch up with the changed international finance and monetary politics?
I think those are legitimate questions to ask and the RBA needs to have a serious review of what is best for Australia, getting out of its comfort zone of conventional thinking and conventional operating.
While free exchange rate has been the norm and dominate economic theory, excessive movements and fluctuations of a currency against others, especially the ones that are having a big effect on the country such as the $US for Australia given that many commodities are priced in $US, may not be optimal or desirable.
If the GFC has promoted a rethink of macroeconomic theories, a thorough review of international exchange rate regimes is also overdue and equally important.
Two points: 1. the $A has entered uncharted territory and no one knows how high it will go in the next year or so. It may go as high as $US1.10, 1.20 or even 1.50, though few people would dare to say the last figure. The point is no one is sure about it.
2. Given the pervasive effects of the high $A, is there a case for some RBA intervention to keep it lower? Why does the RBA continue its conventional operations and stay away from intervention while the US Fed has been doing unconventional quantitative easing? Isn't time for the RBA to catch up with the changed international finance and monetary politics?
I think those are legitimate questions to ask and the RBA needs to have a serious review of what is best for Australia, getting out of its comfort zone of conventional thinking and conventional operating.
While free exchange rate has been the norm and dominate economic theory, excessive movements and fluctuations of a currency against others, especially the ones that are having a big effect on the country such as the $US for Australia given that many commodities are priced in $US, may not be optimal or desirable.
If the GFC has promoted a rethink of macroeconomic theories, a thorough review of international exchange rate regimes is also overdue and equally important.
2010-10-19
Dutch disease may not be that serious in Australia
Comments on Michael Stutchbury “Productivity retreat won't ease squeeze”, 19/10/2010, http://www.theaustralian.com.au/business/opinion/productivity-retreat-wont-ease-squeeze/story-e6frg9p6-1225940390023
Our farmers may or may necessarily be hurt by the strong dollars.
It depends on the world price for food.
Isn't it true that the Russian fires and its restriction on wheat exports caused the price to go up? How much a bushel?
High dollar may be actually not that bad after all.
Most of our exports are primary goods and their prices have been high.
The share of outputs from those sectors squeezed may not be that large.
Our farmers may or may necessarily be hurt by the strong dollars.
It depends on the world price for food.
Isn't it true that the Russian fires and its restriction on wheat exports caused the price to go up? How much a bushel?
High dollar may be actually not that bad after all.
Most of our exports are primary goods and their prices have been high.
The share of outputs from those sectors squeezed may not be that large.
2010-07-28
Risky $A was a key lucky factor for Australiain the GFC
Comments on Tony Makin “Fiscal stimulus did not save us”, 28/07/2010, http://www.theaustralian.com.au/news/opinion/fiscal-stimulus-did-not-save-us/story-e6frg6zo-1225897744621
This is a very interesting empirical finding.
I have two quick questions for Professor Makin:
1. How did monetary policy loosing in Australia compare with other advanced economies relatively?
2. Was it the case as long as the relative monetary settings are the same between Australia and others, the risk nature of the $A would do the trick to be stimulative by depreciating due to rising levels of global risks? The risk nature of the $A is a lucky factor for Australia in down turn times in the global economy or when risks are high, though when the global economy is good it plays the opposite role. That is to say the exchange rate played the most important part.
PS: expectations and confidence were also important. Issue is how to model and capture their effects.
This is a very interesting empirical finding.
I have two quick questions for Professor Makin:
1. How did monetary policy loosing in Australia compare with other advanced economies relatively?
2. Was it the case as long as the relative monetary settings are the same between Australia and others, the risk nature of the $A would do the trick to be stimulative by depreciating due to rising levels of global risks? The risk nature of the $A is a lucky factor for Australia in down turn times in the global economy or when risks are high, though when the global economy is good it plays the opposite role. That is to say the exchange rate played the most important part.
PS: expectations and confidence were also important. Issue is how to model and capture their effects.
2009-10-27
No need for Aussies to panic and learn to live with prosperity
Comments on Alan Kohler “Australian dollar disaster”, 27/10/2009, http://www.businessspectator.com.au/bs.nsf/Article/Australian-dollar-disaster-pd20091027-X7R9U?OpenDocument&src=sph
Alan, there is no need to be so alarming about the rise of the Aussie dollar.
While the so called Dutch disease may present a problem, it can also present some opportunities to Australia.
One is that it will force manufacturing and construction to upgrade their structure to a higher level, through enhanced productivity and better entrepreneurship and management.
A second opportunity is that it may afford the RBA to be a little more relaxed on inflation and hence on its interest rate. A more relaxed inflation target will make the interest rate differential between Australia’s and the international ones smaller and reduce capital inflow for portfolio capitals. It also benefits Australians with low mortgage rates.
The third one is that Australian’s can use the higher purchasing power of the Australian dollar to either enhance their lifestyle, or invest overseas to reap more reward.
So, I am not as pessimistic as some of the commentators or some policy advisors are. One should learn to live with prosperity.
At the same time, I am appalled by the panic some people have shown regarding the rise of the Aussie dollar.
Alan, there is no need to be so alarming about the rise of the Aussie dollar.
While the so called Dutch disease may present a problem, it can also present some opportunities to Australia.
One is that it will force manufacturing and construction to upgrade their structure to a higher level, through enhanced productivity and better entrepreneurship and management.
A second opportunity is that it may afford the RBA to be a little more relaxed on inflation and hence on its interest rate. A more relaxed inflation target will make the interest rate differential between Australia’s and the international ones smaller and reduce capital inflow for portfolio capitals. It also benefits Australians with low mortgage rates.
The third one is that Australian’s can use the higher purchasing power of the Australian dollar to either enhance their lifestyle, or invest overseas to reap more reward.
So, I am not as pessimistic as some of the commentators or some policy advisors are. One should learn to live with prosperity.
At the same time, I am appalled by the panic some people have shown regarding the rise of the Aussie dollar.
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