pauldotmMar 3
Why would the reserve bank increase interest rates to combat inflation caused by external events? It punishes borrowers for reasons out of their control #auspol
Show threadMozMar 3

@pauldotm because that is the role of the Reserve Bank defined in legislation. They have one primary task: keep inflation between 2% and 3%.

They can't change tax rates, especially taxes on profits, but they can change interest rates. If they need to lift rates and create a recession to compensate for excessive profits, the government requires them to do that.

NZ broadened the remit, but the right wing narrowed it. So it can be done.

https://www.interest.co.nz/public-policy/125678/finance-minister-nicola-willis-says-flexible-inflation-target-will-be-kept-and

#AusPol

Parliament votes to remove the RBNZ’s employment target

Finance Minister Nicola Willis says flexible inflation target will be kept and a new remit will be issued

interest.co.nz
Show threadBot4SaleMar 3

@moz @pauldotm I'm not an economist but I do consider myself somewhat intelligent. Dexpite that however I fail fo understand how shifting money from one societal group (mortgage holders) to other groups (banks and shareholders) reduces inflation.

All it does it shuffle money around the system, it doesn't actually reduce the amount of money contained within the system.

#auspol

Show threadMoz

@Bot4Sale @pauldotm count me as not even slightly an economist, but inflation is only partly "too much money", it's also speed of money = money being spent.

If people can't borrow as much money house prices won't rise as fast. Investors are more inclined to put money in the bank rather than use it as the deposit on another house.

People buy cheaper stuff, which reduces inflation measures based on what people actually buy. You're not buying pricey chocolate, just cat food...

Mar 3 at 9:26amWeb
Show threadBot4SaleMar 3

@moz @pauldotm Yes you can reduce expenditure on discretionary stuff but then non-discretionary stuff like electricity, rent, fuel, et al increases and so overall people spend more money (which increases inflation). These items not affected if rates go up or down so I again wonder how does penalizing a portion of the population bring down inflation?
Sorry not bagging you. AI seriously just don't believe that the RBA really has an impact, it's "inflation theatre" if I could call it that.

#auspol

Show threadPhonon RainMar 3

@Bot4Sale @moz @pauldotm Also not an economist, but I'm given to understand the idea is (at least in part) that inflation <-> price rises <-> money losing its value <-> "too much" money.

The RBA and lenders want loan interest to track this value loss so that the loans stay profitable from a value-of-the-dollar-at-the-start-of-the-loan perspective. The RBA takes some and "destroys" it, reducing the amount of money and putting upward pressure on the value of the dollar.

There's at least two other ways the RBA can get money to destroy. One is by selling "financial assets" e.g. bonds or other contracts of some promised future value, and the other is by taking tax money directly from the Treasury and just writing it out of existence.

Since our government are cowards and our media lie to the people about the RBA having "only one tool for one job", these options don't get a look in.

Show threadBot4SaleMar 3

@phononrain @moz @pauldotm "There's at least two other ways the RBA can get money to destroy. One is by selling "financial assets" e.g. bonds or other contracts of some promised future value, and the other is by taking tax money directly from the Treasury and just writing it out of existence."
Unsurprising and just another reason now why I think continue to think the RBA are a bunch of overpaid Muppets.

#auspol

Show threadPhonon RainMar 3

@Bot4Sale @moz @pauldotm They are indeed overpaid Muppets, wielding a Class War analogue of a WMD.

The actual "ideal" inflation and interest rate is not a real thing. It's a correlation someone noticed 60 years ago that plays into control freaks' egos who need to be able to control everything, or failing that have the illusion of control to make profit opportunities more predictable.

The RBA, governments, economists etc. love to talk about "wage-price spirals", where giving people more money just lets retailers put up prices to match. But if retailers were forced to keep prices low, (in a capitalist economy by encouraging more competitors into markets), prices would stay down and we would just get higher standards of living instead.

Instead, our governments permit too much market consolidation (e.g. Colesworths) and even when there are 5 or 6 players (most consumer goods markets are in this 4-6 vendor range when you look behind the brands to the parent companies), cartel price-fixing behaviour keeps prices "as high as the market will bear". Thus, the amount of this we tolerate in our society directly affects our standard of living.

And this is before we even include the effects of the housing market...

Show threadBot4SaleMar 3

@phononrain @moz @pauldotm Nailed it

#auspol