Economy

Dec 7, 2011

RBA takes fright at a desperate
eurozone

The RBA has cut rates in anticipation of the impact of the European crisis. Given the news out of the eurozone, it won't be the last cut.

No wonder the Reserve Bank cut interest rates yesterday. Central banks and governments around the world are increasingly concerned about the debacle in Europe. With Friday’s critical summit meeting approaching and the policy options looking decidedly limited, the RBA’s timing is impeccable, even with the confirmation of how robust the local economy is via the GDP figures. But let’s hope the pre-emptive cut will prove to be a bonus, and not the first of a few as Europe slowly implodes over the Christmas New Year period.

11 comments

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11 thoughts on “RBA takes fright at a desperate
eurozone

  1. Gavin Moodie

    This is a very sad development for the Euro and the EU.

  2. Peter Bayley

    The moves by France and Germany are predictable and will do no good. The problems that led to this state of affairs (removal of controls in an arms-race to be top financial dog, leveraging of 26-to-1, etc) cannot be solved by more, higher-interest debt. Austerity won’t work either as it crushes earnings and therefore repayments. The solution is to go Iceland’s way and forget the debts as they were essentially illusory (only by assuming 0% risk are you likely to receive 100% back – unless you persuade a naive government to take over Bank debts at 100%. For a REAL understanding of the European situation, see http://t.co/LcC5lYdZ

  3. Peter Bayley

    Another, more-entertaining but just as accurate analysis is the phenomenon that is Max Keiser and Stacy Herbert. More at http://bit.ly/ure2Gf

  4. Jenny Haines

    I am no banker, financier or economist, but it seems to me that there is only so many times you can shift the debt around and refinance using printed money before that strategies runs out of value. The middle and working classes of Europe, and the US are about to pay for the greed and selfishness of the financiers. No wonder the Italian Social Welfare Minister was crying yesterday. She must see what is coming and it aint pretty. The question now is how much of the house of cards Europe is going to pull down with it?

  5. [email protected]

    I can’t understand why the failed banking houses who brought all this down on our heads can’t be made to pay? Can’t governments find the guts needed to reregulate the Financial Sector for the good of the world? Why do the poorest citizens of the world have to pay? Why can’t governments find a way to make tax-avoiding and evading companies pay their reasonable dues? That’s where all the money has gone to fund a solution to this crisis, to the tax havens of the world. What happened to the mooted action to outlaw the tax haven’s dirty work for the wealthiest 1% and corporations? I don’t care if they get upset if someone in a courageous government takes away their lolly, what are they going to do? Leave the world?

  6. Peter Bayley

    @[email protected] The Banking houses are untouchable because they have successfully lobbyed the US Government to dismantle all the checks and balances laws put in place after the Depression – and have then filled top Government financial jobs with their own people. So, of course, THEIR government does THEIR bidding and keeps them safe. BTW the same thing is happening in Europe – the so-called “technocracts” in Greece and Italy are really Bankers ( and shouldn’t be called Prime Ministers as they are not even ministers)

  7. Microseris

    Like Jenny I am no economist, but I can reasonably conclude an economic system which is predicated on speculation and perpetual growth is doomed.

    The only question is when.

  8. Mack the Knife

    The dead cat seems to be bouncing less high with each new plan. Perhaps its time for the world to accept that the too big to fail institutions need to go under without rescue packages to the banks who patently are just abusing them with business as usual attitudes.

    Only then when these callous and greedy mega CEOs fall can we all rebuild and hopefully never give these banks this power again. And bring in laws to not only gaol them but strip their assets as proceeds of crime when they transgress.

    The most disgusting thing I’ve seen was Greenspan, pretty much one of the deliberate architects of the GFC, joining Paulson a major hedge betting profiteer from the misery of the GFC as his payoff.

  9. AR

    If anyone is interested in a preview of what we in OZ will be hearing, should China stop buying our shovellings, they’d be well advised to read the recent national address by Ireland’s PM, Enda Kenny –
    http://www.broadsheet.ie/2011/12/04/enda-you-are-not-responsible/
    A more blatant example of “their fault, you’re gonna pay, and your kids, if any..” would be hard to find in english.

  10. Ian

    @Peter Bayley,

    Your analysis covers the situation quite well. It seems to me the only people who don’t recognize or won’t own up to the fact that the system is broken and there is no fix for it are the establishment economists (ex bankers in the main) and politicians who call the shots.

    The American “solution” of printing more and more money and lowering already low interest rates to practically zero – the very policy that lead to unsustainable debt, the housing bubble and speculative games by bankers which brought about the crisis in the first place – is patently not the answer; its the cause stupid!

    The European solution of austerity measures followed by more austerity measures that stifle growth, reduce government revenues and inflame citizen/victims leaving countries in a worse positions than to begin with is another pretend solution.

    In the process of all of this what democracy remained in the US and Europe took a beating with a referendum thwarted and, in Italy, an earlier referendum against privatizing its water supply (I think) likely to be ignored.

    Debt that can’t be repaid wont be repaid, that’s the nub and the can they are kicking down the road will rebound with venom as the piece of elastic tied to it is stretched to its max.

    Greece should have followed the Iceland example right in the beginning as now its only option is perhaps to auction off the entire country – minus its ports and beaches which have already been sold. Perhaps China may be interested as a way to rid itself of all those precarious US & European bond it holds?

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