If you are in a room with 100 people representing the buying power of the global economy only 1 or 2 of them are Australians. I realised how small we were when I stood in a Tokyo train station. This photo isn’t in rush hour - it was too hard to take. Humanity in your face as I remember it.
If you believe our politicians control our interest rates and economy then you are a victim of political propaganda. They might have a pinky on the gear stick but be sure that China, USA and Japan are driving the truck with big old Doc Martin boots.
I always laugh when politicians sledge each other on interest rates. As though they are somehow responsible for what’s happening in our economy. The self importance of their posture, the blanket statements sweeping over their “constituents” (even their use of this word feels demeaning).
Get real! The game is about liquidity, who’s got it and where they are spending it. Everything else is secondary. Few hands have it, and many hands don’t. Liquidity buys resources to build assets, or it skips a step, and just buys the assets.
Our favourite truck driver at present is China. She will change gears up and down for us Aussies based upon the speed for which her purchase orders come. At present, the cup runneth over. They come thick and fast and the speed burn hurts. Higher interest rates for all.
Apparently the politicians think the financial indicators tell the Reserve Bank of Australia what interest rate gear to sit in. Yep, that is true but that’s the speedometer not the truck driver! While the truck driver needs us she will keep us on the truck. When she doesn’t were off and look out for the gutter on your way out. Pray for a soft landing. (Note that she’s not a mean truck driver, she just doesn’t need us when her truck is full of inventory that she can’t move because the global economy is slowing down)
The governments role in this is a third order magnitude effect plain and simple. The arguable and very rough order:
- Global liquidity - e.g. asset valuations, flow/velocity of money
- Global macro - e.g. economic well being, wars, trade policy
- Local macro - e.g. GST, superannuation, income tax decisions
Don’t bother making a voting decision based on interest rates. Make a decision based on anything else but this if you want your watered down democratic vote well represented.
Before you jump on me. Let’s remind ourselves that democracy in history was about voting on projects and their proposers as they came along. Wow, that would be cool! I’d love to vote on a fibre optic network or whether to build a desalination plant. That would be democracy, old fashioned style.
Somehow we changed this to a 4 yearly farce which wastes part of my weekend. Politicians argue this is often enough because people need to be governed, let’s face it they say, because we don’t know the issues well enough. Please, Mr Politic save me the “constituents aren’t smart enough to vote often and on detailed matters” speech.
