At least one reserve bank globally is starting to ponder the question that many central banks across the world will soon inevitably be asking: what happens if we cut to zero and the economy continues to falter?
This has led Australia to start considering QE, following in the footsteps of a world full of central bankers all offering each other as much confirmation bias necessary to continue to walk down the path of eventual economic destruction.
In Australia, the reserve bank has cut to 1% and “nobody expects them to stop cutting,” according to News.com.au. The bank released this chart days ago, showing that market is expecting further cuts.
The average of all expectations is for the market to fall to 0.37% by September 2020. That exact outcome is described as “unlikely”, but the RBA could have rates at 0.25% or 0.5% by then. That would only leave room for one or two more cuts before rates are at zero.
Then what? Destroy your currency and print your way out of your problems.
Apparently convinced that economies only exist as permanent booms now, the RBA said last week that it would begin a program similar to QE in the United States, wherein the central bank would buy financial assets in exchange for cash. The RBA is considering buying Australian government bonds.
“We could take action to lower the risk-free rates further out along the term spectrum,” said the RBA Governor.
Justifying this nonsense, the article then gives the quintessential example of how QE bond buying works in practice:
Bonds are how the government borrows. Here’s how it works in simplified terms:
The government offers to sell a piece of paper that says, “Australia will pay you back a million dollars in 10 years” (a 10-year bond).
Someone buys that for, let’s say, $900,000.
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