Why the RBA is wrong on rates

Christopher Joye

Coolabah Capital

In The AFR weekend I put the RBA to the sword while trying to resolve the puzzle of why sustained consumer price inflation only appeared in Western economies in the second half of the 20th century and coincided with the first genuine explosion in private sector credit. I argue that the answer lies in two intertwined factors: 1/ the dropping of the "gold standard" and shift to so-called "fiat money" in 1970s, which is paper currency that has no intrinsic value other than the assurances provided to it by politicians (it can also be costlessly printed in vast volumes by governments seeking to finance budget deficits, which is what is happening today); and 2/ the establishment of central banks originally for the purpose of guaranteeing the liquidity of highly leveraged private banks that were otherwise prone to failure and the development of government-guaranteed and hence supposedly "risk-free" and ultra-cheap funding via deposits, which radically multiplied the quantity of money and credit throughout the economy as banks sought never-ending asset growth. Read for free here (VIEW LINK)


Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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