Gordon Campbell on the Impotence of the Reserve Bank   11 Aug 2016

Column - Gordon Campbell

Gordon Campbell on the Impotence of the Reserve Bank

If anyone is keen on us having a 90s revival – ASAP – it would have to be Reserve Bank governor Graeme Wheeler. Back in the 1990s, central bankers were like kings. They were Emperors of influence. When the likes of Don Brash clicked their fingers and pushed up interest rates – always up, always tightening – our exporters trembled, and would beg for mercy.

Now however, central bankers seem to be entirely impotent. The ol’ time religion of austerity has failed us all. Around the world, it is now seen to be central governments with their neo- Keynesian economic policies and their quantitative easing and their massive infrastructural spending projects who have to try and restore some life to the economy, and thereby undo the damage done by central bankers of yore.

Regardless, the ancient rituals of central bankery have been duly enacted once again this morning in the vast and echoing halls of the Reserve Bank. Wheeler, the Bank’s high priest, has sawed away ineffectually once again at interest rates, in an effort to try to ignite a spark of inflation in the wet, dead wood of the New Zealand productive economy.

Most analysts predict central bank governor Graeme Wheeler will shave another 25 basis points off the Official Cash Rate, taking it to a new record low 2 percent, as he struggles to get inflation back into the 1 to 3 percent target band.

That prediction has been borne out. Interest rates have indeed been cut to 2 %. It won't make a scrap of difference. In the 90s, inflation was allegedly rampant. Now, inflation has to be cajoled into life or more likely, imported from abroad – ie in the shape of more costly imports, via a depressed Kiwi dollar – because domestic economic activity is still flat on its back.

Out in the real world… other, more significant forces are at work. Whatever Wheeler does to interest rates, the Aussie banks who really call the shots in the New Zealand economy have signalled that they won't necessarily be passing those cuts on to their customers. (Not even to the dairy farmers on the ropes after the collapse in dairy commodity prices, and who may be struggling to service their debt.) True, interest rates are now so low that this morning’s puny tinkering by the Reserve Bank is hardly likely to bridge the difference between a mortgagee sale and survival. Yet the lack of compassion being shown by the banks is startling, and pretty significant.

After all, the Aussie banks are continuing to rake off obscene levels of profit from New Zealand. A gesture of support to the productive sector, and some respect for the Reserve Bank’s desperate attempts to stimulate the New Zealand economy would be good P.R. at least. Australians are not renowned though for their empathy for Kiwi sensitivities. As things stand, the Reserve Bank’s attempts at market stimulation via interest rate cuts are sure to be stymied if and when the Aussie banks refuse – as promised – to pass those interest rate cuts on to their customers. The RB has lost its mojo. All that this morning’s empty ritual is likely to do is to increase the profit margins of the Aussie banks.

Talking of impotence, the Key government long ago chose to be simply a bystander to all of this. As usual when it comes to most of the country’s major structural problems, this government doesn’t seem to have a clue. It is just waiting around for the next diversion. If the economy is bad, what about the sevens in Rio? That’s the real tragedy, right ?

Another Day, another Selfie

OK OK. So, yesterday, Republican presidential nominee Donald Trump did appear to be calling for someone out there who really cares about the Second Amendment to assassinate Hillary Clinton, and stop her from appointing any more left leaning liberals to the Supreme Court.

“If she gets to pick her judges, nothing you can do, folks. Although the second amendment people, maybe there is, I don’t know. But I’ll tell you what, that will be a horrible day.”

Hmmm. Now, we’ve heard a lot in recent weeks about what Donald Trump has said, but very little at all about what he didn’t say. Think about it. Here are a few things that Trump hasn’t said. Yet.

• He hasn’t called for Mexico to be nuked, even though that sure would be a cost-effective way of stopping those migrants and drug dealers from pouring in across the Rio Grande
• He hasn’t called for Barack Obama to be lynched from a tree on the White House lawn
• He hasn’t called for it to be mandatory for women to wear bikinis at all times in public, Only the pretty ones, mind. The ugly ones should have to stay out of sight.
• He hasn’t called for Canadians to be stripped of their American citizenship, even though most of them are panty waists, and a lot of ‘em speak French.
• He hasn’t attacked the Obama administration for failing to ban the Zika virus, even though it sounds kinda Muslim, don’t you think? The Zika virus. Barry Hossain Obama. Join the dots, people.

Have any of those examples of the restraint being shown by Donald J. Trump been mentioned by the liberal media? Of course not. Believe me, when we have a President Trump in the White House you can bet those liberals and pesky journalists are going to be taken care of – and if need be in a Second Amendment way, if you catch my drift.

Moments of Grace

Here’s a good new theme song for the Republicans – and for House Speaker Paul Ryan in particular – as they contemplate their future relationship with the party’s presidential nominee. “I could feel his mind decaying” … etc etc.

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