The weekend is just around the corner and here’s where we find ourselves:
- At the beginning of the month, the RBA held the official cash rate at an all-time low of just 1.0%.
- The ECB (European Central Bank), last night, drove interest rates further negative to -0.5%, they restarted their Qualitative Easing program (warming up their money printing machine) to the tune of $22billion per month and re-packaged their Targeted Long-Term Refinancing Operations (TLTRO) — giving sweet lending deals to banks so that borrow money from the ECB.
- And last but not least, getting his FOMO on, the sitting US president — self-proclaimed “King of Debt” — POTUS Trump called his Central Bankers “Boneheads”. Ranting, on the anniversary of 9/11, that interest rates should be “way down to zero” and that the US should simply refinance its $22.5 trillion debt load…just like he did with his failed Atlantic City casino.
Since the GFC, central banks have injected $15 trillion of new “money” into their respective economies. This may have staved off the GFC from getting worse, but it hasn’t had the desired effect of creating strong growth across the economy or filled society with much trust in economists and politicians alike. Which is why smart money is piling into lumps of dirt (gold and silver) right now.
So, where does that leave us? Here in Australia, having been spared the worst of the GFC?
For the thousands of Aussie investors including retirees, SMSF’s and everyday people hodling cash, they have to be satisfied with earning a paltry 2.0% on their idle cash (if that’s even a real thing these days?).
I even saw a report today that ultra-low interest rates have taken their toll on investors. The fall in rates over the past 8 years has led to less retirement income to live off, Fewer family holidays (less Europe more Bali), downsizing of the family home (Gold Coast instead of Melbourne) and, for a greater majority, higher instances of financial duress.
We can’t deny that there is a crash heading all our ways. Yes folks, it is inevitable that the bubble will burst.
Why? Every indicator from economics to politics are showing a convergence of all things negative. What’s even more worrying is that Central Bankers are doubling down on strategies that haven’t really worked in the past.
Einstein famously said that insanity is doing the same thing over and over and expecting a different result. Cutting interest rates, printing more money, loosening lending policies…same, same but definitely not any different.
But what can we do about all this? We’ve all got enough on our plates as it is!
It is not enough for us to just shrug our shoulders. There doesn’t have to be this disconnect between our own Government’s policies to what we can do and achieve.
The best way for us to navigate this is to inform ourselves and try to understand the what’s actually happening. This is about our livelihood, our hard-earned money and ultimately our future.
