Hi Readers
Markets are continuing to be volatile,
We are starting to get a really clear picture of what occurs when the central banks don't match the reserve currency (US Dollar ) rate rises.
It doesn't matter how strong or weak there economy is money will move for a better rate of return.
Australia at the present time is one of those countries right now that is staring down the barrel of a currency attack. The official cash in the US is 4.75% and in Australia its at 3.35%. So why would you buy Australian bonds when you can buy US with a 1.4% better rate of return. This is the reason that funds are leaving Australia, and your seeing Our banks and the A$ being sold off. Australia has to attract money to come here and buy its bonds and the only way to do it is to raise the cash rate more than the US. So yes readers higher rate than many of you think are coming but there is another way to tackle this issue and that's for the government to cut debt/spending. Yes more suffering which annoys me as it can be avoided if people took responsibility for there actions and not worry about what will be written about them.
Also note that if it costs more due to the lower Australian dollar by business you can bet that they will be passing it on to the consumers. Yes inflationary.
We saw the other day the New Zealand Reserve Bank come out and hike rates again by 50bps, even tho they have just gone through a cyclone.
So don't fooled by what Reserve Banks say around the world, they are fully aware of what they need to do and don't care what happens to anyone. Governments obey the Central Banks not the other way around as many people think.
