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Alan, What stood out to me the most is that you did not use the words 'currency manipulation' or 'currency manipulator' to describe the actions of the Federal Reserve (What to do about the US currency war, December 10).
I wonder what language would be used if China or any other non-Western nation engaged in this so called 'quantitative easing'.
I am concerned about this proposal. Borrowing short to invest long only works for the period of the borrowing. The problems can start when you have to roll over the debt (What to do about the US currency war, December 10).
Think about, for example, a simple case. Australia borrows $250 Billion at 2% interest for 10 years and invests this in infrastructure that has a 100 year life. The interest bill for the first 10 years is $5 billion per annum. After 10 years the debt has to be rolled over but now world interest rates have gone back to normal and Australia's 10 year bond rate is 6%. Suddenly the interest bill becomes $15 Billion per annum. But what if the "great inflation" has now hit and long term interest rates are 10% or even 16%? Could we afford an interest bill of $25-40 Billion per annum?
"Oh!" someone says we just sell off the infrastructure and pay back the capital. But infrastructure valued at 2% per annum has a significantly higher value than infrastructure valued at 6%, 10% or 16% per annum. So that hardly becomes an option.
Many of the dodgy financial products that brought on the GFC have continued to pay interest but the products are not worth much because the capital won't be repaid unless the underlying debts are rolled over. But this seems unlikely unless the extremely loose monetary policy of the US eventually enables this to happen.
If the government were to issue infrastructure bonds then they should be perpetual bonds. But I wonder what interest rate they would then have to pay? I suspect the UK experience with perpetuals won't have been lost on investors.
As the winner by far of the quondam treasurers currency competition I reckon that A SEED is spot on - your analysis is good but the solution is currency manipulation (What to do about the US currency war, December 10).
I'm a little surprised at your rather simplistic and limited analysis Alan, when you position the only choices as inflation or industry destruction, and only discuss those in terms of government action. Where is the discussion on 'free market' activity that could take advantage of our high dollar in purchasing overseas corporate equity and other assets? (What to do about the US currency war, December 10.)
What are our visionary leaders of private enterprise doing about this 'window of opportunity'? Where is the focus on business? Perhaps you could follow up with a broader view.
Excellent idea Allan, but please, no bonds. Just have the treasury create the money and spend it into the economy (What to do about the US currency war, December 10). Why should the government have to borrow to create it's own money? It's ridiculous.
If our dollar is being kept artificially high against the US dollar, which in turn is being depreciated to assist in the reinvigoration of the US manufacturing industry; which is also being helped by energy self sufficiency, how about using our strong dollar to invest in US assets? (What to do about the US currency war, December 10.)
What happens next is what always happens next in this situation – trade Wars; and then, ultimately, a shooting war (What to do about the US currency war, December 10).
It's the same old play-book: currency wars, trade wars, world war. No one can win either a currency war or trade war so it always ends in fisticuffs.
Australia is now dependent on four banks, their yield >5.5% and their share price caused by that yield. This is what is driving the $A (What to do about the US currency war, December 10).
The government and the RBA have artificially driven up the bankers yield and this is attracting savings.
There is now only one foreseeable outcome to a drop in yield caused by a big lift in bad debt allowance. Recession.
So the government is forced by the voter to borrow more from the bankers and start large infrastructure programs or face electoral demise. Such programs are usually justified by fantasy ROIs made up by PPP spivs.
This is what will happen next. Instead of popping the bubble the Feds will add more air. Journalists will support this move because they know no better.
The RBA can only combat this by lifting rates. They will not, they are part of the problem. They were never the solution.
Gillard has primed us for the next round of boondoggles, Gonski and NDIS. We will be shown ROI that has no meaning. Vote for me and I will give you free money. Lets make the entire country one big association.
Meanwhile the LNP will try on the old way with roads and rail.
Will we vote for a job that has no ROI or free money with no ROI?
The plumbers choice, the toilet or the sewer. Either way, we come out smelling. Plumbers with Uni degrees.
Rent seekers and bankers abound. Hand-in-hand they skip to a happy tune. An ode for a crisis is underwritten by fear of recession.
Please excuse my ignorance but what is wrong with the reserve printing Aussie dollars to cover our borrowings? (What to do about the US currency war, December 10.)
If the world wants aussies, then let them buy them. They don't cost much to print and if it has the effect of lowering the value of them a bit, then so much the better.
Recycled from Chicago School of Economics? Isn't this the reason why the US has so many roads to no where? Who ever said the US would plays fair? Remember the LTCM crisis? (What to do about the US currency war, December 10.)
Currency manipulation on behalf of the US is nothing new.
You can't polish a turd but you can roll it in glitter.
Alan, totally agree (What to do about the US currency war, December 10).
What we need is to have infrastructure built with bonds, and then a system of payment for that infrastructure that will pay it off over the economic life of the asset, along with maintenance costs.
We could be building toll roads with $1.50 tolls rather than the mish mash of failed infrastructure trusts that thought they could make 20% ROI.
Debt is bad when used for recurrent spending. Debt for productive infrastructure is good as it helps to increase the productive capacity of nation.
I don't see a problem in taking money from foreigners if they want to lend it to us at basically the inflation rate for 10 years. Heck, lets issue 30 year bonds if they will give us crazy cheap money, then get on with building up the public infrastructure that all levels of Government has allowed to deteriorate.
Temporarily, foreigners want Aussie dollars. So while the dollar is high, let's give them plenty of Aussie dollars by buying our future purchases while they are AUD-cheap. They need to be purely foreign purchases with low maintenance too, to avoid inflating the dollar inside Australia (What to do about the US currency war, December 10).
More than just foreign capital goods, there's investments too, such as a sovereign fund. Oh, and one more thing you could add to your list of infrastructure is nuclear reactors. They are a prime example of high capital cost followed by a long profitable period of low running costs.
I liked Alan Kohler's infrastructure bond idea, and Brent Walker's criticisms in my view are valid (What to do about the US currency war, December 10). I would have thought that an infrastructure borrowing would be managed for the nominal economic life of the infrastructure - eg 30 to 40 years. Benefit-cost analysis of any infrastructure (don't use traffic engineers forecasting) would be needed so that the project had some viability determination. Tolling of the infrastructure would probably be needed and that is not uncommon. Some of Australia's successful public companies are now borrowing long at low interest rates so why couldn't governments do the same.
Finally! Someone has cut the Gordian knot of Australia's fiscal conundrum. Thank you Alan and bring on the infrastructure projects...(What to do about the US currency war, December 10).
The US has no concept of fair play - it is still accusing China of cheating on currency (What to do about the US currency war, December 10).
COAG must stop being a game for, probably misogynistic, boys, and cease being both myopic and obstructionist.
National infrastructure plans should be established quickly - this is an ideal opportunity to get real assets resulting from US inflation.
Make OUR gain from "our, currency, your problem".
Great idea - the best economic idea that I come across in 2012 to-date. Ted Bailieu should seriously consider doing this instead of waiting for a Canberra hand-out. (What to do about the US currency war, December 10).
We can't trust our states to invest wisely. Surely it's up to the Reserve Bank to take the lead. Reverse the net loss in currency transactions over the last few years.
Actually ,I don't trust them either. We are doomed. (What to do about the US currency war, December 10).
Time to buy vegemite back (What to do about the US currency war, December 10).
To borrow large amounts of money at a time when our national income is likely to suffer a serious decline with the end of the resources boom is the height of irresponsibility (What to do about the US currency war, December 10). Ask yourself if you would consider taking our a loan to buy a house when the market is overpriced and you may be at risk of losing your job.
Bank of England Governor Mervyn King on Monday said he was concerned that countries will increasingly resort to "actively managed exchange rates" next year, in place of domestic monetary policies, if the global economy remains unbalanced (What to do about the US currency war, December 11).
Mervyn,you need to know,there's a good guy down under,in charge of the RBA who's behaving differently from the rest of the ratpack around the world.
And what are you going to do with this infrastructure later on? With current law favoring unions no-one risk its money to invest in this country. How are you going to marry Manufacture, Industrial sector development with "Sustainable" ideology? (What to do about the US currency war, December 11).
the US federal reserve is the "Death star" and can only be defeated by the Luke Skywalker's of this world, not this bunch of entrenched clowns parading as leaders. Viva the evolution! (What to do about the US currency war, December 12).
A good idea if it is closely monitored. The last thing we want is a skill shortage, and then wage inflation, that would surely follow because of our notoriously shallow labour pool. A high dollar and wage inflation would make life even more difficult for our exporters. (What to do about the US currency war, December 12).
And all those people in tourism, manufacturing and export who lose their jobs are going to go work on building toll roads? I've always had a secret fantasy about being a lollypop lady (What to do about the US currency war, December 13).
Two things:
Yes we NEED to get ourselves organized and make the most of the high dollar while we can.Paying down debt now is a no brainer.
Bet it wont happen tho... (What to do about the US currency war, December 17).