GarryP

I'm not saying the exchange rate didn't vary (quite a bit), that's what they do.

However when their were sane interest rates in all countries, they gyrated around that 2.4:1 type of level.

From 2007 we've had a situation where the EU and the US have artificially pushed down the interest rate to zero - gifting money to the banks. Eventually that ends and things revert (or fall apart in a horrible mess, which is probably more likely).

And the RBA has it's desires, but next to no ability to make them happen. If the wheels don't come off for "GFC II - Revenge of the Banksters" it's likely that US & EU interest rates will rise at the same time idiot Abbott austerity policies kick the cr*p out of the Australian economy - and the exchange rate will will soar through 2.4 on it's way towards 3.

Beoz

Ah, but if there is a GFC II one would assume the word "Global" meant it was a global thing and include the US & EU.

Would that send the US & EU interest rates up? You would think not if GFC I sent them downward.

GarryP

If "GFC II - Electric Boogaloo" came to pass then all bets are off. There's not sufficient government-type action headroom left to bail out things again - so we are into domino theory territory and probably the need to tear up the existing financial system and start again.

It's partly why we are still in zero interest rate/helicopter money territory 8 years after it started - economists think there are lots of companies and institutions that can't sustain interest rates much above zero, so they are being very tentative about shifting them. However, sooner or later we'll have to see a 0.25% rate hike.

Think of it like a game of Jenga; somewhere near the end.

Beoz

Boom and bust, boom then bust, boom then bust. Yep like always.

GarryP

Not exactly.

If you want another metaphor - GFC I was a left hook to the plucky challenger "World Economy". He'd been hit a few times before, but he was younger then, more vital, less corrupted by living the high life. He staggered back to his feet, guard down, legs barely able to support him.

If there is another GFC II upper cut - he's out for the count.

Beoz

LOL. Great analogy

OzTennis

Interest rates, like exchange rates fluctuate. If the economy is stagnating and growth stuttering and unemployment rising then it's standard (Keynesian) policy to cut interest rates to stimulate the economy. I don't agree that the EU and US 'artificially pushed down interest rates to zero' but rather were responding to the worst financial crisis since the 1930's (without going into how they turned a blind eye to the spiv practices which contributed to it). Japan has had extremely low interest rates since 1998; obviously well before the GFC but in response to stagnant growth.

"Zero interest-rate policy (ZIRP) is a macroeconomic concept describing conditions with a very low nominal interest rate, such as those in contemporary Japan and, since December 16, 2008, in the United States. It can be associated with slow economic growth.

Under ZIRP, the central bank maintains a 0% nominal interest rate. The ZIRP is an important milestone in monetary policy because the central bank is no longer able to reduce nominal interest rates—it is at the zero lower bound. Conventional monetary policy is at its maximum potential to drive growth under ZIRP. ZIRP is very closely related to the problem of a liquidity trap, where nominal interest rates cannot adjust downward at a time when the loanable funds market has not cleared."

paulry

Greece coughs and Australia gets the cold

$A weaker amid concerns over Greek debt

Swerv-o

Yes. It's annoying, as this Greece default has been on the cards for several years now - it's not really as if it's coming as a surprise to anybody. I would have thought that the markets would have already priced this in in their risk calculations.


S

paulry

The dollar touched 2.06 to the pound yesterday. If it carries on like this it could quite easily become 2.4 within a few months.

OzTennis

In a few months time we'll see if you are correct.

Australian Dollar Forecast | Currency Experts views and opinions for the Australian Dollar against major currencies

paulry

It's certainly shaping up that way. It went over 2.085 to 1 earlier today.

Amazulu

Starting to look better every day now

I'm sick of reading about Greece and how it's going to crash the world economy - yawn

DC10

"Better" if you are contemplating a move to Aus, or don't mind your personal wealth in global terms losing a percent or two every month.

I am surprised there aren't more people on here complaining about being trapped in Australasia now that the £XXX,XXX which they brought out in 2011 has been devalued by 40%. I certainly knew people in that boat when the Pound soared in the late 90s / early 2000s.

Amazulu

Definitely getting better