rate cut - tuesday, page-9

When will they LEARN to stop using INTEREST RATES as an ECONOMIC tool.....

You mean - bubbles will then disappear?

History suggests otherwise. There were disastrous bubbles before the creation of modern Central Banks with a mandate to manage money supply for economic purposes.

Some famous bubbles before Central Banks:

TulipMania - 1634-1638
The South Sea Bubble - 1716-1720
Mississippi Bubble - 1719-1720

The Australian Reserve Bank with an official remit for economic management didn't exist before 1945.

There was a famous property bubble in Melbourne in the 1880's. It finished in 1891. No Central Bank back then.

Libertarians often express the view that Central Banks should be abolished - and the economic cycle be allowed to run its course. The same people often also proclaim the need for a reversion to the Gold Standard. According to them, that's preferable to the current system.

I'd point out: taking no action - is a course of action. And history suggests that taking no action by a body like a Central Bank doesn't prevent bubbles.

So - good luck with that one.

I don't wish to be an apologists for the errors of Central Bankers. They have made errors. In some cases - the errors have been ones of omission, or taking too little action too late. But that's preferable to unfettered libertarian free enterprise.

Yes, Mr K. Call me a "leftie". :)


Redbacka