Cutting the interest rate will create inflation. Keynesian economics think inflation is good. Keynesians think if your costs of living fall (deflation) it?s bad. Keynesians are still working out how to prevent the costs of consumer electronics falling because falling prices (deflation) is a bad thing.
The Irish property boom lasted 15 years and people there couldn't walk away from home loans, but, they have. The banks ended up carry the losses. People can declare bankruptcy. Neither of Australia?s four banks can do this. I doubt they can even default on their foreign wholesale funding loans.
