Here is my prediction for the trajectory of interest rates, which will cause the XJO to plummet in a few months time and then recover once the volatility subsides.
Most of the mainstream media hacks this week have been predicting that the next RBA move scheduled for 1st November will be another 0.25%. They seem very confident, which indicates a done deal. Without exception they point to the effect on mortgage holders as justification for going easy on rate increases. As if mortgage holders are the main plank of the economy. It seems that mortgage holders must be protected at all costs, to the absolute detriment of everybody else.
Inflation is approx 7%. The cash rate is seriously low at 2.6%, and will probably still be below 3% after the next RBA rate rise. In my opinion, the cash rate ought to now be 5% and rising. Inflation will go higher and will last longer because the cash rate is too low.
What follows here obviously cannot be proved. What follows here is just a hypothetical theory, but bear in mind that this is Australia and we all (ought to) know how things are done around here. If the cash rate follows the trajectory that I am predicting, this will not prove that the RBA or anybody else deliberately planned it. It will be perfectly plausible that the RBA genuinely thought that their current 0.25% rate rises were sufficient to bring inflation under control. Anyway, politicians do not ever seem to hold the RBA accountable for any of its errors.
I think that the cash rate is being kept low to buy time for some property owners to sell off their property portfolios which have increased in value enormously during the last two years. It takes time to sell property, especially if the sellers are greedy people who want top dollar. Of course, any media hacks who have large mortgages are very happy to have low rates at the moment, which explains why these economic fantasists repeatedly describe the current low cash rate as high, They are more than happy to concoct nonsensical economic justifications for the reluctance of the RBA to raise rates. If I am right, then in a few months inflation will still be through the roof and the RBA will have run out of excuses for keeping rates low. By then, the people who matter most (whoever they may be) will have sold off their excess properties. Then, when interest rates finally go up high enough to combat inflation, the screams of outrage from the mainstream media will be deafening, and as usual the politicians will all blame each other. The RBA will keep their jobs, nomatter what happens.
If inflation does fall to 2% soon with only a few more 0.25% cash rate rises then the above theory will be proven to be wrong. However, does anybody apart from the RBA and media hacks think that this is what is going to happen? If not, then has anybody got a better theory?
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