Rogue Nation

Australia has gone off the reservation, breaking ranks with the G-20 easy money gang:
Australia's central bank unexpectedly raised interest rates by a quarter point Tuesday, the first major economy to increase the cost of borrowing amid signs its recovery from the global slump is gaining momentum.

The Reserve Bank of Australia raised its cash rate to 3.25 percent from a 49-year low of 3 percent. Between September 2008 and April this year, the rate was slashed a total of four and a quarter percentage points as the financial crisis morphed into a global recession.

The rate hike, which comes after recent data showed the economy was improving, sent the Australian dollar soaring to a 14-month high against the U.S. dollar.

The central bank's governor Glenn Stevens said it was "prudent" to begin gradually reducing the stimulus provided by low interest rates. He said the risk of "serious economic contraction" in Australia had passed.

At a Group of 20 summit in the U.S. last month, leaders of major developing and industrialized nations agreed to keep their stimulus efforts — which include increased government spending and low interest rates — largely in place for now to avoid derailing still-fragile recoveries.

But Australia, a G-20 member, has weathered the worst global downturn in decades better than other developed countries. It avoided slipping into recession — helped by stable banks, demand from China for iron ore and other minerals, and the government's 42 billion Australian dollars ($37 billion) of stimulus spending.

In addition to sober monetary policy, Australia has infinitely more responsible fiscal policy than Obama's trillion dollar deficits as far as the eye can see.

If you want to profit from the Bernanke/Obama destruction of the U.S. dollar, you can buy Australian dollars via FXA or at Everbank.


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Happy Super Tuesday!