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RBA: No inclination to rock boat before storm : Comments
By Henry Thornton, published 5/7/2005Henry Thornton argues the Reserve Bank of Australia should enjoy the calm while it can.
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The RBA should manage the value (price) of our currency. The price of credit should be left to the market place.
We have a crazy state of affairs where the value of our fiat currency is left to wander amoungst the stars but the price we charge eachother for an IOU is dictated by beauracrats in some ivory tower.
I am sure it is a real hoot for rich dudes like Frank Lowy to dictate what rate we pay on our morgages, or earn on our cash managment trusts, however such regulated prices hardly represents any sort of free market ideal.
If the state must impose a fiat currency onto our national economy, then ensuring the steady value of that currency ought to be the objective of liquidity management. Liquidity should not be used to target interest rates.