Britain and Europe are beautiful examples of how an inflation-obsessed monetary policy by central banks can ruin a perfectly good economic boom.
You may recall that about two years ago the Brits considered the UK property market to be “overheating.” Interpreting the Bank of England’s role as that of a price regulator whose ideal environment resembles that of warm English beer in a stuffy pub, the august central bankers raised the cost of borrowing until they had choked the life out of the property boom.
That, of course, had an aftereffect: Domestic demand dropped, and so did GDP growth. Now, UK real estate shows no sign at all of “overheating”… but neither does the Christmas retail business.
I’m not sure if the Brits feel better off economically now than they did two years ago.
Australia is apparently next in line for some downsizing. After a great, resource-driven boom despite high interest rates, the high cost of borrowing is starting to show.
Australia’s economy “grew” by rates you might call European: 0.2% in Q3 2005, to be exact. Year-over-year growth is down to 2.6%, according to the Bureau of Statistics.
But there’s no indication that rates will change. Central bank Governor Ian Macfarlane today left the benchmark rate at 5.5% for the ninth month.
The Australian dollar fell to US$0.74.85, joining the euro and the yen in their gradual trend reversals against the greenback.
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