Reserve Bank Governor Adrian Orr copped a heap of self-interest motivated criticism last year for his demand for higher Bank capitalisation.
“Everything’s booming” was the cry; the epitome of ignorance. All booms, and particularly share-market ones, always end in crashes, usually for unforeseeable events.
And so it came to pass. Coronavirus was the trigger this time, but had it not arisen, something would have done to end the most over-priced and irrational share-market in history. It should have occurred at least a year ago.
Now comes in its wake a flood of business failures. Retailers and restaurants will go over in their thousands but so too numerous other activities.
And on the receiving end will be the banks, which thanks to Adrian Orr’s insistence, will be far better placed to see through the losses, always part and parcel of banking.
Blotting his copybook though, Adrian has notched down the base interest rate, presumably to be seen following other dopy central banks.
Not a single cup of coffee, a flight booked, a dress bought or anything else will flow from this allegedly economic stimulation, and Adrian knows it.
If he was right why has he relaxed these capitalisation rules as at the same time as he lowered the OCR. Did he not raise them for this sort of crisis. Otherwise it is all political posturing
Is the irony of the hardline fiscal conservatives bashing the extra $25/week to beneficiaries. At a time like this, when the propertied middle class are likely to stop spending due to uncertainty and thereby deepen a recession, at least beneficiaries are much more likely to spend all they’ve got. Keynesian economics may not work in the long term (or maybe politicians don’t have the discipline or restraint with spending during ordinary times) but at a time like this the answer is to get people spending in spite of their inclination to tighten their belts.
When right, you will never fully convince someone he is wrong; only reality can.