Tuesday 4 December 2007

Kevin, you are an economically illiterate idiot

Banks are threatening to raise mortgage rates regardless of what the Reserve announces tomorrow. Both Mr Swan and the Prime Minister, Kevin Rudd, appealed to banks to consider the plight of working families.

"I would draw their attention to the fact that working families are already suffering a series of interest rate rises and are already under financial pressure," Mr Rudd said. Mr Swan said: "I would urge all of the banks to take great care and great consideration … a lot of people out there are in financial pressure."

A report card on economic growth also due tomorrow is likely to add to fears of interest rate rises. It is expected to show the economy grew a robust 4.8 per cent over the year.

As Homer would say - "Doh!"

You want to dampen inflation? You have to reduce demand. "Demand" is nothing more than spending by people and companies. In order to stop people spending so much, you have to take away some of their money.

You can do that via interest rates or tax increases.

Either way, "working families" are going to have less money in their pockets. It's the only way to make it work.

By the way, we are a "working family" and we are not suffering from high interest rates or financial stress.

Maybe he should redefine that term as "over-extended bogans with a new Crossman Ute and a new boat and a new extension on the McMansion". Working families that exercise a bit of restraint should have a reasonable cushion of financial fat that they've put aside to tide them over the inevitable economic hiccups.

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