Reserve Bank of Australia rules out printing money as a solution

The governor of the Reserve Bank of Australia (RBA), Philip Lowe, has put a spin on the concept of money printing, as new fiscal stimulus measures are implemented in the country in the midst of the ongoing pandemic.

In a speech in Sydney on Tuesday, the head of the central bank said the government could borrow „on very favourable terms“ and that public debt was currently much lower than in many other countries. Calls for printing money are wrong, he said:

„There is no free lunch. The bill always has to be paid, and it’s paid for with taxes and government revenue one way or another […] The message here is that someone always pays.

Dr. Lowe, who has led the RBA since September 2016, made the comments following the announcement of the extension of emergency social security measures that will cost an additional A$20 billion ($14.2 billion), according to reports.

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According to Lowe, printing money is not the solution
Lowe is reluctant to follow the U.S. Federal Reserve’s strategy of unbridled money printing, and he is adamant that monetary financing of fiscal policy is appropriate only if the government cannot influence the amount of money the central bank has created, and where the government’s debts are very high.

However, the bank is not totally against modern monetary theory, as it has repurchased about A$50 billion ($35.6 billion) in state and federal government bonds in the last three months, while reducing interest rates to an all-time low of 0.25%. Lowe ruled out negative interest rates in his speech on Tuesday.

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Bitcoin remains a safe haven
Fiscal stimulus packages that involve printing more money are considered good news for Bitcoin holders, as they reinforce the existing safe-haven discourse due to their finite asset nature. Digital asset manager Charles Edwards said this week that the U.S. stock market reached new highs while the country was still in recession:

„This is the power of exponential money printing. Your dollars in 2020 are worth 28% less than in 2019.

He said that overvalued stocks were in contrast to undervalued Bitcoin, adding that, in his opinion, it is only a matter of time before money floods into the cryptosystem.

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European leaders reach a $2 billion stimulus deal
750bn ($865bn) recovery fund to be lent on the financial markets. Just under half will be distributed in grants to the EU states most affected.

The European Commission also agreed to a new EU budget of almost 1.1 trillion euros ($1.27 trillion) for the period 2021 to 2027. This creates a combined purchasing power of approximately $2 billion.