RBA Screws Up Again, Loses $6bn

19 May

From The Australian:

The RBA faces losses of $6 billion due to the strength of the dollar and will not pay dividends to the government for several years.

The value of the bank’s foreign exchange reserves has plunged since the end of the last financial year as the Australian dollar has emerged as one of the strongest currencies in the world.

The losses threaten to wipe out the bank’s $6.1bn reserve fund, which the board said last year was already below a level they thought “desirable”.

Although government sources indicated yesterday that Treasury did not expect it would be required to make a capital injection, the losses will slash more than half the bank’s capital base.

The commonwealth budget has traditionally relied upon about $1.4bn a year in dividend payments from the Reserve Bank.

The Reserve Bank flagged that after it made a $2.2bn loss last year, dividends would be reduced while its reserve fund was rebuilt, but it is unlikely now that there will be any dividends across the budget forward estimates.


Another multi-billion dollar black hole in the government’s “forward estimates”.

This time, thanks to the RBA’s incompetence.

This latest news follows another revelation recently, that the RBA needed US$53bn in emergency loans from the US Federal Reserve during the GFC.

Now consider.

The “independent” RBA is worshipped by our politicians and the media – and thus, by average Australians too – as some kind of ultimate authority on our economy. In particular, the RBA is regarded as the final authority on what is the “right setting” for interest rates.

The reality is, the RBA robs us by stealth.  For decades, the RBA has utterly failed to achieve their very first legal duty to the Australian people.

Their own data proves it.

In addition, RBA Governor Glenn Stevens failed to foresee the on-rushing GFC during 2008.

The RBA kept raising interest rates month after month in 2007-08.  Right into the teeth of the GFC storm.  Despite clear warning signs out of the USA for well over a year prior.

It could also be argued that the RBA’s actions directly contributed to a change of government, thanks to an unprecedented interest rate rise in the middle of the 2007 election campaign.

Stevens is by far the highest paid “public servant” in Australia.  Conveniently for him, the RBA Board has the power to decide their own salaries:

The Remuneration Committee is a committee of the Reserve Bank Board. Its membership is drawn from the non-executive members of the Reserve Bank Board.

Which helps explain why Stevens is pulling over $1 million per annum.  And why he was able to get away with taking a $234,000 pay rise in the middle of the GFC.

The RBA’s failures are manifest.

So, why do we continue to prostrate ourselves at the Altar of the Reserve Bank?

The RBA has been robbing Australia blind for decades.

They have proven themselves unable to foresee clear economic warning signs.

They did not disclose to anyone that they borrowed US$53 Billion from the Federal Reserve.  It took a US Supreme Court action forcing the US Fed to reveal information about its actions during the GFC, for us to learn about the RBA’s secret emergency loans.

And despite being supposed “experts” on interest rates and currencies, they’ve now managed to blow $6 billion in foreign exchange losses.

How is this possible?

Our main street banks manage to hedge against foreign exchange rate volatility through purchasing Foreign Exchange Swaps & Forwards. Is the RBA too incompetent to manage FX risk, in the same way the Big 4 banks manage to do?

The RBA Board of “experts” are hugely overpaid, demonstrated failures.

Worse, as an “independent” body, they are effectively unaccountable to the Australian people for anything they do.

Now, we have the green lobby arguing for an “independent” Carbon Bank modelled along similar lines to the RBA.  With the power to borrow against the future earnings of taxpayers!

Given the RBA’s track record, this is clearly a very bad idea.

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