by John Rubino
Australia has been in the news lately over its aggressive response to the pandemic.
But the bigger Down Under story might end up being interest rates. It seems that Australia’s central bank (RBA) had, like the Fed and ECB, been pegging short-term government note yields at extremely low levels, thus creating the illusion that local financial markets were tranquil and well-managed and not at all prone to sudden collapse.
With inflation soaring, however, it became harder to manage the country’s increasingly unruly yield curve, and finally, the RBA just gave up and let the market decide how expensive short-term money should be. Here’s what happened: