The most dangerous leader is one who wants to seem decisive.

Sinclair is right, Rudd should have done a Beatie. You can apologise for stuff ups and increase your vote if you do it right.

This morning I heard about a survey result showing 40% of the lump sum payments will be saved. The extension of the FHOG for used houses isn’t going to do much useful stimulating either, but perhaps the idea is to support the prices of cheaper houses and thus minimise flow on effects from negative equity phobia.

You’re right, I think. But if there’s a bank guarantee intervention then one limited by existing deposits would surely have been less disruptive and distortionary.

This whole episode reminds me of the speech by Mises where explains that interventions always beget more interventions. Each one has unintended side effects which lead to a new law, which has unintended side effects, which lead to a new law …

Australia would have been buffeted by an international crisis, but this is now a domestic stuff-up that will undermine domestic confidence. The other problem is that it has taken the $10.4bn spending package off the frontpage. Unlike Nick – who had an interesting piece in the Fin last week (and republished here) – I am not as sanguine about that decision. Ken Henry has had a torrid week and I don’t want to pick on him more than necessary (the government should not turn public servants into political footballs and then complain when they get kicked) but last year he was, rightly, talking about the 3Ps – population, participation and productivity. They haven’t gone away just because there is a crisis on. The ‘go hard, go early, go household’ slogan is all well and good subject to the 3Ps.

What we now have is a policy whereby the banks have a subsidy from government that they will share between their shareholders and customers (John Hewson had a good op-ed in the Friday Fin on this, but he ignored the customers). So my mortgage rate has come down again, and I’m happy with that, but it is at the expense of the taxpayer and those who’ve had their savings frozen (as an individual that suits me – at last some value for my tax dollar – but bad policy is always problematic.

The insurance thing was badly thought out. The Fed’s move was the right one if the action was not going cause more trauma. The very action of the government will cause a reduction in lending as the banks capital requirements prevent them from lending to all the disadvantaged players. Amazing.

If the threshold is low enough as suggested by the RBA Guv this aint a problem? Splitting is more likely among HNW and corporates. If the threshold was $50k before a fee (what i reckon it should be) are you telling me that someone with $2mill will go to the trouble of splitting this into 40 accounts at different institutions to get the guarantee? Surely not hard to legislate against anyway?

Your own bias in favour of policy that favours your mortgage business backed by other associates is increasingly showing mate?

What measures do you take to stop people splitting accounts to avoid guarantee fees?

I’m not sure what is wrong with an opt in guarantee – for which the government requires a fee.

I can think of many other disruptions the price fixing is causing. The interest rate differential is still enormous and the exchange rate looks out of sinc. There is thus an incentive to borrow in the US and invest here in ‘guaranteed’ off-set accounts with the prospect of double-dividends (higher interest rates and the likelihood of exchange rate increases). That would be a normal market reaction via which the guarantee and the end of the carry trade would increase the exposure of risk of our economy to banks in the US.

And god help us if the central banks and everyone else decides to sell their US government bonds and/or their dollars. The only logical reaction of the Fed to that would have to be to either default or engineer an inflation bubble to tax away the foreign holdings.