I’m thinking about Aussie Mac again. The Federal Government has been led to water but only wants a sip – it’s investing $4 billion of its surplus in buying mortgages when the credit that was taken out by the collapse of the residential mortgage backed securities market was around ten times that size. The banks have stepped into the breach, but only by diverting credit that might otherwise be available to business.
Judging from her wise words here, Janet Albrechtsen who is kindly supplying economic policy advice to Americans via the Wall Street Journal would not be in favour of Aussie Mac. Indeed, she’d see it as going down that disastrous road that the Americans have been treading with the debauching of Fannie and Freddie.
Thomas Palley who shows more convincing signs of knowing what he’s talking about, provides a broad canvass. He’s talking about the problems of the US financial market, which are more acute than ours. But his analysis leads to the conclusion that our Government, having begun to prepare to sip, should start drinking.