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'There's No Free Lunch' said Australian Reserve Bank about Money Printing

Philip Lowe, who is the Australian Reserve Bank governor, told that somebody always pays for money printing. 

As more fiscal stimulus measures are rolled out in the country amid the ongoing pandemic Australian Reserve Bank governor Philip Lowe has taken a swipe at the concept of money printing.


The central bank boss told the government could borrow “on very positive terms” and said public debt was currently much lower than in several other countries in a speech in Sydney on Tuesday. Calls for money printing are misguided he said:

“There is no free lunch. The tab always has to be paid and it is paid out of taxes and government revenues in one form or another [...] The message here is that somebody always pays.”

According to reports Dr Lowe, who has headed the RBA since September 2016, made the remarks following the announcement of extensions of emergency social security measures that will cost an additional $AU20 billion ($US14.2bn).


No free lunch 


Lowe is opposed to following the US Federal Reserve’s plan of extreme money printing and is adamant that monetary financing of fiscal policy is only relevant if the government could not influence the amount of money the central bank produced, and where government debts were very big.


The RBA is not completely adverse to modern monetary theory, though, having repurchased around $AU50 billion ($US35.6bn) in state and federal government bonds over the past three months, while cutting interest rates to a record low 0.25%. Lowe ruled out on his speech on Tuesdaynegative interest rates.


Safe haven narrative strengthens for Bitcoin


Fiscal stimulus packages that include printing more money are seen as good news for Bitcoin holders as they strengthen the underlying safe haven narrative due to its nature as a finite asset. Charles Edwards, Digital asset manager, said this week on the U.S. stock market hitting 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 2019.”

He told overvalued stocks compared with undervalued Bitcoin, adding that, in his belief, it is just a matter of time before the money floods into Bitcoin.


European leaders will strike $2 trillion stimulus deal


In relevant news, EU leaders have accepted to a 750 billion Euro ($US865 billion) recovery fund, with the money to be borrowed on financial markets. Simply under half of it will be given in grants to the hardest-hit EU states.


The European Commission also agreed upon a new EU budget of nearly 1.1 trillion Euros ($US1.27 trillion) for the 2021 to 2027 period. This builds a combined spending power of approximately $2 trillion USD.


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