#convenience

Central banks use coronavirus as a convenient cover-up

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Where would we be without central banks? The Reserve Bank of Australia (RBA) has trimmed another 25bps of the cash rate to 0.5%, an all-time low and the fourth cut in 9 months.  It is amazing how central banks can shape-shift from climate scientists to doctors.

Given the recent three rate cuts were unrelated to coronavirus and have failed to stimulate the economy as hoped, the pandemic has allowed the RBA to continue its limited ammunition under the context of rescuing us.

We aren’t supporters of ever more rate cuts, truth be told. Yet if central banks want to keep the disco ball spinning, why bother with a sissy 0.25%? If the RBA wants to jolt the economy back to life it would have been better to go straight to zero. Show the markets they are serious rather than drip-feed to the inevitable.

No doubt we will get the usual song and dance from politicians goading banks into passing on the full rate cut to customers. This time banks will probably fold on the back of the Hayne Royal Commission even though the truth is their funding costs won’t fall by the full amount meaning profit will be forgone for the sake of keeping up appearances.

Think through the logic. Last month, China PMI plunged to 35.7 from 50 in January, the lowest reading since January 2005  38.8 during the 2008 Global Financial Crisis.

Australia’s next economic print will be awful. Pushing through a miserly 0.25% won’t put a spring in people’s step unless they see a cycle. Personal credit growth is negative and at levels not seen since the GFC. Housing and business credit growth are at 6-yr lows. Money velocity is slowing. Business investment is at 1994 lows. Nothing to see here.

The economy needs proper industrial, structural and tax reform. After 28 years of untrammelled growth, Australia needs to realise that the complacency bred over that period will come back to haunt if we don’t wake up from the sleep walk.

As Jonathan Rochford of Narrowroad Capital said,

“When it comes to central banks, I would prefer to believe it is a combination of groupthink, an unwillingness to take career risk by speaking the truth and a willingness to either ignore or disregard counter-evidence that has resulted in the detrimental decisions since the financial crisis. However, the increasing amount of evidence, often produced by central banks themselves, points to central banks being more culpable than gullible.”

Don’t believe the hype. Coronavirus has given another excuse to cover up failed central bank policy alongside climate change green swans.

#boycottyourself next time you buy take-away coffee

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Poor old Coles. In an attempt to listen to its customers over plastic bag use, activists push for a boycott against the supermarket chain! Yet why aren’t these same activists openly protesting in front of department stores or retail chains who brazenly use plastic bags to help their customers carry often bulky items? Why aren’t take away food court vendors openly shouted at when handing over plastic cutlery? Why is Coles subject to social media thuggery when the plethora or other retail chains escape? Talk about double standards.

While we’re at it, do people realize that the majority of take away wax-lined coffee cups aren’t recycled even though you can feel good about yourself when disposing of it? How many people elect to have their brew poured into a ceramic cup? Look net time – hardly any! The cost to recycle the 500 billion (and rising) coffee cups consumed annually is so astronomical (it is hard to separate the wax that stops the cup disintegrating because of the energy intensity involved to do so) that over 90% end up in landfill. No one talks about that 300 million tons of virgin paper used to make these cups! How many of us give it one thought when we need a shot of caffeine? Right?! Although Starbucks is trialing a 5p latte levy for those that elect to use a paper cup.

A decade ago, Japanese retailer Fast Retailing publisher in its annual report:

Additionally, in December 2007 UNIQLO introduced polyethylene shopping bags using the “Nano Hybrid Capsule 2 (NHC2) additive.” These were researched and developed by Professor Masahiko Abe at the Science and Engineering Department of the Tokyo University of Science. NHC2 helps increase the strength of the bag and reduces its weight by roughly 20% and CO2 emitted during incineration by about 40%. This new shopping bag thus reduces about 60% of CO2 emitted altogether compared to the previous model.

Most supermarket shopping bags used in Australia before the self-imposed ban were biodegradable.

In 2006 the UK Environment Agency did a study on the effectiveness of alternative packaging solutions to HDPE (conventional plastic bags) in terms of lowering environmental impact. It said,

The paper, LDPE, non-woven PP and cotton bags should be reused at least 3, 4, 11 and 131 times respectively to ensure that they have lower [impact] than conventional HDPE carrier bags that are not reused.”

So if conventional shopping bags are used to throw out garbage that means 6, 8, 21 and 262 days.

So we can virtue signal all we like. No one wants to see irresponsible use of disposable plastics cause damage to the environment but this idea that some think government intervention is the answer is palpable. In Australia’s case, after examining the most ridiculously incompetent stewardship over power generation in a country endowed with cheap energy sources (we manage blackouts and $1200kWh surges in spot pricing) they have none of the prerequisites to manage disposable shopping bags.