Yes, we won't blame bananas...

It is, perhaps, ironic that in the midst of a discussion on relative economics we find some real time illustrations of the complexities and anomalies of monetarism.

I reported below on Australia’s impending ‘banana recession’, but economists are already jumping on that simplification proffered by the Howard Liberal government.

Howard is a card carrying post-Thatcherite. (Reganite – economic rationalist – this list of appellations changes constantly, but essentially adds up to monetarism.) Howard is in the forefront of Liberalism gone feral, the return to feudalism.

Now monetarism decrees that the politician is at arms length from economic adjustments, such as interest rates which we have note are the province of central banks.

That is well and good when the numbers are favourable, but becomes problematic when the squeeze comes, as it has downunder.

First Howard’s treasury rottweiler, Peter Costello, recognizing an impending rate rise counseled the Reserve Bank, who set the rates, to back off, leave things as they are. Of course he was duly told to ‘get a dog up him!’ No one tells the Reserve Bank anything.

Then Howard jumped in too, saying:

"It's got to realise in relation to the bananas, if I can put it that way, that will flow through and disappear.

"And it's also got to understand the consequences in relation to the fuel price increases."

He was simply ignored. But Costello came back into the fray, oddly claiming his right to speak out about the lack of justification for a rate rise, saying it did not undermine the Reserve Bank's independence.

Costello said it was written into the formal agreement between himself and the governor of the Reserve Bank that the government reserved its right to comment on monetary policy from time to time.

That’s as may be, but you can’t fry an egg and poach it at the same time, so try as they might the neo-libs are hoist on their own petard.

According to one leading economist the problem is not bananas, but Sydney; “the nation's largest economy is in a rut and it makes the bank's task of fighting inflation fraught.”

But whatever they blame Howard’s government is in deep economic trouble. Influencing a the interest rate could only have a marginal and short term benefit.

It is a panic measure from the government of fiscal responsibility. A panic spurred by the certain knowledge that the Australian economy, despite the wonders of monetarism, is headed for stagnation.

The government might well shift the blame to factors outside of its control, cyclones and the Reserve Bank being that chosen targets, but the people still labour under the belief that they elect governments to govern; and in their ignorance to understand the rules of monetarism or other devices, will ultimately blame the governments for failure to do so.