The Juice Media Surprisingly Acknowledges the Consequences of Artificially Low Interest Rates

 https://www.youtube.com/watch?v=DNxXRigHri4

The Juice Media is an Australian company that mainly operates on YouTube, wherein they promote left-wing politics, both in their home country and abroad, through their internationally-seen “Honest Government Ads”. These ads are meant to seem like what the creators imagine brutally honest, vulgar equivalents of government public service announcements would sound like. They sometimes offer decent historical and contemporary interpretations of conflicts in obscure places in the world, such as the brutality that has been and is happening in West Papua at the hands of Indonesia’s imperializing government, but most of the time, they stick to economic analysis and subsequently push left-wing economics and advocate voting against perceived right-wingers, including the Australian Labor Party, in favor of whatever the most progressive alternative is. The Australian Green Party, their home country’s case. Coming across as basically the social democratic, Keynesian side of BreadTube, some viewers may have been surprised on what was acknowledged in a recent video on Australia’s central bank: that central banks artificially lowering interest rates in order to keep the economic expansion going can negatively impact everyday people even before a recession comes.

Seemingly making an argument that could have come from the Australian libertarian party, the Liberal Democrats, The Juice Media’s new “Reserve Bank of Australia” Honest Government Ad video temporarily set aside their Keynesian leanings to point out that years of low interest rates had raised the cost of housing at the expense of young people. This is a very surprising concession to the validity of Austrian economics on the part of a left-wing organization. It is completely true that when a central bank, like the Reserve Bank of Australia, sets their interest rates too low, this will increase the amount of lending going on by banks who receive more of the country’s fiat currency through central bank loans, and that these loans will both increase the money supply and make that new money tend to go towards hard assets, such as housing and land, even before price inflation in the entire economy takes hold. In a highly regulated housing environment, like Australia’s or America’s, the result of all this easy money will be sky-high housing prices. As the announcer in the video points out, this would mean that even those lucky enough to have got a mortgage will have a ton of debt as a result. This principle seems to be universal and not just apply in developed economies or in regulated housing markets. For example, when Emperor Augustus flooded Rome with coins from Alexandria, the result was an increase in housing prices and a fall in the average interest rate in Rome, possibly all the way from 12% to 4%, according to one estimate.

The reason for this is that an increase in the money supply makes currently existing money less scarce and as a result, the interest rate (or the price of that money) charged decreases. Fearing price inflation, this incentivizes current holders of money to invest in housing and land, as these are assets whose value will rise almost certainly rise with the money supply increase (otherwise known as monetary inflation). Combine that with stringent requirements to building houses and limitations on what kind of housing that can be built and a bubble will form that will only pop when the house prices get so high that even the supply of housing in this regulatory environment increases and prices start to go down. Risky loans earn their title when the decrease of housing prices leaves people with loans worth less than the value they owe and having adjustable rate mortgages, they can no longer pay and mass defaults begin to occur. What results is a housing crisis, like that seen in 2008. Due to their abundant natural resources, Australia was spared from this downturn, which makes this understanding of the terrible effects of artificially low interest rates by a left-wing YouTube channel even more impressive. One is almost tempted to think they may have just looked up any criticisms of the Reserve Bank of Australia they could find and just went with it, regardless of how out of touch with the rest of the video it happened to be.

The reason it cannot be said that this video was in any sense written from an Austrian School perspective is because, even after explaining the very real impacts of skyrocketing housing prices and gigantic debt that came with it, the video then completely pivots and expresses discontent with the rising of interest rates that has been undertaken by the Reserve Bank of Australia to stop the monetary inflation in an attempt to quell the price inflation that came with it. Of course, the video doesn’t even acknowledge that money printing that came with the COVID pandemic to be the cause of inflation. The video goes off the walls in a Robert Reich fashion about greed and class warfare. Goes to show that a stopped clock really is only right two times a day.