When the Carry Trade Unwinds what will these winds blow over?

Australia Cuts Rates to Lowest Since 1960 - NYTimes.com

The Reserve Bank of Australia cut its benchmark cash rate by 25 basis points to 3 percent, its lowest level since March 1960. The bank has so far slashed 425 basis points from the cash rate since September in a bid to stop the country from slipping into its first recession in nearly two decades.

What is not in this article is the why they even tried to keep the rates at that level for so long. In some other areas this has been address and it seems about time to do it here. The whole reason that Australia, Japan and Iceland for that matter, the USA too, have managed their Central Bank policies in such a matter that a global currency shuck and jive would be the best way to describe western financial systems.

Think about obtaining a credit card or line with zero or no interest and than using that money as capital to invest in some other area that would both pay off the original balance when due or for way too long just obtain another card and move the balance. Keep doing until you cant do it noo mo....

This is why Japan held it rate at next to nothing and Australia and Iceland had theirs so high. Now what we are seeing is Australia trying to save their economy so it does not disappear like Iceland's. Well it work and which curreny backed by a private central bank is next. And, where does the Muni bond collapse figure in for the USA.

Here is just one aspect of this unbelievably large pool of money.

Carry Trade, Australia, Interest Rates, CB Policy, Yen, US Dollar,