"If it was so, it might be; and if it were so, it would be; but as it isn't, it aint. That's logic."

At least, that's what Tweedledee, one of the Tweedle brothers in Lewis Carrol's famous if twisted tome, Alice Through the Looking Glass, reckoned.

If recent events are any guide, a similar argument is being adopted by increasingly desperate politicians and central bankers here and throughout the Western world.

Having backed themselves into a corner — flooding the world with debt to solve a series of crises caused by debt — our leaders now are preparing to jettison almost every rule in the economics texts.

Watch Duration: 1 minute 47 seconds 1 m 47 s Watch Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Scott Morrison makes first home buyers election pledge

On the one hand, they are increasingly concerned by the lack of inflation and slow wages growth undermining living standards.

On the other, they fear the consequences of deflating the runaway asset price bubbles — in real estate, stocks and bonds — that they've blown in an unsuccessful attempt to boost wages and inflation.

First home buyers' bounty: Gift or curse?

Let's just take the events of the past few weeks.

Over the weekend, Prime Minister Scott Morrison announced yet another first home buyers' scheme; for the government to go guarantor on deposits for first home buyers who haven't saved enough.

It was an idea quickly seized upon and matched by the Opposition.

On the surface, it sounds a laudable initiative, notwithstanding there's an election this weekend.

But who would be the biggest beneficiaries of this largesse?

Overwhelmingly, it would be those trying to sell property, not those looking to buy.

While it is not as bad as the old direct cash handout, which simply transferred cash straight into sellers' pockets, this still is a policy that would pump demand.

It would lift, or at least put a floor under sagging real estate prices right now.

Rather than make housing more affordable, it would likely boost prices in the first home buyer segment.

There's a reason banks have tightened their lending standards.

Much to the chagrin of the powerful real estate lobby, banks have been forced to start lending responsibly rather than simply distribute cash to those who can't afford the repayments just to keep the real estate merry-go-round in motion.

Anyone with less than 20 per cent of the purchase price must buy insurance for the bank to cover that loan.

Clearly, those with less than 20 per cent face a much greater risk of loss in the case of default.

A government covering the cost of that insurance is doing more than covering the cost of the policy.

Effectively, it is guaranteeing that a great many more would-be buyers have the minimum 20 per cent deposit.

RBA goes rogue

Are we in an economic sweet spot? Or are we in a spot of bother? It all depends on who is talking.

Last month, when the Federal Budget was handed down, Treasury published a series of remarkably upbeat forecasts about where we were headed.

Our economy was strong and getting stronger. But that was last month.

Last week, we were told an entirely different story by the Reserve Bank.

Sorry, make that two entirely different stories.

Tuesday delivered news that we didn't need an interest rate cut. Never mind inflation showing almost no chance of reaching the desired 2 to 3 per cent target range at any time soon, or that our economy was growing at well below par.

The most important thing to watch was the jobs market which, we were told, was strong but may become weak if it doesn't get stronger.

By Friday, the unequivocal message was; prepare for rate cuts.

In the process, the Reserve Bank shredded almost every major forecast in last month's Budget.

The Treasurer's Budget forecast 2.25 per cent growth this financial year. The RBA now reckons it will be 1.7 per cent.

It was a similar message for household consumption. On Budget night, we were told it would be 2.25 per cent.

The Reserve Bank told us two different stories last week. ( Thinkstock: iStockphoto )

The RBA now says 1.6 per cent, a massive cut. And instead of dwelling investment coming in at 0.5 per cent growth, the RBA is forecasting a 6 per cent decline.

It's worth noting that the Reserve Bank's forecasts into the next few years have factored in two interest rate cuts.

Even then, they appear overly rosy.

What is clear is the RBA is increasingly concerned about the housing market downturn and heavy indebtedness.

It clearly hopes rate cuts will stop a slide that may destabilise the economy.

Trump and the Fed

US President Donald Trump has been quick to declare that the "system is rigged". He may well have proven himself right.

When Wall Street tanked late last year in response to a persistent series of rate hikes by the US Federal Reserve, the President vented his anger, going so far as to denounce Fed chairman Jerome Powell and even calling into question whether he would remain in the job.

"The only problem our economy has is the Fed," Mr Trump tweeted last December. "They don't have a feel for the Market, they don't understand necessary Trade Wars or Strong Dollars or even Democratic Shutdowns over Borders."

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It worked. Mr Powell donned his gym gear and performed a gold medal backflip at the start of the year, all but ruling out any cuts this year. Right on cue, stock markets — the US President's preferred barometer of success — began to rise.

The President since has demanded interest rate cuts to the tune of a full 1 per cent.

The problem, as the Bank for International Settlements has discovered, is that now the world is flooded with debt, no-one can afford a massive downturn in asset prices — particularly stocks or property.

A market crash would be monumental and potentially could plunge the global economy into a deep recession.

The BIS — the central bank for central banks — now fears rates are forever locked into a narrow band just around zero.

Those dramatic rate hikes of the late 1980s and early 1990s may have killed inflation. But cutting rates to zero hasn't been able to resurrect price growth. All they've done is drive asset prices higher, lifting inequality as those with property and shares become ever more wealthy.

With central banks now all but out of ammo, there are growing calls for governments, particularly in developed nations, to abandon fiscal restraint; to borrow up big now rates are set to remain around zero permanently, and even print money.

Known as Modern Monetary Theory, it's never worked in practice. Just ask Zimbabweans or anyone who survived Germany in the 1930s. And it throws aside all the logic that's prevailed for the past 60 years.