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John Taylor Says To Play The Coming End Of The Global Reliquification By Shorting Australia
In his weekly headline letter John Taylor analyzes where he and Jim Chanos have overlapping views, and where both of them erred (hint: everyone underestimated the willingness of Bernanke to sacrifice monetary prudence in order to reflate anything and everything, although with oil now the latest and greatest excess liquidity target, the experiment may soon be ending). Yet the time of the global reliquification may be coming to an end: "If the Republicans play rough and California craters, fiscal tightening will be the rule, US rates will be higher than Bernanke wants, the dollar will be strong, and foreign markets will be hurt. The odds favor an outcome like this, and the Fed is not free to ride to the rescue again. With Ron Paul riding hard over Bernanke, the Feds wild ways will be corralled. With fewer excess dollars, the growth game, and the markets that follow it, are over." So is shorting stocks the best bet? Yes. But an even better one is going short the Aussies: "The Aussie was over USD 1.0000 today and we think it is a great sell here."
MARKET INSIGHT REPORT
Aussie Luck Could Be Running Out
John Taylor, Chief Investment Officer
Jim Chanos seems to have lost his high profile perch as a China basher in the popular press, but he is still confident that China will be slowing and property values will drop sharply. Another analyst with an outside the box view about Australia and its coming problems has also gone quiet lately – me – as the last letter we wrote on this was dated March 11, titled The Lucky Country. Our conclusions were that “leverage is a dangerous thing and ‘excess leverage is always a disaster in the waiting” and finally that “luck will run out this year.” We’re waiting. Both Chanos and FX Concepts made the same error: we had not appreciated how far Ben Bernanke would go to flood the market with dollars. The Fed’s attempt to float the weak US economy on a pool of excess dollars resulted in a banner year for China, Australia, commodities, emerging markets, and a host of other things. Isn’t this still going on? What has changed? We think the answer is almost everything.
Considering that the Fed recently announced a new qualitative easing program that will put $75 billion into the global system each month until June, it might seem a stretch to say that things are changing, but they are both in the US and in Australia, plus the rest of the world including China. Front and center in the US is the 112th Congress which begins on January 3, which we expect to be one of the most tight-fisted in history. Just last night the 111th Congress in one of its last acts passed a bill to keep Washington running for another 10 weeks – only hours before it would have run out of money. What is impressive is that this bill freezes all budgets at current levels, does not fund the new healthcare bill or the financial regulation bill, and puts all future spending decisions off to the new Congress. The Buy American Bonds (BAB) program seems to have been left for dead, which could pitch California and other near-bankrupt states into a dark hole within a few months. There just won’t be any spending coming from Washington or the states. Most analysts are expecting better US growth from the personal tax compromise, Obama’s cutting of Social Security deductions, and extension of unemployment insurance. Even if this does not create growth – which it might not – it means that the government must borrow more and there will be fewer dollars for the rest of the world. If the Republicans play rough and California craters, fiscal tightening will be the rule, US rates will be higher than Bernanke wants, the dollar will be strong, and foreign markets will be hurt. The odds favor an outcome like this, and the Fed is not free to ride to the rescue again. With Ron Paul riding hard over Bernanke, the Feds wild ways will be corralled. With fewer excess dollars, the growth game, and the markets that follow it,
are over.
Interestingly the Shanghai Composite Index and the Australian dollar are showing a six month correlation of 89%. Sydney looks like Shanghai south, but the Chinese authorities are slowing their economy – and Chanos says this will turn into a sharp slide. In Australia the party seems as exciting as ever and everyone is still dancing (see Chuck Prince). Housing prices – the highest in the world – are still climbing. In the capital cities prices are up over 50% since 2004 and the average house is valued at nearly 8 times the average income. With borrowing rates now averaging over 7¾%, this means about 60 percent of pre-tax earnings would have to go toward the mortgage of a new house. No wonder the delinquency rate is up to 2.8% in Western Australia and climbing throughout the country – even while the party is going on. With about 75 basis points priced into the forward curve this year, the situation will get tighter for the average Joe. Commodity prices made a new two year high today and the government just told us that mining taxes are still in good shape. I hope so, but we don’t bet on hope. The Aussie was over USD 1.0000 today and we think it is a great sell here.
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Its my understanding that per the Calif Constitution, debt obligations have the first priority. With this, aid to local municipalities is what's likely to crater, along with those municipalities. Oh well.. LA is a rathole anyways.
These are two excellent primers on the Muni bond market, not sure about California specifically. Clearly, from a legal perspective, bond holders have the law on their side with respect claims. Seems like the order goes - bond holders, then retired fat school superintendent then at the bottom come those who have no vote, i.e. school children.
https://self-evident.org/?p=877
https://self-evident.org/?p=878
This article is about a failed pension plan in a town in Alabama. They ran out of money, and one day they just stopped sending the pension checks. First of many.
http://www.nytimes.com/2010/12/23/business/23prichard.html?scp=2&sq=alabama&st=cse
Scarey! The first drops announcing the coming deluge!
I bet they are long AUD just watch the fly up after parity is over
Add Taylor's body to the dead corpses laying around Wall Street.
All Ords in Australia made a new 6-month high last night.
And with commodities on a roll, odds are that Australia could go even higher.
But the market is way overextended, and a correction is needed to maintain the market's health.
Of course, any drop will instantaneously turn all the AAII bulls into immediate bears. And virtually everyone will attempt to lay out a huge short line in an attempt to be a top-picking hero.
Tops are a process, not an event.
They take time to form, usually led by persistent underperformance and weakness in:
- Financials
- Retail
- Cyclicals
The Top of the Top comes at new highs.
Is that right near the peak?
the Aussie house market has flat lined since foreign investment laws were changed this year, inflation is running hot if you speak to humans on the street trying to put food in their mouths. $5 for a loaf of bread at woolworths (think Walmart) with AUD running at parity is indicative of the issues, $5-8 for a 300ml glass of beer in most bars and gas prices miles above the US. Couple this with a small widely spread population, fuel is a large component of price of goods in store making the COGS for retailers higher than for their global counterparts. Minimum wages are much higher, more than double the US in many states. The main retail association in Aus is actually lobbying hard to get taxes cut on their sales below AUD$1000 (most of them) due to the a$$ raping they are getting from foreign retailers shipping direct from online sales. This will translate into less tax revenue, in a country with a very large silver top population and couple this with Australians running some of the highest personal debt levels the world over and things aren't shit arsed rosie by any respects.
The Aussie economy the home at present to a lot of people chasing yield from the best of a bad bunch. Not saying the Aus economy would see a long protracted recession like the US but if China shows the slightest hint of a slow down the AUD will see itself burned solidly, but I guess that's just my opinion.
If you actually ask other Australians about this you will probably get similar answers regarding food prices, housing affordability (or lack thereof), fuel prices etc. Sure unemployment is not at horrific levels but there is a lot of upside priced in right here. I am not ruling out the AUD reaching 1.05 or even 1.10 against the USD is The Bernank continues unabated however that is a "can't rule out projection" rather than a realistic one which is, we're above fair value at these levels.
Just back from Australia (homeland) - yes - expensive for sure. But here are some additional thoughts:
- Housing pricing: a lot of the demand for housing in Australia (specifically Sydney) is coming from Asian residents whom are cashed up; Sydney is a highly desirable place to live - great public schools - so house price strength is partly driven by Asian middle class demand.
- Keep in mind - Australia population is a mere 22M (less than Texas) in a country the size of the US
- Beyond the known complexes of iron ore (Pilbara) and Coking Coal (Bowen Basin) - a very significant LNG complex in Australia is now well and truly underway - in WA and Queensland - massive gas projects have been announced.
- RIO, BHP, FMG increasing iron ore capacity from current 400m tpa to 1bn tpa by 2020
- the mining boom has a ways to run yet; a good three years until supply gets to demand; and all the associated infrastructure needs and mining services to go with it
- China is urbanising 20M people per annum; the middle class craves more durable goods - diets need more protein (and btw it is not just china - but india, indonesia, malaysia, korea) - thats a lot of coking coal and iron ore, and now a lot of gas - for the next 7-10 years
- even if china slows; the Australian shovels wont take a day off - it just wont happen
- the Australian economy, if slightly imbalanced, is still going to be driven by the resource sector for 3-7 years; in a strong fashion
- i offer no comment on the Australian dollar (not my remit) - but Australia looks set to continue to be expensive, with a robust economy for...the next half of the metals super cycle; and the interest from wealthy middle class Chinese, Indians etc wanting to make home in the Australian burbs...
So Robo Nutz,
Are you saying buy the coming dip?
Genius !!
Quote: But the market is way overextended, and a correction is needed to maintain the market's health.
LOL!!! You call THIS market or anything connected to it healthy?!?!?
Closed out the FAX positions a couple of weeks ago. I agree with the basic premise of Australia being ripe for a fall; however, avoidance is one thing, being short is another. At this stage, I would only be short anything with OPM. Translation, yea, I'll take some upside if you take the risk.
A massive, multi-year double-top is being put in on the AUDUSD pair. Once that formation has completed, short the SPX, EURUSD and AUDUSD. It's coming sooner than you think.
:D
Opportunity dual FOREX and stocks, here, tight stop limits..
Oh, .... do the deed once only, then LEAVE permanently, Aussie in for secular decline, not cyclic adjustment...
Commodities in Australia
Yes, and the soon to be overextended debtors of Australia will SELL the mineral and mining/environmental permits....bribed, hungry, greedy....buy the Chinese companies that acquired the 'rights' .... and soon to be SPECIAL TAX TREATMENT....right? (huh?? Bribes, properly presented in the British Manner of OxBridge dress-up Colonial morality, should do wonders...absolute wonderous things in Australia)
I could not care less, right now I am long Physical PMs and PUTS(leaps) on just about everything and their Mommies! All other stuff is CASH! Should PMs "correct" i'll get some more, rest is history! Happy Holidays Everyone!
OK!
Short the Aussie, it drops 3 cents before going back up and this guy claims he's a genius.
I coulda been a contender, I coulda been somebody.
http://www.hark.com/clips/xztbqzlqfg-i-coulda-been-a-contender-i-coulda-been-somebody
Do you run the biggest currency hedge fund? I dont think so.
SO STFU
+1 rofl
John Taylor's and Jim Chanos' understanding of the world is dated. It's also a NY-London centric view. Their stories about collapse in China seem to emanate from a world view appropriate to 1987, not 2010. The Australian Dollar is making its way to 2.00 against the USD. That will take some time, but it will happen.
GG
The reasons the AUD is strong are the Chinese halo and positive carry, take away both and they'll be swimming naked.
Not to mention that the Oz housing bubble rivals that of Spain, and that the mining tax has driven Chinese dollars elsewhere.
Or that much of bank funding used to be from cheap overseas funds.
Luck is running out for the Aussies.
You're right. The strength of the AUD has nothing to do with exports, and the Oz housing bubble is a huge 10 year old secret that's only understood in New York.
GG
your right, house prices only rise. the aussies are different.
House prices there are actually coming down, and quite significantly in some parts of the country. The Australian economy is slowly being taken apart piece by piece as a result of the high ccy. Domestic tourism is bleeding, education services are seeing enrollments down 40% from foreign students, theres practically no manufacturing left, farmers are losing out to places like brazil .... only the miners are winning right now. That country is not set up for a high ccy ... when the crash comes or even when the mining cycle runs its course Australia will most likely find itself with no real remaining industry (a-la britain now that banking has proved to be a sham)
That's a pretty good summary actually. The leadership (federal and state) should be ultimately ashamed at allowing the windfall from the mining boom disappear into a real estate bubble.....and pretty much nothing else.
There was a ton of money to go around to build new educational institutions, train people in different areas to diversify the economy etc. Instead, all aboard the mining train! Mining is highly, highly cyclical, this cycle will be no different.
Won't end well when it pops.
"The leadership (federal and state) should be ultimately ashamed at allowing the windfall from the mining boom disappear into a real estate bubble"
Yes, exactly...sad really. I moved from australia 10 years ago but what i see from a distance and from irregular trips to there is not good at all. If they had spent wisely and not spunked the gains on stupid things like hot water systems for footy club change rooms in the middle of the freaking desert then maybe they'd be able to ride it through.
On top of all this is the fact that all the banks are limit long mortgage debt. and if the housing market does as i suspect it will then it could get rather ugly.
Exports?
Oz has historically been a net importer, only in recent years has the commodities boom moved that deficit to a marginal surplus.
10 year old secret?
What secret? Everyone knows its not sustainable, it just a matter of when not if the bubble pops.
Almost every sector of the economy is slowing aside from mining, and seeing how mining employs less than 10% of the population, its not difficult to project fireworks in Oz.
May take a while but if you wanna bet the farm that the AUD is going to the moon go ahead.
Yep, this Aussie sold his RE back in 2009 as you would expect at the top of the market 99.99% of my friends said I'm crazy coz this aint the US LOL.
Australians are the worlds biggest mega mortgage mugs, think USA housing investors 2005/6 times it by 1000 and you have a picture of the delusion here right now. Best short Commonwealth and Westpac banks over 50% of their assets are aussie mortgages. What most dont realise its been a non stop boom here since 1990. We badly need a correction to shake out the delusion.
Check out
www.bubblepedia.net.au
Ive thought long and hard about CBA & WBC and while I certainly agree with you re their exposure (WBC self insures its mortgages as well as having picked up all the St george self insured ones too) I can see a scenario where the AU Govt jumps right in ala Ireland and guarentees everything even remotely shaped like one of the '4 pillars' In that instance, look for the AUD to curl over and die.
Damn math question.
There are only 5 underwriters of mortgage insurance in Australia, and no re-insurance market. They are all exposed to the same risk. That's a systemic risk if ever I saw one.
I think it will all end very badly myself, but I have been calling that since 2004, and it hasn't happened yet.
On another note, this was the worst retailer's Xmas in a very, very long time, so the direction is clear, but the extent and speed are not (yet).
Yeah the banking and mortgage insurance market is just one big circle jerk. I agree its not going to happen tomorrow but its like a big festering pimple, red, narley and full of puss waiting for a gentle squeeze, the bigger it gets the less it will take to splatter the goo all over the mirror.
Wouldn't surprise me if Gillard guaranteed house "prices" at some point....or at least made an effort to do so. So called "leaders" do some weird things when the seams start to fray......
You clearly know very little about the australian economy and market!!
LOL let me guess houses only ever go up, its different here this time, rich people from Uranus will save the overpriced housing market. Its a bit rich from someone in London to tell us who are living in this economy / market we know nothing. Sounds like you would fit right in with the rest of the delusional fools here.
Cute avatar BTW Huggy bear...
"John Taylor's and Jim Chanos' understanding of the world is dated. It's also a NY-London centric view. Their stories about collapse in China seem to emanate from a world view appropriate to 1987, not 2010."
Yes, there remains a neocolonial 'bias' that those outside of NY/London are 'fools' permitted to win, for NOW, but uttimately to be mere suckers to be cleverly dispossessed ..... wrong wrong
Now, all you people out there...China has a long long cycle of industrial growth STILL ahead, and several wash-outs/recessions...serving to INCREASE/IMPROVE the growth rate...
bet against China, 'at your peril'
For those interested in Jim Chanos and his bear call on China, here's a link to a 60 min presentation:
http://www.businessinsider.com/jim-chanos-china-is-overheating-and-overi...
I came upon it while researching on the web about China's ghost cities. Cities built to keep their high GDP up. You can Google "ghost city china" for more.
It's a typical novelty call. Thus, it's shallow. It takes some examples of excess, and then composes a story that applies to all of China. And that's why it hasn't worked, and won't work. Again, it's not that China is without problems. There is no question China will have crack-ups. But Chanos is trying to apply Western style security analysis here.
Americans are funny. They think they know so much. Well guess what, those premier educations at the Ivy League created a groupthink over 50 years post WW2 that echoes the Ox-Bridge syndrome.
The Chanos presentation bores me to tears.
GG
You may be right about the Ivy League types but I wouldn't scoff at 40 billion square meters of empty space. Does that suggest overcapacity?
Time will tell. Last I heard business cycles still exist (though I was told throughout the 90's here in Sillicon Valley it didn't).
A fair amount of the younger Chinese leaders have Ivy League degrees too....
China.... is NOT a western democracy...it is STILL a 'planned/controlled' economy, with a strong set of fascist political tools, learned from the German/Italian 1920-1930's experience, and Social Control tools learned from the Japanese during the 1930-1945 brutal occupation by the Japanese... do NOT use YOUR version of Political economy to judge the outcomes, nor the 'means' 'methods' used....do not assume that the FINAL evolution of China will be a so called democracy EITHER!! Think Singapore I shall again REMIND everyone of the recent NON-DETECTION of a Chinese attack submarine IN THE MIDDLE OF AN ONGOING USA MILITARY EXERCISE, AIRCRAFT CARRIER TASK FORCE...which was ONLY detected AFTER SURFACING!!!!!! .and that China has at least 200+ deployed/deployable nuclear weapons... Do not underestimate the investment implications HERE.
John Taylor must be a foreigner if he expects the "112th Congress...to be one of the most tight-fisted in history." Anyone even marginally familiar with the U.S. federal government knows the money will keep coming and that every layer of government will be bailed out. To the government, the printing press is a goose that lays golden eggs. Any thesis about future events must begin with this as a foundation.
I agree. The freshman class will quickly be indoctrinated. The ones who try to stand firm will be bullied, threatened, and blackmailed.
Democrats, republicans..., what's the difference? Their only argument is over who gets it, and what to spend it on. Neither will introduce austerity, both will keep the printing presses running 24x7. After all, do you want it to be written that half the states went BK because you didn't vote for federal aid to save them? You may not get re-elected, and your campaign contributions could suffer mightily. I think it's reflation and inflation all the way, damn the torpedos..., full speed ahead!
I didn't jump to the foreigner conclusion, but I definitely wondered what he's smoking if he thinks there'll be 'austerity' coming from the 112th.
I'm of the same opinion with regard to the Aussie . Won't be shorting it quite yet as equities could very well continue to float higher in this thin liquidity but once Januray rolls around there'll be some great oppurtunities . Kiwi is also a solid bet . New Zealand fundamentals have been deteriorating over the last few months ( as is reflected in yesterday's GDP contraction ) and on a PPP basis it's above 30% overvalued .
Time to reign in liquidity, hey? How nice and tidy. Why didnt someone think of that before.
1. No liquidity, and rates go through the roof.
2. Mo' liquidity, and the US$ goes through the floor.
3. No 'C' option.
Hmm. China announced it will be INCREASING bank loans next year, not tightening. A small increase in the interest rate will do nothing to put a crimp in their "growth," regardless of what the real numbers are. They are buying all the gold and silver they can get their hands on while keeping the price down as much as possible creating a real shortage in the physical silver market through their proxies in US and Europe (see Ted Butler). The US has massive unfunded liabilities that the boomers will start to collect on next year and shrinking tax revenues everywhere so the gov will still have to borrow copious amounts of money which will drive rates higher, but inflation will be higher as well. Unemployment is staying stubbornly high but apparently corporate margins haven't been wrung dry yet. When they are, prices will rise, but profits may rise less. USD is a piece of doodoo but everything else smells nearly as bad. AUD will do okay as long as China doesn't allow lending to dry up and continues to buy commodities like they ain't making them anymore (they ain't) and buying as much food and farmland as they can get their hands on with soon-to-be worthless USD. I love all this talk about a strong dollar that all the austerity will produce. IMHO this may play for a very short period until people figure out that the USD is now the biggest ponzi scheme in history. At that point .....
"Paper money eventually returns to its intrinsic value, ZERO" Voltaire 1729
+100
Tyler,
A similar term may be used: "Liquefaction". The geological event that is triggered by earthquake. Once it starts, Bernanke can not stop it. http://en.wikipedia.org/wiki/Liquefaction
RobotTrader -
financials, retail, cyclicals.
Copy that - but,
oil spikes to $91.50 and gold doesn't move. Limited time frame in term of sample range but - I wonder - - -
I agree with Mish and this post: Australia, Canada and China-all real estate bubbles that burst in 2011.
(d)
Unless gold goes below $1000 and silver below $20 for a long period Vancouver Canada will see no prolonged real estate crash. Vancouver benefits tremendously from PM finance as a proportion of its economy, and in general is a major hub for commodity finance. Toronto has a much more diverse economy but Vancouver's narrow market benefits from commodity strength.
If British Columbia were a country it would be #18 in the world based on exports
The Fraser River delta is one of the richest river deltas in the world, can support 150m people
Almost all Canadian grain and potash and coal exports go through Vancouver
Wyoming Powder River coal goes through Vancouver on Buffetts BNSF which bought BC Rail
Look at the resilience to San Francisco city real estate and Vancouver will be more resilient in any selloff
All Ron Paul has is words, not power. He will offer some theater while the permanent government does what it has to do. Because Paul is so outer' he actually strengthens the Feds hand. The Villiage will roll their eyes, the Tea Party hangeroners along with their pure true idiots will foam at the mouth for the benefit of their audience, and that will be that.
Since mortgage refis have slammed to a hault the Fed is going to have to scale back the QE lite portion of their operations. The news of which should be just enough to slow things down awhile setting the stage for QEIII.
Oh the Republicans are going to bring fiscal tightening? And how is that sub-prime borrower called the US going to make its payments with higher rates?
By investing the payment instead in physical silver, forcing the bank to admit they don't have the paperwork, and are willing to renegotiate the loan. This may take a couple years, meanwhile the redirected money makes a killing in silver, saving his ass?
everybody seems to think China, with its Tao-ey and "Art of War" ways is a sagacious chess-master that will win the Grand Game with its series of five year plans. not buyin it. central planners screw up in a bigger way than the market, and their empty cities, one way trade policies, and dollar pegging will dismantle rapidly when shifted into reverse. Aus will go down in sympathy and economically, just when their residential Re bubble pops.
Ha you see you have it all wrong.
Here in Sydney we are different, our housing prices never go down, we will balance our budgets through never ending increases in commodities.
Hey don't you have a morning show to attend to? Thats the beauty of Sydney, it will be is the first indicator of property decreases in Australia followed by Melbourne. then the mining towns and Perth become depopulated once gain.
He had not appreciated how far Ben Bernanke would go to flood the market with dollars?
Yet now it's different? There's no way Ben Bernanke will flood the market with dollars? If he could not appreciate before, why does he now?
copper is the only major commodity trading in serious backwardation, for a metal that needs storage, thats quite interesting; go JPM go, another $3b loss after silver shorts fiasco is no sweat, afterall its mark to fantasy, so just roll it to foreign associates, plus ben prints twice as much everyday. but that aud short idea is getting sweeter by the day.
Speculation on housing has become a favourite pastime here in Australia, exacerbated by unique negative gearing laws.
The average new mortgage is in excess of 350k. An acquaintance of mine recently took out a 700k interest only loan on two properties on the Gold Coast which is sure to end in tears.
My employer forecasts 2 more intrest rate rises by the middle of next year pushing the AUD to 1.05; timing a short entry is the obvious issue.
Does anyone have any thoughts on the best way to play an Australian property crash?
They won't be raising rates to help their housing problem, that's for sure. A contrarian approach with regard to how quickly the RBA will have to ease may be the best bet. I think they are going to have to ease fairly quickly once this thing unravels.
The double-top being put in now against the USD may be the last straw for the AUD. The NZD has already topped but the AUD has yet to confirm. When it does, it should catch up fairly quickly.
My concern is that if things may go shitty in China and we feel the squeeze here.
Ok so the RBA lower rates, but we know the Banks arn't working off the RBA it is the cost of o/s $.
So the o/s financers see the problems here and charge a larger spread. You could see the Aus banks raise rates into a terrible economy.
Well... My personal plan is to wait for the AU property market to crash, the $AUD to crash, then to set myself up with some nice property. Not going to try to time shorts or any of that, just wait for a correction then have a crack.
Some Aussie real estate investors that I know (that are still in Aus) are actually investing in US real estate these days. There's still downside risk in the US, but when you factor in the AUD and compare it all to the current state of the AU real estate market, it's much harder to lose for them here than there.
Yes timing the short AUDUSD position is a nice way to lose your shirt...a bit at a time!
An other option on the sell AUD buy USD (or peg) and invest in USD Asset market is....wait for it..Middle East Real Estate....
I know you are probably rolling on the floor but hear me out, prices in Dubai/Abu Dhabi/Qatar have been creamed 30-50-70% depending what and where it is.
Rent yielding 6-8-10% TAX FREE
Capital Gains - TAX FREE
everyone hates it....could be interesting in 2011.
That depends on your timeframe I guess... What's the long term appeal of middle east real estate? Doesn't matter how much oil is underground, it's still a desert. To me it's like real estate around Las Vegas. Ultimately you own a PoS plot of sand.
It's been creamed 30-50-70% because it was never worth what it was run up to.
On the other hand, rent yielding 6-10% tax free sure sounds nice.
people ...really , in terms of population, Australia has 8 (eight) USA's sitting to the north of us in the form of India and China , one to the left, one to the right and pretty well equidistant , with staggering and growing demand. Things could get bumpy , but this train aint stoppin, for a long ,long time.
WTF, yeah there is a real shortage here, a shortage of house buyers. Most Aussies are still back in 2005 caught up with the delusion of ever increasing house prices. You put too much faith in the employment of less then 10% of the population in minning. I get so sick of idiots who rattle on about the same old crap RE blah blah shortage, prices never go down, get your head out of Uranus and atleast learn some simple economics. Shortage to glut is a function of "on market" not population divided by dwellings Geez.
Celtic, not sure of your geopolitics. China and India are more to left, and the only thing to the right is New Zealand, unless you mean Brazil, which is more to the Right
Pigs will fly before our congress imposes anything vaguely resembling reduced spending - let alone austerity. ( hey wait a minute!!).
You see the US is in fact a democracy where the will of the majority is generally enacted. And the majority like the big spending ways, like the unemployment checks ( hey new Ipods are coming out all the time), like the ability to live rent free while foreclosure laws area mess. They like taking on massive debt that they know they cannot repay ( better than income), And when they canyt repay - nothing bad happens to them ( the laws can always be changed as you go).
People love the system - thats why it exists.
Ron Paul represents a now extinct sub-species (Austropithicus)that once roamed the Alps and was last heard singing sad oopmpah songs as they held their gold coins to their chest. Lovely tribe - really.
Until the world stops lending to the USSA, the FederalReserve buys all the bonds issues to finance the ever-increasing federal debt, and the dollar collapses.
Then, business as usual ends. Not because the FederalReserve wants to. Not because the federal government of the USSA wants to. But because the dollars they issue are worthless, and people can only buy foreign products with gold... then increasing numbers of domestic products too.
Then, game over.
If americans decide to hold their savings in gold [and silver], and transact in gold [and silver], then the FederalReserve and federal government of the USSA become obsolete. They already are.
I'm not sure what people are expecting should be happening to the market and the economy at this point but people should get a clue.
The Fed drove a binge of speculation in late 2007 and early 2008 trying to stave off the collapse. What it did was precipitate the collapse since people couldn't afford to afford and businesses couldn't pay the pay. Estimates are that Zimbabwe had 80% unemployment and kind of high rates of inflation. Do you think Zimbabwe started with 80% unemployment or did high prices cause 80% unemployment? Guess what - stocks and commodities should go up even as things get worse. Otherwise prices wouldn't have to go up (in Bernanke's opinion at least) so they will go up until things get better and since high prices don't cause things to get better they will cause things to get worse so that higher prices will be in order. In case it's still unclear - it's a self-fulfilling prophecy.
However, nothing goes in a straight line. The collapse of economies and fiat currencies will happen in step fashion. There has never been a case of sustained deflation in the history of the world. Some will point to Japan and say that statement is false. Well, the final chapter for Japan has yet to be written. I can guarantee one thing - in Japan deflation will end because once prices hit zero I'm buying it all.
So could we have another bout of deflation? Yes. And another one after that? Yes. But ultimately, inflation and penultimately hyperinflation are the destination. The question is how many switchbacks does this road hold.
Loan standards drop to keep the bubble afloat by Steve Keen
http://www.debtdeflation.com/blogs/2010/12/23/loan-standards-drop-to-keep-the-bubble-afloat/#comments
Australia has a history of following the US a few years behind. I remember in the 80s AUS was implementing failed US policy a few years after America discovered it failed. One policy after the next. Interest paid by retail banks was 21%. The AUS dollar was 70% of the greenback. The papers then all talked about looking to China for the future to export. The worry was that if Austria left the protection of the US, they would be overrun by Java. The most populace country takes over the most under populated. That is still the worry. The future of Australia, as a hospitable western county is dependent on Java not waking up. Australia can only wander so far before they loose control. Remember, Java's children are taught in school that Astralia is called "south Java". Australia was called Austral-Asia by Captain Hook. Austrailians are well aware how isolated they are and that they can't defend themselves, that's the reason they have the ANZA treaty with the US. Watch the US to see what happens next in Australia.
Very interesting. Thanks for that perspective. I really hadn't thought about it but the proximity of clashing civilisations, one rich, one poor, makes for a tenuous situation.
Many of North Java's poor and downtrodden are beholden to radical Islam. That doesn't bode well for business in Oz.