"It's Too Late" - 7 Signs Australia Can't Avoid Economic Apocalypse

Tyler Durden's picture

Authored by Joe Hildebrand and John Adams via News.com.au,

AUSTRALIA has missed its chance to avoid a potential “economic apocalypse”, according to a former government guru who says that despite his warnings there are seven new signs we are too late to act.

The former economics and policy adviser has identified seven ominous indicators that a possible global crash is approaching — including a surge in crypto-currencies such as Bitcoin — and the window for government action is now closed.

John Adams, a former economics and policy adviser to Senator Arthur Sinodinos and management consultant to a big four accounting firm, told news.com.au in February he had identified seven signs of economic Armageddon.

He had then urged the Reserve Bank to take pre-emptive action by raising interest rates to prevent Australia’s expanding household debt bubble from exploding and called on the government to rein in welfare payments and tax breaks such as negative gearing.

Adams says he has for years been publicly and privately urging his erstwhile colleagues in the Coalition to take action but that since nothing has been done, the window has now closed and Australia is completely at the mercy of international forces.

“As early as 2012, I have been publicly and privately advocating that Australian policy makers take pre-emptive policy action to deal with the structural imbalances within the Australian economy, especially Australia’s household debt bubble which in proportional terms is larger than the household debt bubbles of the 1880s or 1920s, the periods which preceded the two depressions experienced in Australian history,” he told news.com.au this week.

 

“Unfortunately, the window for taking pre-emptive action with an orderly unwinding of structural macroeconomic imbalances has now closed.”

Former Coalition economic adviser John Adams.

Former Coalition economic adviser John Adams.Source:The Daily Telegraph

Adams has now turned on his former party and says both its most recent prime ministers have led Australia into a potential “economic apocalypse” and Treasurer Scott Morrison is wrong that we are heading for a “soft landing”.

“The policy approach by the Abbott and Turnbull Governments as well as the Reserve Bank of Australia and the Australian Prudential Regulation Authority, which has been to reduce systemic financial risk through new macro-prudential controls, has been wholly inadequate,” he says.

 

“I do not share the Federal Treasurer’s assessment that the economy and the housing market are headed for a soft landing. Data released by the RBA this week shows that the structural imbalances in the economy are actually becoming worse with household debt as a proportion of disposable income hitting a new record of 190.4 per cent.

 

“Because of the failure of Australia’s political elites and the policy establishment, the probability of a disorderly unwinding, particularly of Australia’s household and foreign debt bubbles, have dramatically increased over the past six months and will continue to increase as global economic and financial instability increases.

 

“Millions of ordinary, financially unprepared, Australians are now at the mercy of the international markets and foreign policy makers. Australian history contains several examples of where similar pre conditions have resulted in an economic apocalypse, resulting in a significant proportion of the Australian people being left economically destitute.”

Following his landmark seven signs of the economic apocalypse, which was read by a quarter of a million people, Adams has now identified seven signs that it is too late for Australia to take action. Here they are in his own words:

SIGN 1: TIGHTENING MONETARY POLICY

The US Federal Reserve has raised interest rates. Picture: Andrew Caballero-Reynolds

The US Federal Reserve has raised interest rates. Picture: Andrew Caballero-ReynoldsSource:AFP

A cycle of global monetary tightening has begun. For example, the US Federal Reserve has raised short term interest rates in December 2016, March and June 2017 with more forecasted increases to come. The US Federal Reserve also announced a program, expected to commence within months, which would shrink its balance sheet (i.e. quantitative tightening) by selling its holdings of $US6 billion a month from Treasuries and $US4 billion a month from mortgage bonds, increasing each quarter until the Fed’s balance sheet is being reduced by a total of $US50 billion a month or $US600 billion per year.

Market expectations are now being set by officials at the Bank of Canada and the Bank of England for higher interest rates in both Canada and the UK in the near future.

Due to Australia’s record high foreign debt, increases in the international cost of credit are being passed onto Australian borrowers through the banking system, particularly on interest-only and investor loans.

SIGN 2: INVERTED AND FLATTENING YIELD CURVES

Chinese officials kick off trading on the long awaited Bond Connect link. Picture: Vincent Yu

Chinese officials kick off trading on the long awaited Bond Connect link. Picture: Vincent YuSource:AP

In May 2017, the Chinese Government bond market recorded its first ever inverted yield curve. Also, the US Government bond yield curve, over the past 6 months, has significantly flattened as some market analysts anticipate an inverted US yield curve in late 2017.

Inverted yield curves (or where long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality) are known as a market predictor of a coming market crash or broader economic recession.

SIGN 3: SOVEREIGN AND CORPORATE DEFAULTS

Corporate defaults are emerging around the world. Picture: Bryan R. Smith

Corporate defaults are emerging around the world. Picture: Bryan R. SmithSource:AFP

Sovereign government and corporate defaults in both developed and developing economies are beginning to emerge. For example, China has registered in 2017 its highest level of corporate defaults in the first quarter of a calendar year on record. Delinquencies and charge-offs in the United States soared to $US1.4 billion in the first quarter of 2017, the highest recorded level since the first quarter of 2011.

Also, in May 2017, creditors to the International Bank of Azerbaijan (Azerbaijan’s biggest bank) were forced to take a 20 per cent haircut (i.e. a partial default) which was upheld in June by a US Bankruptcy court in New York.

SIGN 4: FALLING CONFIDENCE AND CREDIT DOWNGRADES

In May 2017, six major Canadian banks were downgraded by Moody’s Investor Service (Moody’s) as concerns rise over soaring Canadian household debt and house prices leave lenders more vulnerable to losses. Moody’s also downgraded China’s sovereign debt in May 2017 for the first time since 1989 and has warned of further downgrades if further reforms are not enacted.

In May 2017, S&P has downgraded 23 small-to-medium Australian financial institutions as the risk of falling property prices increases and potential financial losses start to increase. In June 2017, Moody’s downgraded 12 Australian banks, including Australia’s four major banks.

Standard and Poor’s and Moody’s downgraded bonds for the US State of Illinois down to one notch above junk bond status as the state has over $US 14.5b in unpaid bills. Despite a new budget deal passing the Illinois state legislature which raises more revenue through higher taxes, Moody’s this week has placed the state government’s bonds under review for possible downgrade.

SIGN 5: EMERGING CHINESE CREDIT CRISIS

There could be big trouble in big China. Picture: Keith Tsuji

There could be big trouble in big China. Picture: Keith TsujiSource:Getty Images

Significant concerns among international observers are now being discussed publicly regarding the $US4 trillion Chinese Wealth Management Product (WMP) market as Chinese bank regulators are now taking significant interventionist steps to drain liquidity and reduce financial risk. As a result of recent interventionist steps, the one-year Shanghai Interbank Offered Rate hit a two year high at 4.30% in May 2017.

The Chinese WMP market has, in the past few years, experienced significant growth involving long term asset acquisition funded through the use of short term liabilities. Evidence is emerging that the long-term assets within WMPs are not performing consistent with expectations resulting in difficulties meeting short term debt obligations.

The WMP market represents approximately 10% of the Chinese banking system whereas the 2006 07 subprime mortgage backed securities crisis only represented 2% of the US banking system.

SIGN 6: SIGNIFICANT GROWTH IN VALUE OF CRYPTO CURRENCIES

Bitcoin is on the rise, which is not comforting news. Picture: Roslan Rahman

Bitcoin is on the rise, which is not comforting news. Picture: Roslan RahmanSource:AFP

In the past five months, the crypto currencies industry (especially the leading five internationally recognised cryptocurrencies) have experienced tremendous growth in market capitalisation indicating that investors are seeking to escape the formal banking and financial system as well as government mandated fiat currencies.

This is particularly acute in Japan where Japanese businesses and citizens have been pouring into Bitcoin given the Bank of Japan’s unconventional monetary policy measures, such as negative interest rates, as well as that Bitcoin has become legal tender in Japan in April 2017.

For example, Bitcoin has experienced growth in market capitalisation by approximately 170% in the past 4 months, while Ethereum has grown by an approximate 2504%, Ripple by an approximate 4025%, NEM by an approximate 3194% and Litecoin by 1236%.

SIGN 7: DISCREDITED AUSTRALIAN FISCAL AND MONETARY POLICY

Australian policy makers have failed to address economic imbalances. Picture: Stefan Postles

Australian policy makers have failed to address economic imbalances. Picture: Stefan PostlesSource:Getty Images

The 2017-18 Turnbull Government Budget, as well as recent decisions by the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA), have failed to address the structural imbalances and impediments plaguing the Australian economy.

For example, many of the assumptions underpinning the Turnbull Government’s 2017-18 Budget, including assumptions relating to growth in real Gross Domestic Product, non-mining investment, wages and household consumption, are highly questionable and almost certain not to eventuate, placing significant risk that the Federal Government will not deliver a budget surplus in FY2020-21 as currently projected.

Moreover, despite the introduction of new macro prudential rules by APRA, artificially low interest rates by RBA driven by a flawed monetary policy framework, has seen Australian household debt as a proportion of disposable income continue to climb to a new record high and now stands at 190.4%.

*  *  *

Adams' comments confirm the grave fears of Philip Parker, who serves as Altair's chairman and chief investment officer, who just returned hundreds of millions of dollar of his fund's money to clients...

"...this is not a winding up of Altair, but a decision to hand back client monies out of equities which I deem to be far too risky at this point."

 

"We think that there is too much risk in this market at the moment, we think it's crazy," Parker said with a candidness few of his colleagues are capable of, at least when still managing money.

 

"Valuations are stretched, property is massively overstretched and most of the companies that we follow are at our one-year rolling returns targets – and that's after we've ticked them up over the past year. Now we are asking 'is there any more juice in these companies valuations?' and the answer is stridently, and with very few exceptions, 'no there isn't'."

 

"Let me tell you I've never been more certain of anything in my life," Parker said. "I am absolutely certain we are in a bubble in this property market. Mortgage fraud is endemic, it's systemic, it's just terrible what's going on. When you've got 30-year-olds, who have never seen a property downturn before, borrowing up to 80 per cent to buy three and four apartments, it's a bubble."

 

In a rather dire forecast, Parker outlined a situation where the stock market could fall as low as 5200 points in the coming months, depending on the confluence of his identified risk factors.

 

"Australia hasn't had its GFC event, we've been living in this fool's paradise. But if China slows down the way the guys think it will towards the end of this year, then that's 70 per cent of our exports [affected]. You can see already that the commodity market is turning down."

 

Some speculated whether there is another motive behind the sudden shuttering, but Parker stridently denied any suggestion that there were other factors at play other than a pure investment decision. No personal issues, no position that has blown up and forced his hand. "No, God no," he said. "We've sold out all of our positions at huge profits for our clients."

 

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Sonny Brakes's picture

Should I be wearing a sweater in this economy?

LetThemEatRand's picture

Sweaters don't protect you from central bankers.  Ask any Greek person.

Sonny Brakes's picture

I wonder who's side the military will take when the plebs rise up to ring the necks of central bankers and the politicians and the talking heads that have brought all of this upon the world?

LetThemEatRand's picture

I used to wonder that, too.  But I've become convinced that the people are not going to rise up, so it's a moot question.  When the bailouts happened in 2008, there were huge numbers of people who reached out to their Congressmen to say don't do it.  Overwhelming opposition.  But Congress did it anyway, and the new "outsider" President was just fine with it.  And they got re-elected anyway.  There were no uprisings.  Just angry phone calls and emails and some articles.  I guess there was Occupy Wall Street, which was quickly branded a bunch of spoiled kids and communists and placed in the dust bin.   Now I see people even here supporting President Kushner and his Vice President Cohn.

veeger's picture

   it's a big club.......and they intend to smash us with it.

veeger's picture

  " whom the gods would destroy , they first make mad ".............that way-point has been reached.

Déjà view's picture

8. Current account balance...odd 4/5-Eyes LAST...

196 AUSTRALIA -$33,200,000,000 2016 EST.
197 CANADA -$51,080,000,000 2016 EST.
198 UNITED KINGDOM -$114,500,000,000 2016 EST.
199 UNITED STATES -$481,200,000,000 2016 EST.

https://www.cia.gov/library/publications/resources/the-world-factbook/ra...

zebra77a's picture

Republicans and Democrats alike have NEVER vetoed a government deficit.  EVER.

This only ends when people stop accepting the currency of their nation as a form of exchange.  Unfortunately most of the worlds population will have to go with the failure of the various currencies.

I heard that Tide Detergent is a common currency in Africa. If the government tries to dilute it - well it just won't wash your clothes and you can probably smell it to figure out how diluted they might of tried to make it.  Very hard to forge it.  Meanwhile the LBME can dilute the paper value of Gold so easily shit - they do it every week and espeically right before FOMC meetings. Weird eh?

Which makes Crypto-Currency very interesting because at the current rate of expansion Bitcoin will soon have a market cap larger than Amazon or Canada, and cannot be controlled, tracking participants costs more than the amounts being exchanged, does end-runs around any attempts to censor or block it, and cannot be diluted, unlike paper  gold, and the fiat.

That is why I poured every dollar I could into UCO deep OTM Call Contracts expecting a shock jump in oil prices when the inevitable WWIII breaks out  before September, the governments of the world have no other mechanism to control the collapse than to enact martial law, and you need a BIG event to get there.

Watch Turkey.. Watch Israel closely..

enfield0916's picture

Ever heard of a network error or access lists on a Cisco router?

How will your kin buy anything with Bitcion if the network conection is "unavailable" courtsey of he CIA or the FBI like it happened with Silk Road?

please explain. I am listening.

Gold and Silver on the other hand are globally recognized and accepted, even by the so called "village idiots" who don't own a computer.

Article 1 Section 10 - that is all I have to say!

_triplesix_'s picture

I'm not an anti-PM guy, but serious question.  What grocery stores accept gold and silver?  Which gas stations?  Seems to me you're going to need food and (maybe) gas if the SHTF, so please explain.  I'm listening.

Gargoyle's picture

I saw a video a while back, a marketplace in Zimbabwe where the merchants were weighing gold dust with scales, and people shopping and paying with sacks of gold dust.

Good question, but Mr. Market will find a way.  Want a bag of groceries?  Let me weigh that gold nose ring you've got.  Wipe it off, first...

mrtoad's picture

There are such things as paper wallets in the crypto world. These are a piece of paper that show your address and a QR code which can be used at retailers that accept bitcoin. This takes away the need for computers. Maybe some research on crypto is needed so you can have a real argument against it or you may embrace it. Either way its up to you whether to like it or hate once you research. in Australia I can now pay any Bpay bill using crypto's.

Pinto Currency's picture

Central banking always ends this way.

Ask the politicians why they've permitted these failed institutions to exist.

sinbad2's picture

I see banks as a utility, like water and gas, you wouldn't let the water company control a nation, why should we allow the banks?

sinbad2's picture

OK think about this, the debt is all in US dollars, if the price of the US dollar goes down, the debt in Pounds etc would be a lot lower, but it wouldn't change US debt.

If the US dollar goes higher, the other countries owe more in their own currency.

That's why the US keeps the US dollar high, it has gutted American manufacturing, but makes lots of easy money for the banks.

deimos178's picture

It's a two party system and you and I aren't invited to the party.

Scuba Steve's picture

Yea, but there was a pause in 2008 and plebs saw the 401k's and Pensions have small constant upticks from the worst day forward ... those days are over, that will never happen the next time.

Even old ladies will be looking for blood the next time.

No state was considering bankruptcy back then, now? LOL, its beginning.

The proverbial Shit is Starting to Hit the Fan, its just now getting interesting.

 

PUNCHY's picture

Good point, yes, the Industrial Revolution/Consuming Society insanity is unravelling just like an old knitted garment. The CB's have been issuing IOU's and flat out counterfeit Cargo Cult funds since 2008 but the forces of nature by way of good ol' demographics is winning the war against their delusional BS month by month, day by relentless day.

Enjoy NOW my friend as these are the GOOD OLD DAYS. Trust me, it wont be too long now and potable water in those municipal pipes ouside our front gates will be considered an extravagant and fondly remembered LUXURY. Especially in Illinois and Noo Joisy.

Meredith Whitney was early, but RIGHT!

( Yup, clean running water, a story for the grand children I guess)

Maghreb's picture

"Even old ladies will be looking for blood the next time"

The problem is they are already playing factions off against each other. The "blame the boomers crowd" and "fuck the snowflakes" are stirring up the inter generational divide. Same with the Alt Right and New left. Identity politics has been hijacked from having an identity to a grudge against everyone else. Worked on African Americans for decades now. Divide and rule. Gatestone Foundation and Open Socitey are the mian ringleaders but Hollywood is pushing it as well.

When the Soviet Union went down old Russkie´s were dying in the streets of vodka poisoning and hypothermia. Now days you hear how old white guys are dying from opiate addiction. Easier to crush the old men now with the fragile and fragmented family units in developed nations.

You´d be surprised how much more pissed off actual Vietnam Vetrans are about things like Gulf of Tonkin and inflation. Drugging them up before they die would be a very good tactic to stop the ones diagnosed of cancer losing their shit like that bernie supporter did. Death bed confessions may be another issue.

There are stories like this going back centuries after wars and financial crisis. Old folks being left to die on mountain tops, covens mass poisoning whole towns. I was wondering if that spike in celebrity deaths around december had something to do with that kind of shit.........

https://en.wikipedia.org/wiki/Affair_of_the_Poisons

 

sinbad2's picture

Australia's unofficial anthem is Waltzing Matilda, which is about a guy who would rather die than submit to financial, political authority.

fulliautomatix's picture

He was going to die anyway ('cos he stole a sheep) - he just had the balls to do it on his own terms and bilk the hangman out of his fee. Its all about the balls.

OpenThePodBayDoorHAL's picture

Yeah but what's it really like in Australia? I should know I relocated here from the US after Bush was re-appointed the second time in 2005.

It's friggin' great. Expensive as hell but worth every dime. Clean air, water, and beaches. Normal good-looking people. Excellent health care that's single payer so no hassles whatsoever, top quality care.

The locals are getting priced out of housing but it won't crash, there's just too much money coming in from overseas. 25M people and a small supply meets endless money trying to leave China.

Politics: it's the same mess as everywhere, right now we have the standard neo-libs in so they're squeezing the poor to benefit the billionaires. But people are waking the f*ck up on immigration.

Prime Minister says "Australia is a lifestyle superpower" and he's right. That will keep the dollars flowing. It's also called "The Lucky Country". #1 export earner is tourism (which booms when the dollar is low) and #2 is mining (which booms when the dollar is high). A lot like Canada in that regard but why go to Canada when you can have a white sand beach all to yourself, lobsters jumping out of the ocean, warm weather.

Local Aussies will chime in and say "but mate it used to be so much better" and they're right. But today here and now it's friggin' great, I pinch myself all the time. Costs me $1500 per year to send my kid to a world class university. I ride a clean train straight into a real urban metropolis that has everything I want and people speak English. Then hop on a bus straight to an awesome beach with friggin' gorgeous women everywhere. Sign me up

Jultorsk's picture

Agree. Although I'm in the 'never Labor' camp myself, whatever Turnbull does it cannot be as bad as if we'd have Shorten on the reins.

I moved here from Europe some years ago, to buy some time (before the white genocide completes) and respite from the insanity of EUSSR. No regrets.

WakeUpPeeeeeople's picture

I'd bet that if the US shipped you some of our "Abos" you would change your tune.

Twodogs's picture

Turnbull and Labor are the same thing. Those rumours of Turnbull wanting to join Labor don't sound ridiculous now that he's brought in all of the Labor policies. The Machurian candidate!

Déjà view's picture

OZ likes imported Chicom hot money...
OZ also was keen to import RABBITS more than 100 years ago...

Need to add Chinese hot money investors to list...
http://panique.com.au/trishansoz/animals/australia-introduced-animals.html

dojufitz's picture

You need to be on TV to help dumb Aussies know how lucky they are! lol!

4freedom78's picture

If Australia is in bad shape, all other place are worse

The Real Tony's picture

Fast forward in time and all that's left is the Chinese and all the locals have left. Vancouver, Canada is about 5 years ahead in time and presently is being turned into a ghost town or ghost city by the Chinese. Enjoy it while it lasts maybe another decade at most. Plan on your next destination stop.

Xena fobe's picture

You are being replaced with voters who will comply. 

The Gun Is Good's picture

Plebes can only rise so high (and not very) after having been largely disarmed after the Port Arthur Massacre False Flag event in '96.... They'll definitely need the help from their mil spec brethren.

Old_Dog's picture

How will the Aussies rise up? I thought they turned in most of their guns already.

Thom Paine's picture

China needs a war.

Australia willing to supply resources to all sides.

Problem solved

Abitdodgie's picture

What a crazy man , what the fuck does he know.

CheapBastard's picture

Is that his real photo?

Or does he really look like that?

Winston Churchill's picture

So Aussies have Nancy boys as well ?

fulliautomatix's picture

Fuck yes. We used to call them poofs, but we're not allowed to any more so we don't.

Vigilante's picture

Just call them 'poustides' then  (singular:poustis)

D Nyle's picture

sad part is Australia competes with America on percentage of Gays and fatties (being hypocritical here, I'm fat), so it would be a limp wrist, slow walk uprising

keep the bastards honest's picture

What does he know? he sold out all postions likely into crypto very profitablly and NOW he rants to bring the market down.

Yen Cross's picture

  You might as well throw in depressed commodity prices, to make it a nice round (8).

Thom Paine's picture

I'm out of equities. Split money between two banks, gold, silver, and hard cash. Denomination atleast half in 20s...the rest in 50s..no 100s

chosen's picture

Aussies let too many foreigners buy their land, which is their country.  Dumb fucks.  Throw another aussie on the barbie.

CheapBastard's picture

Aye that.

2 bedroom condos in Darling Harbor are now > $2 million.