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Overheating China Can’t Be Cooled

1 Mar

China’s rapidly overheating real estate bubble cannot be cooled, lending further weight to predictions that the Chinese economy will bust inside ten years:

Even among Western analysts who live and work in China, the major role played by municipal governments in fueling China’s increasingly speculative real estate boom is underappreciated. The actions of those local authorities are at the heart of China’s property bubble, and they explain why the central government’s attempts to cool lending and construction are failing.

The key difference between China’s current real estate bubble and the U.S. bubble that popped in 2007 is this: In the U.S., it was individuals and lenders who made overleveraged, speculative bets via subprime mortgages. In China, explained Northwestern University researcher Victor Shih to NPR, the leveraged debt fueling the speculation comes from local governments, which have borrowed trillions of dollars worth of funds from China’s banking system to develop real estate projects in their jurisdictions.

Rudd Labor, Treasury Secretary Ken Henry, RBA Governor Glenn Stevens, and a lazy, blinkered mainstream media can no longer try to blame Barnaby Joyce’s warnings for scaring off the Sino-cyclical angel on which they have pinned all their hopes for economic prosperity.

After all, there is a growing chorus of leading international economists and financiers all around the world who are warning of a China implosion.  Perhaps our talking-head economic commentators, and the EPIC FAILURES currently in charge of the Australian economy, would like to start ridiculing and smearing all of them too?

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Greek Debt Crisis Reflects Global Problem

1 Mar

The Greek debt crisis represents a threat to the entire Eurozone, and ultimately, the global economy:

Simon Tilford, chief economist at the Center for European Reform in London, says the Greek crisis reflects a larger economic problem in Europe. EU members like the Netherlands and Germany have spent too little and their economies are driven by exports. Meanwhile, southern economies like Greece and Portugal have spent too much and amassed debts as a result.

Now that sounds familiar – “…economies are driven by exports… spent too much and amassed debts as a result”. One could be forgiven for drawing a logical conclusion – that the Australian economy, far from being a shining beacon of fiscal prudence, actually encapsulates the worst of the Eurozone’s economic dilemma.

Greece’s problems are also spilling beyond Europe’s borders. The value of the euro currency has plunged for example, which makes American exports – key to the U.S. economic recovery – less competitive.

Ultimately, Tilford says, the Greek problem reflects a world economic problem.

“The eurozone s really just a microcosm of the global problems we see. So unless we see the big countries in East Asia rebalancing away from exports and toward domestic demand, we are not going to generate a self-sustaining global economic recovery,” he said.

But Tilford does not believe Europe is ready, or willing, yet to undertake fundamental economic reforms he thinks are needed to right these imbalances. The region may rescue Greece, he says, but it will only be putting a bandage on a far bigger problem.

Could it be that, as with every other global trend, Down Under Australia has not “escaped” the GFC at all, but is simply running a few years behind everyone else?

Barnaby is right.

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Abbott Backs Joyce

1 Mar

From the Sydney Morning Herald –

Opposition Leader Tony Abbott has defended Barnaby Joyce amid questions over the coalition finance spokesman’s economic credibility:

“Barnaby Joyce has not been responsible for the actual disasters in people’s lives that (Environment Minister) Peter Garrett has been responsible for,” Mr Abbott told Network Ten.

Mr Abbott said he was happy with Senator Joyce’s performance.

“Every member of the team including Barnaby is doing a good job. That doesn’t mean that all of us can’t on occasions lift our game but I’m confident in the team.”

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OECD Economist: Double-Dip Recession Looms

28 Feb

One can only wonder if Treasury Secretary Ken Henry watched the ABC’s “Inside Business” this morning:

One of the OECD’s leading economists says there is a strong chance that the world’s leading economies could quickly slide back into recession.

The deputy director of the OECD’s financial and enterprise affairs, Dr Adrian Blundell-Wignall, has told ABC1’s Inside Business program that the threat of a double dip recession remained because problems in the banking system have not been solved.

“There are many icebergs the ship has to negotiate before we’re out of jail here. This is going to be a 10 year process, not a one year process,” he said.

Dr Blundell-Wignall says many of the banks’ problems have been hidden by changes to accounting rules and their most toxic assets have been shifted to the balance sheets of the big central banks in the US and Europe.

Dr Henry recently stated that the GFC is “over”:

“What people have called the global financial crisis, that has passed“.

Dr Henry went on to predict a “period of unprecedented prosperity” for Australia, one that could “stretch to 2050”.

Dr Henry failed to predict the GFC.

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Joyce: Rudd ‘A Deadly Risk’

28 Feb

Barnaby Joyce has returned fire at Kevin Rudd on Saturday, after the PM suggested that Barnaby should be sacked:

“Surely Mr Rudd must see the paradox of his statement,” Senator Joyce told AAP.

“The person who has now admitted responsibility for a program that has burnt down 100 houses, killed four people, electrified 1000 houses and created fatal death traps and is going to cost $100 million just to fix, is stating that I may appear a risk.

“Quite evidently he is absolutely a risk, a deadly risk.”

Earlier on Saturday, PM Rudd had again tried to discredit Barnaby over his warnings late last year concerning the possibility of the USA defaulting on its massive debts:

“It’s now, I think, 87 days since Mr Abbott took the reckless decision, the risky decision, of making Barnaby Joyce the alternative finance minister of Australia,” Mr Rudd told reporters in Adelaide.

“In just 87 days he said that America could default on its sovereign debt, he said that the Australian states could or would default on their sovereign debt, he has said that the Australian government could or would default on its sovereign debt.

Kevin Rudd is a liar.  Barnaby Joyce never said that Australia could or would “default”.  Instead, he questioned whether we could repay our debt, if the Government continues on its present rapidly-rising trajectory of wasteful (and deadly) spending with borrowed money –

Kevin Rudd is oblivious to the warnings of many acclaimed international economists who share Barnaby’s concerns.

Kevin Rudd also appears ignorant of the deep concerns about US sovereign debt that were expressed by none other than Secretary of State Hillary Clinton just three days ago.  She warned that the US deficit is a risk to national security:

“We have to address this deficit and the debt of the United States as a matter of national security not only as a matter of economics,” Clinton said. “I do not like to be in a position where the United States is a debtor nation to the extent that we are.”

Having to rely on foreign creditors hit “our ability to protect our security, to manage difficult problems and to show the leadership that we deserve,” she said.

“The moment of reckoning cannot be put off forever,” she said. “I really honestly wish I could turn the clock back.”

Kevin Rudd is a proven liar, an economic imbecile, and an arrogant, financially reckless fool.

Barnaby is right.

UPDATE: Abbott backs Joyce, happy with performance

UPDATE 2: ‘Fix the stuff ups’, Joyce Tells Rudd –

‘I am flattered that Mr Rudd would come out on Saturday to go after little old me but I really thought he had other things to do and if he has spare time my humble suggestion is to concentrate on fixing up your stuff ups.

‘If he wants me to make suggestions for his little notebook I will forward my mobile number later.’

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Henry: GFC Is ‘Over’

28 Feb

Earlier this month, Treasury Secretary Ken Henry declared that the Global Financial Crisis is “over”:

“What people have called the global financial crisis, that has passed, I think it’s safe to say,” Dr Henry said. “But that isn’t to say that there will not be further adverse shocks for financial markets down the track and some of those shocks … could be of some significance for individual countries, but I don’t imagine (they would be) shocks of the sort that would be globally significant.”

Remember that claim.

Ken Henry did not see the GFC coming in the first place. He later claimed that “only extraordinarily good forecasters” would have predicted the GFC.

Well, that would be lots of extra-ordinary folk like me then, Ken. Even I could see it coming, from late 2005. And despite the ridicule (familiar story?) of “trained” “expert” financial advisers, I chose to pull all my superannuation out of the sharemarket into cash in May 2007, completely avoiding the global crash that has wiped out the investments and retirement savings of countless millions –

Historical performance chart assumptions: Performance is calculated on an initial investment of $10,000, using entry to exit prices, with distributions reinvested. A 4% contribution fee has also been applied. This information is general information only


And what about those international economists who publicly warned of a looming GFC, Ken?  Men such as professors Ken Rogoff and Nouriel Roubini, and our very own “Dr Doom”, Professor Steve Keen?

You’d think Henry might have learned a few lessons about wide-ranging research… and caution… given his utter failure to foresee what many others did.  So has he learned anything?

Clearly not.

Henry presently remains ignorant of, oblivious to, or (worse) rejects the numerous dire warnings coming daily from all around the world. Not just from Barnaby Joyce, but from many leading international economists – several of whom did predict the GFC – who are now genuinely concerned with multiple threats to the global economy. Everything from the European debt crisis, to the China property bubble.

Scarily, it has become increasingly obvious that Ken Henry is the man who really holds the reins of Australia’s economy, since PM Rudd, Treasurer Swan, and Finance Minister Tanner, are all totally unqualified economic imbeciles. Never forget, all of them were frantically talking up “the inflation genie” danger in 2008, even as the GFC tsunami was breaking over the world economy.

If (when) it all goes pear-shaped… again… Ken Henry must be sacked.

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Stutchbury Sees The Angel Too

28 Feb

Brandishing the headline “Chinese Can Fund Our Boom”, The Australian economics editor Michael Stutchbury sees that Chinese cyclical angel descending from heaven too… and joins in the smearing of Barnaby Joyce:

The method and madness of Barnaby Joyce won’t lie down because it strikes at the heart of Australia’s economic risks and opportunities amid the mother of all mining booms…

The opposition finance spokesman has tweaked his reckless claim that Australia could default on its sovereign debt…

His incoherence invites ridicule. “He does not have a clue what he is talking about,” Wayne Swan responded, mocking Joyce’s reference to “net debt gross, public and private”. The Nationals senator was saying “ridiculous, stupid and damaging” things about Australia’s debt position. Swan’s Treasury head Ken Henry has accused Joyce to his face of “a gross oversimplification of economic understanding”.

Doesn’t have a clue, ‘eh Wayne?  Remind us again how your Bachelor of Arts (thence career political hack) compares with Barnaby’s qualifications?

As for Ken Henry’s arrogant comments, perhaps Mr Stutchbury might care to do a little research. He might learn just how many international economists directly refute Henry’s confident visions of a multi-decade China Miracle.

Mr Stutchbury goes on to imply that Barnaby poses a threat to that Chinese angel descending, thanks to his warnings about Australia’s levels of debt:

So Joyce now begins with private debt, particularly Australia’s gross foreign debt of $1.2 trillion, or about 100 per cent of gross domestic product.

At $638bn or 47 per cent of GDP, Australia’s net foreign debt is one of the highest in the developed world and much higher than in 1986 when Paul Keating warned that Australia could become a banana republic.

You’d think that fact might concern Mr Stutchbury. Not at all. Immediately comes the justification:

…

Continue reading ‘Stutchbury Sees The Angel Too’

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Can We Even Pay The Interest?

27 Feb

Estimated (E), Projected (P)

It seems that every man and his dog… except Barnaby Joyce… happily takes for granted the popular claim that Australia’s sovereign debt levels are nothing to worry about.  But have you ever stopped to think about whether we really can pay back the debt?

I made the chart above using the data from the Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) 2009-10 Budget statements. It shows Treasury Secretary Ken Henry’s projected Interest on debt for this financial year, and the following three years. Those are interest-only repayments that Kevin Rudd incurred, and now we-the-taxpayers have to pay.

Doesn’t look too bad, you say?  An Interest bill starting at $8.26 Billion for 2009-10, rising to $15.28 Billion for 2012-13? Surely your $900 “bonus” cheque, and your dodgy roof insulation from the Fairy Ruddfather, make paying this Interest bill worthwhile?

To put it into perspective, I’ve put together another chart (below).  It shows the Australian Government headline Surplus / Deficits going back to 1996, and adds in the projected Interest on debt (in blue) from the above chart. Simply click on the chart to enlarge –

As you can see, Ken Henry’s projected Interest on debt alone is greater than many of the 12 years of Howard Government surpluses. And they came during an unprecedented mining boom.

One other thing. Can anyone really believe Ken Henry’s projections?  This is a man who could not see the GFC coming.  And even now, he is confidently predicting a “Golden Age” of “unprecedented prosperity” for Australia, one that could “stretch to 2050”. All thanks to his belief in a 4o year continuous boom in China.  He is clearly ignorant of the fact that more and more leading international economists… including some who did predict the GFC… are now predicting that China is a bubble that will bust within ten years.

Paying back the projected Interest-only will obviously be a big challenge. So try to imagine how we are ever going to pay back the principal too.

Barnaby Joyce has recently stated that it would take eight (8) consecutive years of $19 Billion surpluses to bring the budget back to earth.  As you can see from the chart above, the Howard Government achieved a budget surplus that big only 3 times… in 12 years.

It is easy to see why Barnaby is so concerned about our ever-rising debt under Rudd Labor.

Because quite simply, we can not pay it back.

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Clinton: US Deficit A National Security Risk

27 Feb

US Secretary of State Hillary Clinton says that “outrageous” advice from former Federal Reserve Chairman Alan Greenspan helped create record U.S. budget deficits that put national security at risk:

“We have to address this deficit and the debt of the United States as a matter of national security not only as a matter of economics,” Clinton said. “I do not like to be in a position where the United States is a debtor nation to the extent that we are.”

Having to rely on foreign creditors hit “our ability to protect our security, to manage difficult problems and to show the leadership that we deserve,” she said.

“The moment of reckoning cannot be put off forever,” she said. “I really honestly wish I could turn the clock back.”

Barnaby Joyce has been pilloried mercilessly for daring to voice concerns about the USA and its massive debts. Even though many acclaimed international economists agree with his concerns.

In light of Secretary of State Clinton’s testimony, will Rudd Labor and the Australian mainstream media now apologise for their smears, abuse, and ridicule of Senator Joyce?

More importantly, will Lindsay Tanner, Wayne Swan, Ken Henry, Glenn Stevens, and the media now pause to properly consider Barnaby’s prescient warnings about an impending Day of Reckoning for Australia?

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Soros: ‘Very Cautious’ On China

27 Feb

International financier George Soros has confirmed concerns expressed by leading international economists on the possibility that the Chinese economy is in a “bubble”:

A hard landing for Chinese markets could come, Soros said, due to a significant increase in supply offset by falling demand. China’s regulatory authorities have managed the situation well thus far, he said, but he’s concerned about how various countries are maneuvering in the face of global imbalances…

“I’m very cautious, until the economy cools off a little“…

“The overheating, the inflation, the harsh policy tightening is happening right now and it will continue to happen until the economy cools off. And with this explosion of credit, there are bound to be non-performing loans in due course. The extent depends on whether it is a hard landing or soft landing…”

Speaking about the global economic recovery, Soros commented:

“The recovery has been anemic; this was to be expected. But now, the increasing concern about rising sovereign debt is working against continued stimulus. And that increases the threat of a double dip. The rising concerns on sovereign debt increases the prospect of a double dip.”

Asked whether he thought that the major economies have taken sufficient action to address fundamental problems of the world economy in the wake of the Global Financial Crisis, such as global imbalances, Soros responded:

No. The global imbalances have continued to increase. Notably, China continues to run a very big current account surplus. That is one reason why an appreciation of the renminbi would be desirable. The task of correcting those imbalances hasn’t yet begun to be addressed.

Meanwhile, in Australia all our economic leaders remain convinced of a China-funded economic miracle, confidently expecting that the Chinese economy will give us up to 4 more decades of “unprecedented prosperity”.

It seems only Barnaby Joyce has his head out of the sand.

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