Tag Archives: Asia Crisis

Stevens’ Nonchalance ‘Stunning’

2 Mar

This excellent article by David Uren at The Australian suggests that he may be the only mainstream journalist in Australia who is awake to international developments, and not in awe of every utterance from RBA Governor Glenn Stevens:

If the Reserve Bank raises rates again tomorrow, it will risk repeating the mistake it made in early 2008, when it failed to see the global financial crisis coming.

Now, as then, it is beguiled by soaring commodity prices and believes Australia can shrug off what it sees as essentially local woes in the industrialised world.

In 2008, it was the subprime crisis, and today it is the sovereign debt crisis, focused for the moment in Europe.

Glenn Stevens’s nonchalance about the Greek debt crisis at the recent parliamentary hearings was stunning.

It had been no more than a marginal influence on the RBA’s decision to hold rates steady in February, he said.

“There is a bit of uncertainty about how all of that is going to be resolved. I do not think, myself, at this point, that those issues will directly present a serious problem for Australia. After all, it is a sovereign debt issue for Europe.”

Europe still represents about a quarter of world GDP and its unity and sound finances matter a lot for global financial stability.

US academics Kenneth Rogoff (a former IMF chief economist) and Carmen Reinhart have been among the most influential analysts of the developments of the past two years because of their analysis of crashes in 66 countries stretching back two centuries. “Serial default remains the norm,” they say.

There is often a lag of some years, leading policymakers to believe “this time it is different”.

Rogoff, who did predict the GFC, is currently warning that China is in a bubble, one that he believes will burst within ten years. If so, then so much for the belief that Australia is on the verge of a new China-fuelled mining boom.

Glenn Stevens appears to be in a bubble of his own, oblivious to the ever-growing warnings from leading international economists about the Eurozone crisis, and/or a new Asia Crisis triggered by the inevitable bust of China’s real estate bubble.

A man who apparently does not learn from his epic failures of the past, should no longer be permitted to retain such enormous power over the economy, and the lives of 22 million Australian citizens.

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Abbott: Low-Growth, High Inflation Future

1 Mar

Tony Abbott also sees the danger signs that so many are warning of:

The danger for Australia, as we enter what could turn out to be a long period of 70s-style low growth and high inflation, is not just that the Rudd government has saddled us with debt and deficits but that it’s undoing the reforms on which a golden age was built.

Rudd Labor have tried to smear Tony Abbott’s economic credentials too, trumpeting that he thinks “economics is boring”. Whether that is true or not is beside the point – just because a subject is boring, does not mean you do not understand it.

Tony Abbott is a Rhodes Scholar, with a degree in Economics.  The Rudd Labor economic team, by comparison, are all uneducated imbeciles. Compare their credentials here.

Barnaby is right. Tony Abbott is right as well.

Thank goodness that at least two people in our parliament are aware of the serious economic problem that lies ahead.

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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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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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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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Rogoff Warns of China Crisis

25 Feb

Former chief economist of the IMF, Ken Rogoff, warns of a regional crisis when the China “bubble” collapses:

China’s economic growth will plunge to as low as 2 percent following the collapse of a “debt-fueled bubble” within 10 years, sparking a regional recession, according to Harvard University Professor Ken Rogoff.

“We would learn just how important China is when that happens. It would cause a recession everywhere surrounding” the country, including Japan and South Korea, and be “horrible” for Latin American commodity exporters, he said.

The impacts on Australia – a leading commodity exporter – arising from a collapse in demand from China are obvious.

Rogoff was one of very few economists who predicted the GFC.

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