Tag Archives: China bubble

China Nearly Bankrupt, “Every Province In China Is Greece”, Says Chinese Economist

17 Nov

China is “on the brink of bankruptcy”.

Your humble blogger has been warning of this reality ever since beginning this blog in early 2010.

And along with those warnings, has bashed the many “experts” like RBA Governor Glenn Stevens and former Treasury secretary Ken Henry who couldn’t see it … just as none of them could see the GFC coming either.

Here’s a mere handful of examples –

Feb 2010:

Rogoff Warns of China Crisis
Henry Sees Cyclical Angel Descending
Soros: ‘Very Cautious’ On China
Henry: GFC is ‘Over’

March 2010:

Overheating China Can’t Be Cooled
Stevens: ‘Risk Of Serious Contraction’ Passed
Official: China Bubble ‘Indisputable’
Premier Wen: ‘Latent Risk’ In China’s Banks
China: ‘Large Financial Crisis’ By 2012

China’s Banks In Trouble
China Warns Of Double Dip Recession
China Biggest Worry For Markets
China ‘Greatest Bubble In History’
Ten Ways To Spot A Bubble In China
Global Turmoil Looms: Keating
Australia’s ‘Goldilocks’ Economy

April 2010:

China Crisis ‘A Lot Worse Than People Expect’
China’s Debt Bubble: When Will The Ponzi Unravel?
China Losing Control Of Economy
China On ‘Treadmill To Hell’ Amid Bubble
Bubble Proof: Chinese Maids Buying Houses

May 2010:

Don’t Bet The House On China
China Brakes, Australia Breaks

August 2010:

Is China Bankrupt?

April 2011:

Costello: Wayne’s World A Parallel Reality

May 2011:

Bloomberg: ‘Downunder Hypocrites Bet All On China’s Boom’
Swan Hides Budget Risk
Barnaby: “God Help You When The Prices Go Down”

June 2011:

China’s Economy At Risk Of “Hard Landing”, 60% Chance of Banking Crisis By Mid-2013
McCrann: America Is Now Turning Darker, China Can Crash The Whole Economy
China Lending Tumbles, Signals Slowing Economy
Swan: Not Drowning, Waving

July 2011:

Here Comes Swan’s Black Swans: Chinese Bad Debt “Bigger Than Stated”
One Chart Debunks Treasury’s Growth Forecasts
Still Pointing To The IMF’s Opinion Now, Wayne?

August 2011:

How China Will Crash, Explained In 700 Words
Swan Tells Parliament 5 Lies In 2 Short Sentences

October 2011:

Australian Media 4 Months Late On China Bust Warning

November 2011:

Gillard Offers Borrowed Money To Bail Out Europe
Wayne’s Budget Is Already Shot To Hell

Now, confirmation of the truth about China’s Ponzi-finance bubble economy slips out from behind the regime’s Red Curtain.

All thanks to a lecture where the lecturer did not realise he was being recorded.

Larry Lang, chair professor of Finance at the Chinese University of Hong Kong. (Wu Lianyou/The Epoch Times)

From the Epoch Times (reproduced here in full):

China’s economy has a reputation for being strong and prosperous, but according to a well-known Chinese television personality the country’s Gross Domestic Product is going in reverse.

Larry Lang, chair professor of Finance at the Chinese University of Hong Kong, said in a lecture that he didn’t think was being recorded that the Chinese regime is in a serious economic crisis—on the brink of bankruptcy. In his memorable formulation: every province in China is Greece.

The restrictions Lang placed on the Oct. 22 speech in Shenyang City, in northern China’s Liaoning Province, included no audio or video recording, and no media. He can be heard saying that people should not post his speech online, or “everyone will look bad,” in the audio that is now on Youtube.

In the unusual, closed-door lecture, Lang gave a frank analysis of the Chinese economy and the censorship that is placed on intellectuals and public figures. “What I’m about to say is all true. But under this system, we are not allowed to speak the truth,” he said.

Despite Lang’s polished appearance on his high-profile TV shows, he said: “Don’t think that we are living in a peaceful time now. Actually the media cannot report anything at all. Those of us who do TV shows are so miserable and frustrated, because we cannot do any programs. As long as something is related to the government, we cannot report about it.”

He said that the regime doesn’t listen to experts, and that Party officials are insufferably arrogant. “If you don’t agree with him, he thinks you are against him,” he said.

Lang’s assessment that the regime is bankrupt was based on five conjectures.

Firstly, that the regime’s debt sits at about 36 trillion yuan (US$5.68 trillion). This calculation is arrived at by adding up Chinese local government debt (between 16 trillion and 19.5 trillion yuan, or US$2.5 trillion and US$3 trillion), and the debt owed by state-owned enterprises (another 16 trillion, he said). But with interest of two trillion per year, he thinks things will unravel quickly.

Secondly, that the regime’s officially published inflation rate of 6.2 percent is fabricated. The real inflation rate is 16 percent, according to Lang.

Thirdly, that there is serious excess capacity in the economy, and that private consumption is only 30 percent of economic activity. Lang said that beginning this July, the Purchasing Managers Index, a measure of the manufacturing industry, plunged to a new low of 50.7. This is an indication, in his view, that China’s economy is in recession.

Fourthly, that the regime’s officially published GDP of 9 percent is also fabricated. According to Lang’s data, China’s GDP has decreased 10 percent. He said that the bloated figures come from the dramatic increase in infrastructure construction, including real estate development, railways, and highways each year (accounting for up to 70 percent of GDP in 2010).

Fifthly, that taxes are too high. Last year, the taxes on Chinese businesses (including direct and indirect taxes) were at 70 percent of earnings. The individual tax rate sits at 81.6 percent, Lang said.

Once the “economic tsunami” starts, the regime will lose credibility and China will become the poorest country in the world, Lang said.

Several commentators have expressed broad agreement with Lang’s analysis.

Professor Frank Xie at the University of South Carolina, Aiken, said that the idea of China going bankrupt isn’t far fetched. Major construction projects have helped inflate the GDP, he says. “On the surface, it is a big number, but inflation is even higher. So in reality, China’s economy is in recession.”

Further, Xie said that official figures shouldn’t be relied on. The regime’s vice premier, Li Keqiang for example, admitted to a U.S. diplomat that he doesn’t believe the statistics produced by lower-level officials, and when he was the governor of Liaoning Province “had to personally see the hard data.”

Cheng Xiaonong, an economist and former aide to ousted Party leader Zhao Ziyang, said that high praise of the “China model” is often made on the basis of the high-visibility construction projects, a big GDP, and much money in foreign reserves. “They pay little attention to things such as whether people’s basic rights are guaranteed, or their living standard has improved or not,” he said.

Behind the fiat control of the economy, which can have the appearance of being efficient, there is enormous waste and corruption, Cheng said. It means that little spending is done on education, welfare, the health system, etc.

Cheng says that for the last decade the Chinese regime has accumulated its wealth primarily by promoting real estate development, buying urban and suburban residential properties at low prices (or simply taking them), and selling them to developers at high prices.

According to Cheng, the goals of regime officials (to enrich themselves and increase their power) are in direct conflict with those of the people–so social injustice expands, and economic propaganda meant to portray the situation as otherwise prevails.

Few scholars inside the country dare to speak as Lang has, Cheng said. And that’s probably because he has a professorship in Hong Kong.

For those with ears to hear – especially regular readers who know that the same topics have been covered here with regard to our own government, and their constantly fiddled economic figures – the bolded words above will ring with a profound sense of deja vu.

Now Wayne … about our economy and sovereign balance sheet. The ones that you keep telling us are “the envy of the world”.

And about those “truly extraordinary” growth forecasts, based on former Treasury secretary Ken Henry’s much-touted belief in 40 years of China-fuelled “prosperity”.

And about that promised budget surplus of $3.5 billion (for one year only) in 2012-13.

Wayne?

Wayne??

WAYNE?!?!

[ … crickets … ]

Australian Media 4 Months Late On China Bust Warning

26 Oct

Top feature story at The Australian today:

‘Hard landing’ coming in China, warns Nouriel Roubini

AUSTRALIA faces the threat of a “hard landing” in China within two years and the growing risk of being hit by a double-dip global recession sparked by the European debt crisis, one of the world’s leading economists said yesterday.

Nouriel Roubini, from New York University and widely known as “Dr Doom” for predicting the global financial crisis of 2008, told the opening day of the Commonwealth Heads of Government Meeting business forum in Perth that China’s economic growth model was unsustainable, and he predicted a sharp slowdown in 2013.

The downturn would have a “major effect” on Australia by driving down commodity prices and denting economic growth.

As reported on barnabyisright.com way back in June:

China’s Economy At Risk Of “Hard Landing”, 60% Chance of Banking Crisis By Mid-2013

Nouriel Roubini, one of the dozen or so economists who predicted the GFC, has just given an ominous warning for all those – like Wayne Swan, the Treasury department, former Treasury secretary (and now personal adviser to Gillard) Ken Henry, and the RBA – who are blindly banking on a never-ending China boom, with continuous record high terms-of-trade, to get us out of their $1.59 million per hour Interest-only debt hole.

The Australian mainstream media continues its fine record of keeping us ill- and under-informed.

How China Will Crash, Explained In 700 Words

17 Aug

Vitaliy Katsenelson, author of the Little Book of Sideways Markets, and Chief Investment Officer at Investment Management Associates Inc, explains simply and concisely how China will crash.

In my opinion, this is a must-read for all Australians (reproduced in full below, from Forbes magazine):

How China Will Crash And Burn

Party rulers in China are trapped in a position that chess players deeply fear — zugzwang — where any move made puts you at disadvantage. In China, the potential cost of both action and inaction is economic collapse.

China is slowly starting to face the consequences of its actions — loans grew over 30% a year over the last few years — and inflation is rising fast. Inflation in developed countries is unpleasant, but it is tolerable. For a developing country — and China, despite its size, is still a developing country — it can be catastrophic. In developed countries, we spend two or three times less on food as a percentage of our income as do people in developing countries.

Therefore, though food inflation is unpleasant, we have a much greater tolerance (margin of safety) for it. While food inflation the U.S. can mean fewer trips to restaurants or no summer vacation, food inflation in China leads to hunger.

The Chinese government is desperately trying to put the brakes on the economy. It is shutting off lending to land developers and has raised bank reserve requirements five times this year. However, its success on the inflation front will likely lead to a slowdown of the economy and high unemployment. Ironically, those were the issues party planners tried to cure when they stimulated the hell out of the economy over the last few years.

China bulls are arguing that the almighty Chinese government will be able to soft-land the economy. Unlikely, I’d say. Forced lending was at the core of Chinese economic growth. Simply put, there is too much debt to go bad. According to Ernst and Young, one-third of the $700 billion in loans taken out by local governments may face repayment problems. The People’s Bank of China estimates that Chinese banks’ exposure to local government loans is 14 trillion yuan ($2.2 trillion), according to the June 17 South China Morning Post.

Once lending is cut off, property prices will stop appreciating (and likely collapse — that is what usually happens in a Ponzi scheme). Also, the overcapacity in the industrial sector and commercial real estate will come to the surface. And suddenly everyone will discover that the venerable emperor has no clothes.

I often hear the argument that China will not have a real estate crisis of U.S. proportions because home and condo owners have to put 30-40% down when they buy. So where do people get the money to buy a house that costs, on average, 8 times their annual income (a figure several times higher than in the U.S.)? Some of it comes from savings, and some comes from borrowing from relatives.

Let’s pause for a second. In the 1990s, the Chinese banking system basically collapsed. To revive it, the Chinese government took bad loans from banks’ balance sheets and put them into off-balance-sheet vehicles (Enron would be proud of that financial ingenuity). Banks started to function as though nothing had happened. To finance the off-balance-sheet assets, the government set deposit interest rates at very low levels: 1% or so. In a country with a very high savings rate and 5% inflation, this resulted in a 4% annual loss of purchasing power.

Chinese consumers were punished severely over the last 10 years for the banking crisis of the late ’90s. And they’ll be punished even more soon. Keeping money in the bank didn’t make that much sense, and investment alternatives were limited. However, they could invest in an asset that supposedly never declines in price – a house or condo. So they did.

As China slams the brakes on the economy and as housing prices fall, the banks will lose plenty of money. But more importantly, it is the people who bought tremendously overpriced houses, and their relatives who lent them money, who will lose. The wealth and hard work of more than one generation will be lost, and this kind of pain leads to political unrest. That is the Chinese blacks swan!

See also Mr Katsenelson’s excellent slide-show presentation – China: The Mother of all Grey Swans

Still Pointing To The IMF’s Opinion Now, Wayne?

24 Jul

Remember when Treasurer Swan repeatedly pointed to cherry-picked comments by the IMF, as though they should somehow be construed as proof of Labor’s economic management throught the GFC?

In light of his government’s/the Treasury’s “truly extraordinary” assumptions underlying the “stratospheric” growth forecasts in the May budget, any bets that Wayne won’t be pointing out what the IMF is saying now, about China’s darkening economic prospects?

From Dow Jones Newswires via the Australian (emphasis added):

China’s manufacturing sector shrinks, HSBC’s preliminary PMI survey signals

HSBC’S preliminary survey of China’s factories indicated manufacturing activity in the world’s second-biggest economy in July declined from last month, the first such contraction in a year.

The survey comes at a time when various economic indicators in China are pointing in different directions, leaving market participants unsure if they should be more concerned about slowing growth or high inflation.

The International Monetary Fund released its annual review of China today, warning that inflation, real-estate bubbles and weak monetary controls pose “significant risks to financial and macroeconomic stability” in the world’s second-biggest economy.

“Significant risks” to the financial and economic stability of the nation whose massive, regional “shadow-banking” credit-fuelled “stimulus” in the GFC was almost solely responsible for our not following after the USA, UK, and Europe.

I think that I can safely guarantee that you won’t be hearing Wayne trumpet that comment from the IMF.

One Chart Debunks Treasury’s Growth Forecasts

21 Jul

Our erstwhile Treasurer keeps insisting that our economy is strong, that the budget growth forecasts are sound, that he roolly roolly will get that one year of budget surplus in 2012-13, and go back to sleep children, everything’s fine.

Even Dear Leader Julia has been in on the act, trying to instill con-fidence … while flogging the dead horse called “carbon tax” to the public.

Now, recently we brought your attention to the Macquarie Economic Research debunking of the Treasury department’s growth forecasts. That is, the assumptions underpinning the May budget “estimates” and “projections”.

“Truly extraordinary” assumptions for “stratospheric” growth, were some of the bold words they used.

In the RBA’s latest release Chart Pack, there is one single chart that tells you all you need to know about the Treasury assumptions of a neverending China-fuelled “boom” in investment in Australia – the quarry to the world.

And what is that tell-all chart?

China’s credit and money supply growth:

Sorry Wayne.

The credit-fuelled China boom is already over.

It’s just a matter of time before reality hits.

Not quite convinced?

Ok then, here’s another. China’s industrial production.

Is China producing as much steel? Or making as much crap, as it was pre-GFC?

Nope.

The key China trends are all down.

It’s just a matter of time.

As we have been pointing out here for quite a while.

Bye bye Swanny.

Bye bye economy.

UPDATE:

Lo and behold! Maybe Treasury is reading barnabyisright.com?

From the Australian this morning:

Treasury’s warning on China as IMF fears Eurozone debt crisis will infect global economy

Treasury has warned the Gillard government about emerging threats to the Chinese economy, which shielded Australia from the global recession and continues to underpin its resilience in the face of global economic weakness.

The warning about China’s runaway inflation, contained in a working paper posted on Treasury’s website yesterday, could have ramifications for Australia’s resources-rich economy, which is dependent on the highest terms of trade in 140 years.

Although the paper is understood to have been prepared in May, the situation has worsened and China’s efforts to control inflation have become more urgent in the past two months.

The warning on China came as the International Monetary Fund cautioned that the debt contagion in Europe could infect the global economy, and the nation’s largest supermarket operator, Woolworths, warned that the year ahead would be one of the company’s most challenging as Australians spent less and tried to save more.

Would that be the same “inflation” concern that gave rise to this RBA chart, by any chance –

Clowns.

Treasury, that is.

Banging on about “inflation” in China (which as the chart shows, has been worse). When the real problem in China is that the massive amount of “credit” (ie, debt) issued to prop up their economy through the GFC, has simply fuelled overinvestment / malinvestment and thus the world’s biggest bubble in real estate … as we see in this RBA chart –

Did you notice that the chart on the right – “Floor space sold” – looks to have pretty much topped out?

Hmmmm, what happens to a property bubble when the amount actually selling ceases to rise … anyone, anyone?

Buehller, Buehller?

And what did Wayne have to say about the warning from Treasury about China and Europe?

The comments prompted the Treasurer to urge Europe to get its house in order.

ROFL.

Here Comes Swan’s Black Swans – Chinese Bad Debt “Bigger Than Stated”

8 Jul

Remember our Wayne’s tireless refrain on the economy?

That investment (mostly from China) in our resources sector will ensure a budget back in surplus (for one year), and “lasting prosperity” via an endless “boom”?

Remember how he remains ignorant of all the many warnings about China?

(And, about our second largest trading partner, Japan?)

Including this one, just before the May budget:

“The market is telling you that something is not quite right,” Faber, the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong today. “The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months.

Faber joins hedge fund manager Jim Chanos and Harvard University’s Kenneth Rogoff in warning of a crash in China.

China is “on a treadmill to hell” because it’s hooked on property development for driving growth, Chanos said in an interview last month. As much as 60 percent of the country’s gross domestic product relies on construction, he said. Rogoff said in February a debt-fueled bubble in China may trigger a regional recession within a decade.

Remember the devastating critique of the May budget by Macquarie Research? The one that said Wayne’s (ie, Treasury’s) forecasts for business investment – the key assumption underpinning all the budget projections – are “truly extraordinary”?

Upbeat growth forecasts from the Treasury and the Reserve Bank of Australia (RBA) are based on very optimistic forecasts for private sector business investment.

The RBA and Treasury forecasts for business investment over the next couple of years are truly extraordinary.

In our opinion, achieving such stratospheric growth would be extremely difficult.

By putting all their eggs in the mining investment basket, policymakers appear to have no Plan B for what will support the economy if investment disappoints. And this note provides three clear reasons why one should be cautious about counting those mining investment chickens before they are hatched.

Well, on July 4 the international ratings agency Moody’s – the same one that has downgraded our banks and effectively declared them “Too Big To Fail – dropped another bomb on Wayne’s parade.

It says that 10% or more of Chinese GDP is bad debt, and claims that the “China debt problem (is) bigger than stated”.

From Moody’s Investors Service, via ZeroHedge (emphasis added):

Moody’s Investors Service says that the potential scale of the problem loans at Chinese banks may be closer to its stress case than its base case, according to an assessment that the rating agency conducted following the release of new data by China’s National Audit Office (NAO).

Since these loans to local governments are not covered by the NAO report, this means they are not considered by the audit agency as real claims on local governments. This indicates that these loans are most likely poorly documented and may pose the greatest risk of delinquency,” the analyst adds.

Moody’s report estimates that the Chinese banking system’s economic non-performing loans could reach between 8% and 12% of total loans, compared to 5% to 8% in the rating agency’s base case, and 10% to 18% in its stress case.

But it’s not just Moody’s now warning about China’s banking system.

From MarketWatch (emphasis added):

China’s debt woes point to bank bailout

China’s banking system will require an eventual bailout by the central government, according to some analysts, who said figures released last week on the size of local-government borrowings point to the need for a rescue.

Credit Suisse economist Dong Tao said the numbers backed up concerns he’s been voicing for the past two years on China’s toxic loan problem.

“Ultimately, we believe that the central government will need to separate the local government’s bank debt from banks’ balance sheets and recapitalize the banks,” Tao said in a note following the release of data on China’s local-debt obligations by the National Audit Office.

Reuters reported last month that Beijing is considering a bailout that could see the central government accept to 2 trillion to 3 trillion yuan of local governments’ outstanding debt in an effort to ensure against a mass default, which could bring down the economy. See report on China’s initial bailout plans.

Stress is building within the system, Tao said, as local governments face a growing pile of debts coming due at a time of declining land sales, normally a key revenue stream for the provincial authorities.

Meanwhile, local governments are also having trouble finding new sources of lending as state-controlled banks grow increasingly wary of their deteriorating ability to service existing debt.

Standard Chartered said last week there were early signs of major financial distress building at the local government level.

Anecdotes of local-government investment vehicles in Shanghai and in Yunnan province struggling to meet loan payments “signal the beginning of the wave of difficulties,” Standard Chartered’s China economist Stephen Green said in a note Thursday.

And Bloomberg reports that both Fitch Ratings and Standard & Poors have also flagged serious concerns:

Fitch Ratings lowered its outlook on China’s AA- long-term, local-currency rating to negative from stable on April 12 because of the risk the government would have to bail out banks. As much as 30 percent of loans to local government entities may go bad, accounting for the biggest source of banks’ non- performing assets, Standard & Poor’s said that month.

Now, are you one of those who doubts that China’s “boom” is/was driven by massive borrowing by local (regional) Chinese banks to finance over-investment in “infrastructure” – the mother of all real estate bubbles world wide?

Then take a look at these pictures from Time magazine, showing just how massive speculative over-investment in property construction has left China with literal ‘ghost cities’:

Click to visit the complete Time photo series

If like many readers you have skimmed over this article and not bothered to click on … and carefully read … all of the links embedded in this article, then you are doing yourself and your loved ones a disservice.

Because you are about to leave this site … ignorant.

With only part of the story.

Do not be a Goose.

Like Swan.

Educate yourself.

Lots of labour has gone into collating all these news articles from around the world.

Over many, many months.

Do yourself a favour, and become better educated about reality than the buffoon who lives in Wayne’s World.

So that you too can see with crystal clarity the gaggle of Black Swans that are soon to blot out our Aussie sun.

Then you too can help to warn others.

Because rest assured – just as with the GFC – you will get no forewarnings from our “expert” economists when the SHTF.

Or from our “authorities”.

Or from their sycophants in the mainstream “business” media.

Your superannuation depends on your being properly informed.

Because both “sides” of politics are planning to steal itwhen the SHTF

Barnaby Was Right – U.S. Congressional Budget Office, China Central Bank Confirm

20 Jun

From Bloomberg:

A U.S. government default on its debts would be a “dangerous gamble” that could easily cost taxpayers billions of dollars, the head of the Congressional Budget Office said today.

Doug Elmendorf told reporters that if the investors who buy federal debt begin demanding even modestly higher interest rates, to compensate for additional risk, it could quickly add more than $100 billion to the interest payments the government must make on its debt.

“It is a dangerous gamble because any government that has borrowed as much as ours has borrowed, and will need to borrow as ours will need to borrow, cannot take the views of its creditors lightly,” Elmendorf said today…

Indeed. One certainly can not take one’s creditors views lightly.

And America’s #1 creditor has said the USA is “playing with fire” in even considering a “technical” default on its debts (from Reuters):

Republican lawmakers are “playing with fire” by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China’s central bank said on Wednesday.

The idea of a technical default — essentially delaying interest payments for a few days — has gained backing from a growing number of mainstream Republicans who see it as a price worth paying if it forces the White House to slash spending, Reuters reported on Tuesday.

But any form of default could destabilize the global economy and sour already tense relations with big U.S. creditors such as China, government officials and investors warn.

Li Daokui, an adviser to the People’s Bank of China, said a default could undermine the U.S. dollar, and Beijing needed to dissuade Washington from pursuing this course of action.

I think there is a risk that the U.S. debt default may happen,” Li told reporters on the sidelines of a forum in Beijing. “The result will be very serious and I really hope that they would stop playing with fire.”

Of course, the reality is that the USA is already defaulting on its debts.  By printing hundreds of billions of new dollars, they are devaluing the USD … meaning that holders of US Treasury bonds will be repaid in money that cannot buy as much as it used to.  2012 US Presidential candidate, and Chairman of the House Financial Services Subcommittee on Domestic Monetary Policy, Congressman Ron Paul has confirmed that this is exactly what is happening:

America is defaulting on its debts.  And the Chinese are not happy.

As a gentle reminder, here is what Senator Barnaby Joyce had to say about the US and its debts, almost 18 months ago (from the Brisbane Times, October 23, 2009):

The Nationals Senate leader Barnaby Joyce is openly canvassing an economic upheaval that would dwarf the current global financial crisis, triggered by the US defaulting on its sovereign debt within the next few years.

In unusually pessimistic comments for a senior political figure, Senator Joyce said the US Government was running such large deficits and building up so much debt that it was in a similar position to Iceland or Germany before World War II.

Senator Joyce insisted yesterday that the dangers to the global economy from the run-up in US private and public sector debt were real and should be debated.

”It is the elephant in the room,” Senator Joyce said. ”This is a huge risk that Australia faces. What is the game plan, what happens if it comes unstuck?

And from the Sydney Morning Herald, December 11, 2009:

The Opposition finance spokesman, Barnaby Joyce, believes the United States government could default on its debt, triggering an ”economic Armageddon” which will make the recent global financial crisis pale into insignificance.

Senator Joyce told the Herald yesterday he did not mean to alarm the public but there needed to be a debate about Australia’s ”contingency plan” for a sovereign debt default by the US or even by a local state government.

”A default by the US means complete economic collapse around the world and the question we have got to ask ourselves is where are we in that,” Senator Joyce said.

His warning came as the Rudd Government ramped up its attack on Senator Joyce as an economic extremist…

Senator Joyce said the chances of a US debt default were distant but real and politicians were not doing the electorate a favour by refusing to acknowledge the risk.

Barnaby was right.

100% right.

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