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Tag Archives: GFC2
China’s Vice Premier “Certain” Of Long-Term Global Recession
24 NovReally looking forward to seeing Waynes’ massaged MYEFO now.
From Business Spectator:
China triggers the recession alarm
Last night’s fall in global share and commodity markets plus the slump in the Australian dollar will affect not just Australian superannuation balances and consumer confidence, but will extend deep into sectors of the Australian dwelling market. If you are about to buy or sell an apartment or house, you need to be aware of the forces that have been unleashed.
The most dramatic contributor to last night’s drop, from an Australian point of view, was not the growing frustration with Europe; it was not the global banking crisis; and it was not the fact that the US must introduce mandatory spending cuts. All of those events were very important, but what spooked our part of the world was the statement by Chinese Vice Premier Wang Qishan that a long-term global recession is certain to happen and China must focus on domestic problems.
And from CNN Money:
European stocks were getting slammed Monday, after Moody’s Investors Service issued a dire warning on French bonds, and Asian markets were dampened by pessimistic remarks made by a high-ranking Chinese official.
…
“China’s Vice Premier Wang Qishan said that the current economic situation is extremely serious and is certain that a global recession triggered by the international crisis will last a long time,” wrote the Deutsche Bank analysts in a report to investors.
And the “hot money” (ie, speculator-driven) that had been keeping the AUD artificially strong … until late 2008 … and, until recent weeks … is not just fleeing Australia.
It’s fleeing China too.
From the Wall Street Journal:
Hot Money’s Hurried Exit From China
More signs of bearish sentiment on China, this time from cross border capital flows.
Data released Monday showed China’s banks were net sellers of foreign currency in October (in Chinese). That’s unusual because China’s trade surplus, combined with inflows of direct investment, mean the mainland’s banks are almost always net buyers of foreign currency.
Indeed, the numbers normally suggest that in addition to the trade surplus, banks are buying up speculative capital flowing into the economy. Tuesday’s numbers suggest that now speculative capital might be exiting China. That makes sense given diminished expectations of yuan appreciation, falling property prices and a deepening crisis in Europe pushing investors away from risky positions.
A comparison with past occasions when hot money has flowed out of China provides little reassurance. Netting out the trade surplus from banks’ FX purchases gives a rough approximation of the scale and direction of capital flows. The last time it turned negative was May 2010, when fears of a double dip downturn were on the rise. The time before: the eve of the financial crisis in August 2008.
Come on now Wayne.
Out with the MYEFO already.
Surely all this is nothing for the World’s Greatest Finance Minister to handle:
Australian Media 4 Months Late On China Bust Warning
26 OctTop 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.
World Bank: We’ve Entered “New And Dangerous Phase”
16 AugFrom the Australian:
The world has moved into a “new and more dangerous phase” of economic uncertainty because of the European sovereign debt crisis, according to World Bank president Robert Zoellick.
In an exclusive interview with The Weekend Australian, Mr Zoellick said the European economic problems were far more intractable and serious than the US economic problems.
Amazing, isn’t it.
The profound and mystical ability of the world’s elite bankers and economists to state the bleeding obvious.
After the fact.
When “Outspoken” Is A Perjorative For “Truth-Teller”
12 Aug
Outspoken former RBA board member Warwick McKibbon (emphasis added):
Ditch the delusion that stimulus saved us from GFC
The sell-off in global sharemarkets reflects the realisation that debt problems in advanced economies are serious, but it reflects more than this. For some time the fiscal fragility in the global economy has looked like a slow-motion train wreck …
Australia is now likely to be hit with a second global shock. This is different from the GFC in a critical respect. It is a concern over excessive government debt so the response in Australia should not entail a new fiscal package …
Bad fiscal design always has an unexpected cost. Why is a flood tax being introduced just as the economy slows? The forecast that this would help dampen the boom is now likely to be wrong. There clearly should be an urgent review of the mismatch between spending commitments in the pipeline and highly uncertain revenue. This is essential to better understand future fiscal vulnerability.
The delusion that what saved the Australian economy from the GFC was entirely fiscal policy needs to be jettisoned.
Outspoken chairman of the Future Fund – the government fund containing public servants’ super, that Barnaby has warned will be raided to pay down debt – says that the global sovereign debt crisis could take 20 years or more to “play out” (emphasis added):
The chairman of the $75 billion Future Fund has warned the debt crisis engulfing Europe and the United States could take at least 20 years to resolve, causing ongoing market volatility.
David Murray warned the post-global financial crisis environment would continue to be characterised by a series of market shocks, with investor uncertainty heightened by concerns over the ability of political systems to contain any emerging meltdown.
And he sounded the alarm on the level of government and private sector debt in Australia, saying they both needed to be reduced, given the capacity of Australia to be caught up in a new global financial rout.
“The global financial crisis was caused by excessive debt which had built up in the world at both the government level and in the private sector in developed countries,” Mr Murray told ABC radio.
“The sorting out of that problem is something that could take up to 20 years. As that post crisis environment unfolds we will see continuing events such as we’ve seen in the past couple of weeks.”
“Outspoken” is another of those words wielded as a weapon.
In modern, politically-correct Unspeak, it is the latest putdown label for “truth-teller”.
When someone speaks the truth, contrary to the “mainstream wisdom” – especially someone like Warwick McKibbin or David Murray holding a public position, who cannot be “politely” attacked more viciously – then they/their viewpoint is labelled as “outspoken”.
The unspoken implication of labelling someone as outspoken … is that we should not speak out.
That we should all be good, silent, obedient slaves.
I Told You So
6 Aug
From Reuters:
The United States lost its top-notch AAA credit rating from Standard & Poor’s on Friday in an unprecedented reversal of fortune for the world’s largest economy.
Five days ago, prior to the US raising their debt ceiling, I wrote this:
Why The US Is Doomed, And The Debt Ceiling “Crisis” Is Irrelevant
If you missed it, click on the link above to see the chart from the New York Times which explains why – whether it be now, or later – the US economy is doomed.
UPDATE:
Dow Jones Newswires comments:
Standard & Poor’s has taken the unprecedented step of downgrading the US government’s “AAA” sovereign credit rating, in a move that could send shock waves through global financial markets and potentially undermine world economic growth.
In a press release, S&P, today cut its top-notch long-term credit rating for the US Treasury’s debt to AA plus with a negative outlook. It is the first time in modern history one of the three main ratings firms has stripped the US of its coveted AAA rating.
S&P warned last month if the US government didn’t approve a credible medium-term plan to shrink its fiscal shortfall, it would downgrade the rating even if Congress approved a debt deal that raised the Treasury’s borrowing limit.
UPDATE 2:
The Wall Street Journal:
A cornerstone of the global financial system was shaken today when officials at ratings firm Standard & Poor’s said US Treasury debt no longer deserved to be considered among the safest investments in the world.
S&P removed for the first time the triple-A rating the US has held for 70 years, saying the budget deal recently brokered in Washington didn’t do enough to address the gloomy long-term picture for America’s finances.
It downgraded US debt to AA+, a score that ranks below Liechtenstein and more than a dozen other countries, and on par with Belgium and New Zealand.
What did then Opposition Finance spokesman Barnaby Joyce say, back in February 2010?
“If you do not manage debt, debt manages you”.
Barnaby is right.
Barnaby Is Right 
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