Irish Meltdown

[Tehanu]

I am a believer in China, and India, and to an extent Thailand, Vietnam,Indonesia, etc. I

I am highly optimistic for the continuing growth of these economies, and although there may be speed bumps on the way, the idea that these people having tasted their future, would fling themselves into reverse, is highly unlikely, bar another cultural revolution.

Did Japan, US or any other country (besides may be Zimbabwe) willingly fling themselves into reverse? Of course not.

I do believe China is ripe for a collapse. However when it happens they will be dragged kicking and screaming down that path. For example china's construction dependent economy (as a result consumption has been going down as a percentage of China's GDP) is because of attempts to prevent problems after the US started going down. They went down the Japanese route after the Plaza Accord of making up for not being able to grow by imports by inflating asset prices. Now the Chinese have been using the Plaza Accord as one of the big reasons for them NOT to increase the value of their currency so they are fully aware of the danger of this route. However they still went down it in the hope of short-term success and a blind hope that somehow in the medium term they will find a way out of the trap. The US housing bubble was the result of an attempt to stop economic problems after the dot-com bust, once again by inflating asset prices (you know this is becoming a common theme). In fact probably more than anything else, the short-term attempts to kick the can down the road and prevent recessions and save the economy is what has caused the massive problems of today, rather than active attempts to destroy economies.

 

[Intrinsic_Value]

Tehanu, your trading path is not consistent

 

[Tehanu]

Tehanu, your trading path is not consistent

Probably not if you are talking about buy and hold. But that's because I see this as a dynamical situation in which things are likely to change quite rapidly and seriously multiple times. And as I said before in this path as each phase is entered into different factors become important and what is safe can become dangerous and what is dangerous safe. And it is not necessarily clear what exactly the next phase is going to be until you are closer to it. As a result it is likely that I am going to have a very twisty and turning investment path.

We are in an era of extreme volatility and where true price values are masked by rampant global speculation (which is going to get worse). I believe every proponent of every theory that X/Y/Z is going to be "safe" will end up being very badly burnt at some point. And that includes bears. This realization that nothing is safe has annoyed the hell out of me because I am generally a lazy person and I love being secure.

Also even more important than the economics is the political situation. Even if economically a situation can continue for a long time, the political situation will likely force a crisis long before it theoretically economically reaches that point.

The *long-term* trend is resource constraints (resources that people actually consume, not precious metals). However there are going to be lots of twists and turns along the way.

 

[topcropper]

The key things keeping the AUD/USD up are:

- the high interest rates
- the perceived stability of the Australian economy
- the massive credit in the system
.

Hmm. Surely the main reason for the high $A is high commodity prices. This makes imports cheaper, and we have an embarrasment of export wealth coming in and making everyone wealthier, even despite the fact that we manufacture almost nothing. This then gives us our perceived stability of economy and high interest rates and everything else.

Actually if there is a massive AUD/USD reversal, it would be better for Australia if China reverses, dropping the prices of commodities. A bad scenario would be a massive drop in the AUD while at the same time commodities increasing in price or even staying the same price. This will lead to massive sudden rise in cost of living expenses in Australia. The most obvious and dangerous one is a massive localised oil shock.
.

True. But what situation would see commodity prices rise and the Aussie dollar plunge? I can't see it happening, the two are linked, always have and always will. When commodity prices are high, this country is flooded with riches.

It's a truely great thing that our dollar plunges when commodity prices plunge. It's kept us out of trouble over the years. Like in say in 2000 when commodity prices were terrible. Coal mines were shut. Iron ore was worth bugger all. But our dollar was in the 50's, so manufacturing was still competitive here, imports were expensive, our exports were worth more to us here, tourism was great with overseas visitors flooding in.

It's all a big inverse hedge sort of thing. Smooths out the booms and busts.


See ya's.

 

[Tehanu]

Hmm. Surely the main reason for the high $A is high commodity prices. This makes imports cheaper, and we have an embarrasment of export wealth coming in and making everyone wealthier, even despite the fact that we manufacture almost nothing. This then gives us our perceived stability of economy and high interest rates and everything else.

I bolded the relevant part. The important thing is not commodity prices are high but of the belief that commodity prices high mean a stable Australian economy and high interest rates.

*However* if the Australian economy starts look wobbly and there is talk of interest rate cuts for another reason *besides* falling commodity prices then that is the environment under which the AUD can plunge while at the same time commodity prices remain high. Australia is such a small part of the global economy that if Australia starts going under, the rest of the world will go, "Oh that's interesting" and move on. It won't be sufficient to cause the fear that might bring commodity prices down too as opposed to talk about the Eurozone, America, China or Japan. The most likely culprit being the housing market. And remember housing market bursts are pretty much on the minds of all international investors.

China stumbling causing the AUD to crash would be the better of the two scenarios. An AUD crash caused by the housing market would be much worse.

True. But what situation would see commodity prices rise and the Aussie dollar plunge? I can't see it happening, the two are linked, always have and always will. When commodity prices are high, this country is flooded with riches.

The key thing is not that commodities are magically connected to the Australian dollar. The transmission mechanism is via the fact that generally as commodities go up in price, the Australian economy is expected to grow stronger. The important part is the strength of the Australian economy, not the commodity prices. However, if the Australian economy is not strong while commodity prices are high then it doesn't matter how high commodity prices go, the Australian dollar will fall. In fact the shock of the disconnect will probably make the fall worse. And if the Reserve Bank is forced into an interest rate cut everyone will take it as a sign that the Australian economy is growing weaker, regardless of how high commodity prices are. And also the carry traders are relying on yields to justify their investment.

If as you expect commodities will save Australia then interest rates will not be cut, then this is a moot point. However I think a lot of the suppositions that the Australian property market will not really fall relies on assumptions that the government and the Reserve Bank will support the market by cutting interest rates. So if the Reserve Bank doesn't cut interest rates, will the property market really stay up? And if it doesn't, what effect will it have on the economy? And then what effect will this have on the Australian dollar?

The numbers which I got from the ABS are:

Mining has 0.2 million employed people (including support services). construction has over 1 million people employed. So there are five times as many people employed in construction than mining. Financial and insurance has 0.4 million (and remember our banks are very focused on mortgages). Rental, Hiring and Real estate have 0.2 million employed which alone is more than mining (yes, we have as many people flogging real estate as we do mining). Retail by the way has over 1 million jobs too.

Also mining is worth $62 billion to the Australian economy. However, construction is wroth $23 billion, financial and insurance services $33 billion, rental hiring and real estate is worth $8 billion. In total that is $64 billion.

If the property market looks like it is in trouble, regardless of how high commodity prices are, the Reserve Bank will cut.

The key question at that point is, and where I am most possibly wrong, is the magnitude of the drop in the Australian dollar. i think that it will drop a lot, but it is possible it will only drop to maybe 80c, which is not that bad. But I suspect with the international paranoia about housing bubbles, carry traders and the hedge fund shorts it will probably drop a lot more than that. The the magnitude of the drop will be the most uncertain part. If it doesn't drop a lot then the effects I talked about probably won't happen. So if it doesn't drop a lot more than 80c you can ignore most of what i say.

 

[topcropper]

Also mining is worth $62 billion to the Australian economy. However, construction is wroth $23 billion, financial and insurance services $33 billion, rental hiring and real estate is worth $8 billion. In total that is $64 billion.
.

I wonder how those figures are worked out?

Export earnings from mining are into the 100's of billions.

http://www.theaustralian.com.au/bus...to-drive-exports/story-e6frg926-1225971143316

Export earnings from the booming industry are set to increase by 28 per cent next year to about $177 billion.
.

Coal exports are 56 billion dollars. And remember lots of coal is not exported, but burned here and make our electricity, so the exports are not the whole figure. Coal on it's own must be worth more than the figure you quoted. And then that's just the value of the raw commodity. Imagine what it's worth when you count all the service industries and jobs that support coal mining, then add the worth of the base load power supply?

I suppose you could argue that a lot of profit goes overseas via share holders. But to balance that, Aussie miners are mining overseas and bringing the profits back here.

Mining does employ hardly anyone. Coffee shops would employ more people, but that doesn't mean coffee shops have the same importance to the economy.

Service industries are mainly just moving money around and around and back and forth. Wealth that has already been created elsewhere.

I'm not arguing or disagreeing with anything your saying, just pondering some figures.


See ya's.

 

[Tehanu]

I wonder how those figures are worked out?

Export earnings from mining are into the 100's of billions.

http://www.theaustralian.com.au/bus...to-drive-exports/story-e6frg926-1225971143316



Coal exports are 56 billion dollars. And remember lots of coal is not exported, but burned here and make our electricity, so the exports are not the whole figure. Coal on it's own must be worth more than the figure you quoted. And then that's just the value of the raw commodity. Imagine what it's worth when you count all the service industries and jobs that support coal mining, then add the worth of the base load power supply?

I suppose you could argue that a lot of profit goes overseas via share holders. But to balance that, Aussie miners are mining overseas and bringing the profits back here.

Mining does employ hardly anyone. Coffee shops would employ more people, but that doesn't mean coffee shops have the same importance to the economy.

Service industries are mainly just moving money around and around and back and forth. Wealth that has already been created elsewhere.

I'm not arguing or disagreeing with anything your saying, just pondering some figures.


See ya's.

The numbers I quoted are quarterly numbers. I presume to get a rough annual figures you can just multiple them by four (it doesn't change that much from quarter to quarter). So mining would make up around $250 billion (annual) GDP. The point though was to show that construction+finance+real estate's contribution to the nation's wealth is (very) roughly equal to that of mining. And of course employs a lot more people. If it starts going down it will likely have a real impact on the economy.

The figures are from ABS publication 5206.0, the spreadsheet called "Gross Value added by industry, chain value measures".

Actually there is another one, "Industry Gross value added, annual" (June 2009 to June 2010) and the total annual figure is about $240 million so it's about right.

To get the figure I added three categories: Mining (B): Mining excluding services to Mining, Mining (B): exploration and mining support services and Mining (B).

 

[topcropper]

The point though was to show that construction+finance+real estate's contribution to the nation's wealth is (very) roughly equal to that of mining. And of course employs a lot more people. If it starts going down it will likely have a real impact on the economy.

.

As I pointed out on my farm thread, the September quarter growth figures were only kept in the positive by a massive boost from agriculture. And this massive figure from agriculture was counting the supposedly massive winter crop this year as being 'in the bag'. After 200 to 300 mills of rain in recent months along the entire eastern grain belt, the contribution from the winter crop will be billions of dollars behind what was counted in the growth figures.


http://www.abc.net.au/news/stories/2...01/3081379.htm

.The figures released by the Australian Bureau of Statistics (ABS) show growth over the third quarter came in at just 0.2 per cent.
The agricultural sector was the biggest contributor to growth in the period, growing by 21.5 per cent. Economists say without that, the economy would have probably contracted in the three months. .

The september quarter growth figures were most likely really negative once the winter crop disaster is included.

It's fairly easy for me to see that construction, real estate and retail is in a big slow down right now. Home starts are down. Massive amounts of houses for sale. Retail spending is right down.



See ya's.

 

[willair]

Did Japan, US or any other country (besides may be Zimbabwe) willingly fling themselves into reverse? Of course not.

I do believe China is ripe for a collapse. However when it happens they will be dragged kicking and screaming down that path. For example china's construction dependent economy (as a result consumption has been going down as a percentage of China's GDP) .

Let's just hope that does not happen,and i don't think for one second that China will collapse in any way most of their companies are under state control in one way or another,and are very adaptable to dectecting changes are them..

 

[Graemsay]

I'm not convinced that there's something magically better about the primary (mining and agriculture) and secondary (manufacturing) sectors over the service industry.

Wikipedia's definition lists a few examples, which include:

• Banking / Financial services
• Consultancy
• Legal
• Media
• Tourism

All these can be considered as exports. (I'm including tourism in a loose sense as it involves bringing people and therefore money into the country.)

Is there any great difference between selling $100 million of iron ore than there is from selling $100 million worth of financial services to another country?

Going back to Tehanu's posts (which I've only just scanned), I've got a theory that the bubble over the last ten or fifteen years has been in the financial sector, particularly the availability of credit, and that the worldwide property boom was a consequence of this.

If so, the GFC was that particular bubble blowing, and recent profits from the banks are simply a dead cat bounce. (Or because of £150 billion worth of subsidies to the sector in the UK alone.)

 

[Tehanu]

Let's just hope that does not happen,and i don't think for one second that China will collapse in any way most of their companies are under state control in one way or another,and are very adaptable to dectecting changes are them..

Well...I have to remind you of the last bit of this 2005 NY times article about the Japanese bubble burst:

http://www.nytimes.com/2005/12/25/business/yourmoney/25japan.html?pagewanted=all

Japanese economists say the United States is not likely to suffer a decline that is as severe or long-lasting as Japan's, because they see a more skilled hand at the tiller of the American economy: the Federal Reserve. Japan's central bank, the Bank of Japan, failed to curb the stock and real estate bubbles until mid-1989, when it was too late and prices were sky-high, they said.

When it did take action, it moved faster and more drastically than Japan's overinflated land and stock markets could handle, raising its benchmark interest rate to 6 percent from 2.5 percent over 15 months. Economists say that this pulled the rug out from under both markets at the same time.

Akio Makabe, a finance professor at Shinshu University in Matsumoto, says the Fed has been more deft in handling the rise in America's property market, which he believes is definitely in a bubble. He praised the Fed for apparently learning from Japan's mistakes, tightening more gradually and taking the economy's pulse as it does so.

"Japan shows the importance of avoiding a hard landing," Professor Makabe said. "Avoid big shocks. That is the biggest lesson of Japan's bubble."

My personal suspicion is that if the Chinese government fails it will be due to bad information. I am not talking about the higher level fudging of statistics - I am talking about misinformation from the local and provincial levels. One of the wikileaks has a high level Chinese official saying he doesn't trust the economic stats reported by the local and provincial officials.

http://www.telegraph.co.uk/finance/...nese-official-doesnt-believe-GDP-figures.html

However, in private talks with the US ambassador in 2007, when he was still just the head of the Chinese province of Liaoning, Mr Li cast doubt on China's much-vaunted economic statistics.

A diplomatic cable leaked by Wikileaks, the whistle-blowing website, reveals that Mr Li described China's gross domestic product figure as "man-made" and "therefore unreliable".

Chinese officials have repeatedly been found to have artificially inflated their local GDP figures in order to win face and hit their targets.

On several occasions, the sum of all of China's local GDP tallies added up to more than the national statistic. In 2009, for example, the National Bureau of Statistics said first half GDP had grown by 7.1pc to 13.99 trillion yuan (£1.37 trillion), only to find that the sum of local GDP readouts was 10pc higher.

The problem is in china there is a lot of pressure to give nice numbers so you can get promoted. And the nature of chinese society means it is difficult to subordinates to report bad news. So they just make it up. This was precisely the thing which led to the Great Leap Forward.

http://en.wikipedia.org/wiki/Great_Leap_Forward#Consequences

Although actual harvests were reduced, local officials, under tremendous pressure from central authorities to report record harvests in response to the new innovations, competed with each other to announce increasingly exaggerated results. These were used as a basis for determining the amount of grain to be taken by the State to supply the towns and cities, and to export. This left barely enough for the peasants, and in some areas, starvation set in. During 1958–1960 China continued to be a substantial net exporter of grain, despite the widespread famine experienced in the countryside, as Mao sought to maintain face and convince the outside world of the success of his plans. Foreign aid was refused. When the Japanese foreign minister told his Chinese counterpart Chen Yi of an offer of 100,000 tonnes of wheat to be shipped out of public view, he was rebuffed. John F Kennedy was also aware that the Chinese were exporting food to Africa and Cuba during the famine and said "we've had no indication from the Chinese Communists that they would welcome any offer of food."[23]

In 1959 and 1960 the weather was less favorable, and the situation got considerably worse, with many of China's provinces experiencing severe famine. Droughts, floods, and general bad weather caught China completely by surprise. In July 1959, the Yellow River flooded in East China. According to the Disaster Center,[24] it directly killed, either through starvation from crop failure or drowning, an estimated 2 million people.

Just speculation but I suspect that if there are dodgy reports going back to Beijing right now it will be inflation.

However we can't blame local officials entirely. A big part of the problem is Chinese culture which generally does not like hearing bad news (one of the biggest differences between good emperors and bad emperors is whether they kill their advisers for telling them something they don't want to hear) and politics in China involve things like death and prison. If you want to get rid of someone in Chinese politics you put them on trial for corruption, find them guilty and get rid of them. The sad part is most of the time they probably are guilty. Stern Hu is just the most famous example of this tactic in action. In some way the local officials are just working in a bad system. If they weren't in fear of the careers and possibly lives, they probably would tell the truth.

But the key point is, if there is anything that will cause the Chinese government to fail to control the situation, it will be this. It's hard to make a good decision when you don't have the right information.

 

[Aaron Sice]

Tehanu,

with all due respect, your argument misses a huge fundamental point, but then you mention you're aware of it...

It's hard to make a good decision when you don't have the right information.

China is a communist regime. They can, will and do manipulate market data. You can never fully know if the Chinese market is overestimated, underestimated or actual fact.

ALL DATA that leaves China is not independent, it is all state-washed and dyed red.

everyone MUST read up on China and their goals for the next 50 years to understand that they are NOT going away, they are UNLIKELY to collapse and they do NOT want to be the world's reserve currency, WHICH EXPOSES THEM UNNECESSARILY TO MARKET MANIPULATION.

while i agree you bring up some excellent points for consideration you should also take heed of your OWN advice, otherwise you end up being a preacher and, well, no-one likes a preacher.

 

[Tehanu]

Tehanu,

with all due respect, your argument misses a huge fundamental point, but then you mention you're aware of it...



China is a communist regime. They can, will and do manipulate market data. You can never fully know if the Chinese market is overestimated, underestimated or actual fact.

ALL DATA that leaves China is not independent, it is all state-washed and dyed red.

everyone MUST read up on China and their goals for the next 50 years to understand that they are NOT going away, they are UNLIKELY to collapse and they do NOT want to be the world's reserve currency, WHICH EXPOSES THEM UNNECESSARILY TO MARKET MANIPULATION.

while i agree you bring up some excellent points for consideration you should also take heed of your OWN advice, otherwise you end up being a preacher and, well, no-one likes a preacher.

The point is not whether China is manipulating data for outsiders. The point is whether China itself knows what the true data is. I don't think they do.

The thing is though, even assuming the Chinese government is made up of magicians, the chances of them making a bad decision increases a lot if they don't have the right information on hand. For example, the Great Leap Forward. Of course they could be lucky and still stumble through. However not having the right data just increases the chances of them making a mistake.

Of course my trepidation about China is not just that. It is also the fact they look like they are following Japan's path. And also the fact that I can't actually see a path for China to get out safely. Now everyone seems to think governments are Gods. But my opinion is governments are made up of people and their resources are limited and there are political, psychological and economic constraints. If I can't think of a way that a government can get out given all this I'm not betting that government will somehow magically find a way out. Of course there could be someone much smarter than me in that government. But still, this is my money and I'm not betting on something based on well I can't see a way out, but I'm hoping someone else can or that someone is much luckier than me. Except in the case there is a leader who I truly admire and respect for his/her brilliance and greatest and who I have faith in personally. But none of those actually exist nowadays.

Of course governments are likely to know a lot more of the details than are publically available and they have a fair amount of control over events. Hence I only bet on large enough forces such that there is no way a government can hide them or manipulate them over the time period of my investment and where the signals are indicating they will emerge to the fore shortly.

Actually i should correct that. If I think someone is going to fail, but I think their decisions will stave things off long enough for me to make a good profit, especially if I think it will sucker in most other people, then I'll invest, but only for enough time before things start falling down. Then you can also possibly make money on the way down too.

As for plans forward - there is a saying, no plan survives contact on a battle field. Also how many state transport plans or masterplans have not worked out in Australia? Mao's plans definitely didn't work out and China was a lot more centrally controlled back then than it is now. I wouldn't take having a plan too seriously.

 

[Ed Barton]

Mining does employ hardly anyone.

i read maccas employees are more than the coal mine industry. can;t be arrsed googling it, but you feel free.

for australia to really kick off we need an OPEC style cartel amongst the coal countries.

 

[CJS]

Tehanu,

while i agree you bring up some excellent points for consideration you should also take heed of your OWN advice, otherwise you end up being a preacher and, well, no-one likes a preacher.

Hey! I'm a preacher

At least my kids like me. Even my jokes.

 

[Tehanu]

Another thing is I think people vastly overestimate the real control Beijing has in China. The number one priority of the Chinese government is the provinces declare political loyalty to Beijing (the good old traditional enemy of all Chinese governments for millenia - actually beijing has put in place measures to try to limit any provincial governors from gaining too much local power so cudos to them for that). If they are however, a bit loose on administrative guidelines, well, as long as it is not public...Also from gossip from Chinese friends and family (yes I am of Chinese descent), the officials in charge of enforcing government policies are, how can we put it, like most public officials in most countries, a bit lazy. We get the impression here that Beijing is all gung-ho and in control but that's because Beijing chooses its battles. It cracks down on certain specific issues and then turns a blind eye to other things. Actually the laziness of government officials and corruption is probably the easiest way for chinese people to gain personal freedoms.

There's also the point that all governments, regardless of whether they are a command economy or not, have limits to their control. You can't suddenly turn on a dime. You cannot make food appear where it does not exist (as Mao eventually found it) no matter how much you command your officials to supply it. You cannot control the price of food without causing issues with supply. As America is finding out you cannot force people to buy a house when they don't want to. You cannot force people to consume when the desire is not there. As the Eurozone is finding out you cannot force austerity on people while letting the rich go free without riots. And you cannot force an unpopular Eurozone fiscal union if people don't want it. Well you can force it but only to a certain degree without a massive backlash. A government is not God.

Here's a question to ponder - if China really is such a command economy, why couldn't they just turn off inflation like that? Why couldn't they just stop property price rises just like that? Why are they struggling?

Part of the reason might be because of this:

http://www.businessspectator.com.au...kes-on-soaring-land-prices-CB4VC?OpenDocument

China has repeatedly vowed to keep land supply and prices at reasonable levels, but as local governments are increasingly relying on revenues from land sales for local fiscal expenses, warnings from Beijing have been often neglected.

In China's land "market", the only supplier is the local government that sells land via public auctions, and property developers often jostle in these auctions to acquire land, resulting in hefty prices.

This is a pattern. Local governments ignore Beijing on environmental edicts:

http://www.channelnewsasia.com/stories/afp_asiapacific/view/289823/1/.html

BEIJING: Local governments in China are continuing to invest in dirty, resource-intense industries, jeopardising Beijing's goals of saving energy and cutting pollution, state media reported Monday.

Some regions are encouraging steel, cement and other heavy industries to boost economic growth despite demands from Beijing to rein in those sectors, the China Daily newspaper said, quoting a top development official.

"The central government is committed to achieving the (green) targets but some local governments have turned a blind eye to them," said He Bingguang, a deputy director with the National Development and Reform Commission.

http://www.asianews.it/news-en/Loca...forced-expropriation-of-rural-land-19967.html

Beijing (AsiaNews / Agencies) - Beijing has warned local authorities to stop the forced evictions of the country people from their lands, often with meagre compensation, to turn them into industrial plants and housing estates.

For some time the central government asked local authorities to respect the economic rights of citizens, the primary cause of over 87 thousand mass protests that explode each year. The tough stance taken by the State Council yesterday shows that the warning is often unsuccessful. The central government's website reported that Premier Wen Jiabao pointed out there are "issues that require urgent attention," because local governments continue to expropriate land to expand the small provincial towns.

In areas like the eastern Jiangsu and Shandong, the authorities have even tried to force farmers to leave land and homes and move into large popular settlements for more space for new industries and neighbourhoods.

This raises another issue about china - the Chinese government has to consider the responses of powerful constituencies. It may not be a democracy but there are still powerful interest groups that limit its control. For example:

(1) Property developers.
(2) Local governments. Who not only rely on the property developers for revenue but also are at risk of being saddled with massive bad debts if the property market goes bust.
(3) Exporters who are hurt by both inflation (rising wages) and a trade war with America.
(4) The masses who are all hurt by inflation but especially the poor who spend a lot of their money on food. People have been killed in stampedes for food in China. The richer masses would also be hurt by a property crash.

This is partly because of financial involvement of communist party officials and their families. but also because they fear social instability.

All these issues act as constraints on the ability of the chinese government to act.

Another possibly more immediate constraint on the ability of the chinese government to act is political factions within the Communist Party itself. It is hard to tell what exact factions exist because of the opacity but it would be foolish to think they don't exist and aren't ready to turn on each other. However from what I hear the factions which exist differ on tightening or not.

Another constraint is the extreme nationalism of its youth. The Chinese government needs to appear tough on foreigners for that. Actually another historical psychological constraint is the century of humiliation which still burns at the Chinese psyche. They cannot lose face to foreigners, they cannot appear weak. It also limits the ability of the Chinese to truly reflect on their weaknesses, at least to outsiders.

Another constraint is demographics. China's dependency ratio is turning and that will have an impact on the future.

Yes, China is not a democracy. But the idea that Beijing can order something and it happens is a bit idealistic. There are serious constraints on Beijing from adminstrative (the local officials disobeying them and them not having the power to enforce directives) to psychological to demographic to economic.

BTW this is not evidence of any sort that china *will* collapse, just those relying on china not collapsing because of the supposed complete control Beijing has are wrong. It may not collapse for other reasons but not that. To tell the truth, I have never understood the almost mythical status many Australians seem to place on the Chinese government. From what I can see, it's just another government. It's nothing paticularly special or exotic or anything, especially if you look at it from the POV of previous Chinese governments in history. China is China. So what?

 

[willair]

. One of the wikileaks has a high level Chinese official saying he doesn't trust the economic stats reported by the local and provincial officials.

But the key point is, if there is anything that will cause the Chinese government to fail to control the situation, it will be this. It's hard to make a good decision when you don't have the right information.

Thanks for the link,so maybe there is some fact that all the conservative Chinese under total control Bankers are sitting on a pile of dynamite for a while now,but i think it's a very medium risk that anything harmfull will happen over the next 4 years in China they can do whatever they want,and the 10% you pay under the table in most Asian countries has been there from day one,that's they way Business works..

 

[Beebop]

If retail tanks or inflation gets so high as to invalidate the retail wage then it is all over. Right now we've got ridiculous levels of inflation which are crippling the economy.

For every house that is sold for 500k profit, that is 500k debt for one person, and 500k of currency which is created i.e increased money supply which is the definition of inflation.

The out-dated and innacurate measurements used by the ABS don't matter in reality.

 

[Beebop]

Going back to Tehanu's posts (which I've only just scanned), I've got a theory that the bubble over the last ten or fifteen years has been in the financial sector, particularly the availability of credit, and that the worldwide property boom was a consequence of this.

I agree. If credit dries up, so does your housing market. I don't know too many people with 650k in cash that are going to spend it on a POPR.

 

[Graemsay]

Just reviving a sleeping thread.

Vanity Fair published an article on the Irish property boom and subsequent banking collapse. You can find it here, and it's well worth a read.