Links 13 February 2013

Here’s a list of things Reynard read over night.

Global Macro/Markets:

  • Evidence suggests central banks can use monetary policy tools to restrain credit growth without crushing the economy – The Economist. So why’s the RBA sitting on its hands?
  • Rio and the $115bn capital return – FT Alphaville
  • Andy Xie: Strong Dollar Could Cause Next Global Financial Crisis –
  • A physical vs forward commodity market disconnect –FT Alphaville
  • Marc Faber: Stocks Are Set for a Possible Repeat of 1987 – Yahoo Finance 
  • Fed Presidents Ask For Money Market Fund Restrictions –
  • G7 seeks to diffuse currency tensions – Financial Times

North America:

  • Why a ‘soft landing’ for housing could still hurt the Canadian economy – The Globe & Mail
  • Your New Landlord Works on Wall Street – New Republic
  • Why Do People Leave California for Texas? – Trulia Trends. Umm, lower housing costs and jobs.
  • U.S. January budget surplus $3 billion: Treasury – MarketWatch
  • Total federal spending: Federal spending under Obama. – Slate


  • What chance a direct shot from the ECB? – FT Alphaville
  • Italian Election Campaign Foreshadows Return to Politics as Usual – Der Spiegel
  • Chief Greek Statistician Charged for Revealing True Size of Debt – Der Spiegel
  • U.K. Inflation Stays at 2.7% as Price Pressures Mount: Economy – Bloomberg


  • Big shifts ahead in Chinese energy consumption – FT Alphaville
  • A promise not to go to war – FT Alphaville
  • China’s mounting debt crisis turns another bull into a bear – Financial Times
  • China’s banks channeled RMB 1 trillion thru brokerages last year to hide lending – Caixin
  • Failure of trusts sends ripples through China’s financial industry – Caixin
  • China reacts to North Korean nuke test – Wall Street Journal
  • Japan’s economic minister wants Nikkei to surge 17% to 13,000 by March –
  • Don’t Be Afraid of China – Bloomberg


  • Why hasn’t the minerals resources rent tax produced significant revenue? – The Conversation
  • Japan’s retail investors cool to Australia – Financial Times
  • Local banks may cut rates independent of RBA – The AFR
  • RMBS market rebound may free rates from RBA – The AFR. No, RBA looks at end-user borrowing costs, not OCR.
  • RMBS revival may be game-changer – The AFR. Yes, expect credit standards to slip.
  • Super limits drives investors to negative gearing – The AFR. So why not close that loop hole?
  • Melbourne – a two-tier city – The Age
  • No mining tax for big miners until their $1.7b arsenal of tax credits is all used up – The Age
  • Gillard slayed over mining tax – The Age
  • Miners, greens step-up tax row – The Age



  1. Lord Adair Turner at the G30: “If you do a billion of it (printing) it won’t produce hyperinflation, if you do 10 trillion it clearly will”

    Honestly these MMT types are getting more ridiculous by the day. He supports governments funding deficits with the printing press and then makes the above comment… does he realise the US already has over $16 trillion in public debt, $10 trillion of which was added in the last decade?

    • “Stockland has taken impairments on 13 residential projects that it plans to sell instead of develop, the company said. It has also written down seven other residential communities after making more “conservative” assumptions about the housing market, it said.”

      Here comes the land supply.

    • It is interesting that RBA cut rates ostensibly to “boost the construction sector”.

      Yet, Australia’s largest developer suffers a loss while the largest bank declares yet another bumper profit.

      Just saying…

    • Yes, it seems our monetary/fiscal/political policy nexus is doing the exact opposite of creating a robust economy:

      1. make existing non-productive assets more expensive (i.e houses) thus enshrining the need to reduce supply of any new stock of non-productive assets to speculate using limited capital

      2. mine and pump out as much non-renewable mineral resources as soon as possible at the cheapest possible price letting any Tom Dick and Harry multinational do whatever they want, thus enshrining the notion that we need “more mining investment at any cost”

      I would have thought the anti-thesis of this would make more sense:

      A. make existing non-productive assets as cheap as possible (thereby creating incentive for additional non-productive housing stock to be constructed as cheaply as possible, not requiring huge amounts of credit to be created/imported)

      B. reduce mineral extraction but with sustainable investment into projects(e.g limit exports and/or sequester such profits into a SWF) so that when there is a supply squeeze and price spike after inevitable end of a commodity price cycle, there are huge super profits made on very little use of finite productive capital.

      Nah bugger it – too much hard work, just borrow the wealth and spend it. YOLO

      • The overriding importance mining investment played in ensuring Australia did not experience recession post GFC is well documented in a recent paper by Bob Gregory and Peter Sheehan.

        Mining investment is to be welcomed however it is not guaranteed. Sequestering profits as you suggest may indeed ensure withdrawal of mining investment altogether.

        Resource product is sold into the global market place – if prices decline precipitously projects are no longer viable, a natural curb on extraction. The markets work!

        A major challenge facing all developed economies is navigating a path through the expected low-growth era with simultaneous challenges presented by competitive globalisation.

        My 2c 😉

        • “Mining investment is to be welcomed”


          Print, and DIY.

          And before anyone pipes up with the usual “You can’t print and build without equipment” … ummmm, there’s a $h!tload of iron ore out there just waiting to be smelted and turned into something useful, say, like trucks and dozers. And there’s a $h!tload of coal out there too, that we’re foreign multinationals are selling to provide cheap electricity in nations abroad, that can be used to generate the energy needed for the manufacturing industry development needed to achieve this. Alternately, we can develop a vertically-integrated, from ore-to-fuel-rod-to-waste-disposal nuclear industry for ourselves, and keep flogging coal abroad to help developing nations.

          But … naaaaaah … far better to keep borrowing digital book-keeping entries at usury, than just print and DIY.

        • A major challenge facing all developed economies is navigating a path through the expected low-growth era with simultaneous challenges presented by competitive globalisation.

          It’s worse than that.

          Maintaining the complexity of our civilization requires a consistent input of net energy and a stable climate. We’ve already experienced the first few years of a long emergency through economic stagnation and contraction, financial fraud and a lack of meaningful political momentum. Can we expect advances in technology to make a useful contribution to solving modern challenges or are we headed for a technological time out? Are we approaching a magic moment when those oppressed by debt refuse to pay?


    • Just a reminder of Stockland’s landbank

      Lots sold last year 11/12 – 5 388
      Lots under development – 87 900
      Total value of lots – $23.0b (not so much)
      Average lot value – $338k (maybe not now)
      Years of supply – 16.3

      • Stockland getting smashed by Big Ted and the REIV mafia

        “The residential business was weakest in Victoria over the six-month period, with Stockland reporting a 46% decline in Victorian settlements to 463, compared with 850 in the first half of the 2012 financial year”

  2. I didn’t see this reported elsewhere, but apparently Vietnam’s property market has crashed in the last few years:

    Anecdotally, the amount of non- performing loans is huge (I was told as high as 75% – I assume only in limited cases).

    (real estate speculation seems a national obsession in Vietnam so now I know why my partner’s family stopped talking about property prices this year…)

      • Ideally will be offset by increasing commodity prices over time (think Jeremy Grantham’s view go long everything in the ground) encouraging greater exploration for new mineral sources and the adoption of more expensive extraction techniques for currently ‘unviable’ production.

        Nonetheless, eventually new sources will be exhausted. I rather hope by then this place has got its act together and boldly forged a sustainable economic base. We have this marvellous mineral wealth that should allow us the largesse to invest in wealth producing infrastructure and encourage innovation.