Weekend Links 22nd-23rd August 2015

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Floating in a sea of stars – DE collection

Asia

Europe

United States

No idea Land

Global Macro

…and furthermore…

 

Comments

  1. The Traveling Wilbur

    Gen Ys should be marching in the streets over housing affordability

    http://smh.com.au/comment/gen-ys-should-be-marching-in-the-streets-over-housing-affordability-20150723-giioeg.html

    And in honour of that epic commentary, some epic prose, revisited. In consideration of the first home-buyer challenges and travails facing MB’s younger readers…

    Half a suburb league-table, half a suburb league-table ,
    Half a suburb league-table onward,
    All in the estates of Housing
        Drove the three hundred.
    “Forward, the Light Value Ratios!
    “Charge for the auctions!” he said:
    Into the estates of Housing
        Drove the three hundred.

    “Forward, the Light Value Ratios!”
    Was there a man dismay’d?
    Not tho’ the bidders knew
        Someone had blunder’d:
    Theirs not to make reply,
    Theirs not to reason why,
    Theirs but to bid and buy:
    Into the estates of Housing
        Drove the three hundred.

    Speculators to right of them,
    Speculators to left of them,
    Speculators in front of them
        Volley’d and thunder’d;
    Storm’d at with mehaphone and ad-shell,
    Boldly they drove and well,
    Into the auctioneer’s jaws of Debt-serfdom,
    Into the mouth of Hell
        Drove the three hundred [Gen Y… the other half were late…].

    Flash’d all their pre-approved lending amounts bare,
    Flash’d as they turn’d to air,
    Asuaging the vendors there,
    Charging a grey army, while
        All the world wonder’d:
    Plunged in the bbq-smoke
    Right thro’ the line they broke;
    Boomer and X-er
    Reel’d from the credit stroke
        Shatter’d and sunder’d.
    Then they drove back, but not
        Not the three hundred.

    Foreign investor proxies to right of them,
    Foreign investor proxies to left of them,
    Foreign investor proxies behind them
        Volley’d and thunder’d;
    Storm’d at with megaphone and ad-shell,
    While Jeep and brave hipster fell,
    They that had bid so well
    Came thro’ the auctioneer’s jaws of Debt-serfdom
    Back from the mouth of Hell,
    All that was left of them,
        Left of three hundred.

    When can their glory fade?
    O the wild prices they paid!
        All the world wondered,
    Who would honour the charges they’d made,
    And denounce and decry those politicians, those elders, those ‘betters’ for whom such usury was their housing-stock in trade.
    The politicians, the elders, the ‘betters’ who’d blunder’d.
        Not the three hundred.

    • St JacquesMEMBER

      Vilbur, you just ruined an old favourite! I’ll never be able to picture the mad dash of the dashing 300 now without the intrusion of RE spruik “And magnificent vistas of the battle ground sir…” lol

    • http://jbh.ministers.treasury.gov.au/transcript/173-2015/

      TREASURER:

      Well, it won’t be about policing the consumers. It will be about policing the vendors overseas. So, when a company overseas sells a product into Australia, they need to charge the GST in the same way that an Australian business employing Australians located in Australia will have to charge a GST for the same product or service.

      Contemplate, for a few moments, how much stupid is wrapped up in that statement FROM THE TREASURER.

      • Ha ha ha ha… Australians voted for the dumbest people in the country. This is just too delicious… I can’t even… Bwahahahahahaha. Giggle. Snort.

        They really think Amazon will be an Oz tax collector? This is the company that until recently refused to collect states sales tax INSIDE the US!

        Hahahahahalolololol!

      • Interesting to see how they will implement that! I had assumed they were going to start charging GST on all incoming parcels. That already occurs quite efficiently in the UK where VAT cuts in at £15 for an online purchase or £36 for a gift (and duty cuts in > £135). For regular parcels, Royal Mail/Parcelforce add a £13.50 clearance fee on top of the VAT/duty, so your incoming parcel is held based on the declared value, they send you an invoice in the mail for VAT+duty+fee, you pay that online and then they release the parcel for delivery. It adds about 3 or 4 days to the delivery time. I imagine that the ‘clearance fee’ will be the key should this arrangement be introduced in AU, and can imagine a bunch of politically connected rent seekers lining up to offer their services.

      • Steven

        It’s already collected here on parcels over $1000.

        I don’t understand what the Treasurer is thinking.

    • [email protected] big old warehouses stockpiling imports while the processing fails to keep up, that’s how. After a while, people will stop ordering stuff and just go pay double at Harvey Norman.

      That is precisely how this is intended to work. Australians truly have the government they deeply deserve.

    • It likely won’t, until 3 yrs down the track when Harvey Norman gets too much press on the issue and the gov is fixed to act

    • As the ultimate sanction, the Government can ban Australian credit card providers from remitting payments to non compliant organisations, as is supposed to happen for some internet gambling sites. I don’t imagine that will be Hockey’s opening gambit with these companies though,

      • BoomToBustMEMBER

        So we use paypal, puts a man in the middle. I really do hope the enforcement mechanism is via the seller not the purchaser, it will leave so many holes to walk through.

      • As the ultimate sanction, the Government can ban Australian credit card providers from remitting payments to non compliant organisations, as is supposed to happen for some internet gambling sites.

        People travelling overseas might not appreciate either a) not being able to use their credit cards to buy dinner or b) being charged Australian GST every time they do.

        Like I said above. The level of stupid being exhibited by the people responsible for running the country on this issue is staggering.

  2. IMHO we are at the beginning of a global equity markets crash. Energy commodities in a rout and PMs on a tear.. The markets could not be clearer if they tried.

    Take your marks, get set…. GO!

    • Jagster,

      You worry too much. Right around the world central bankers will be digging out their mix tapes and putting this on high rotation. When it comes to stimulus they will not stop till they get enough.

      http://youtu.be/DAHhjeXuiHk

      But I agree – malinvestment driven by broken pricing signals is still malinvestment and eventually a price must be paid. Though I am not expecting an admission of that from official sources.

      • Gotta love the whole Central Bank meme…. hint its run by humans which hold certain beliefs, the institutions themselves don’t have some innate agency, by virtue of bricks and mortar. As such its important to examine the historical context wrt to what informs those that administer such institutions.

        At this time that would be quasi monetarists, before it was monetarists, that’s about 40 years.

        Skippy… a better question is what was/is the dominate ideological theory and whom promoted it and why.

      • Which actual is made even more ludicrous, by the manifold size of the shadow sectors machinations, during the same time period.

      • I know you do but nothing bad is going to happen. The business cycle has been defeated by some synth beats and pastels and central banks (or their private banking delegates) who can buy any under performing asset with a few key strokes – or so we have been told.

      • Phf007,

        The term “Businesses Cycle” is nothing more than a bit of sophistry based on an equally erroneous belief in equilibrium, which is more underpinned by quasi religious ruminations dating back to St Augustine [and before], than to evidence based observations imo.

        Skippy…. I might as well evoke “let Gawd sort it out’.

    • Yep, soon enough all my super will be allocated to high growth.

      And my cheque book will be dusted off for that house deposit.

      • BoomToBustMEMBER

        +1 we are the same, super is in cash, and cash is in USD ETF. Bring on the bust so we can get moving again !

      • GunnamattaMEMBER

        +1

        …and the key (the real key) to that bust in Australia is a real estate implosion the like of which probably hasnt been seen before.

  3. Chinese factory gauge drops to lowest level since March 2009 … Bloomberg

    http://www.bloomberg.com/news/articles/2015-08-21/chinese-factory-gauge-drops-to-lowest-level-since-march-2009

    No one knows how bad China’s economy will get – Quartz

    http://qz.com/484710/no-one-knows-how-bad-chinas-economy-will-get/

    Sell-Off in Global Markets Continues Into Second Day – The New York Times

    http://www.nytimes.com/2015/08/22/business/dealbook/global-markets-fall-for-second-day.html?_r=0

  4. Down 530. “This is a normal , healthy market, sell off “ some wise commentator nervously suggests.
    He’d be spot on IF everything else was normal; like interest rates and productivity. But they aren’t.
    With so many now stranded on the last stock/property/bonds high water mark in China ( are they trading all their stuff yet!) and elsewhere, September might be an interesting month.

    • I think sticking to tradition October will be when the crash will happen. I just don’t know which year it will be!

    • Yeah, but is this really GFC 2.0 or another short sharp correction like October last year?

      Sure the chickens are coming home to roost in China and Australia, but what about the US? There were lots of gathering clouds during 2007-2008 that gave you clues that some serious shit was imminent (Icelandinc banks, Northern Rock, Bear Stearns, Fannie and Freddie). Where are the equivalents in the US today?

      • It depends on what one sees as fundamental? I’d suggest that, fundamental…is an ever changing landscape. Those fundamental entity-types that brought us to the edges, last time, are unlikely to be the ones that do it (this?) next time. I just ask myself “What if FANG went to $0, overnight (people stopped using them etc)? How would that affect the market and/or individuals?” The Markets would suffer dramatically, but the effect on individuals would be limited to those who had an exposure to the financial side of things. Practically, many people could actually live without just one of few social media services, a new phone, a streaming service and one of several search engines. FANG have run up a long way…that might be the fundamental problem!

      • We could live without lots of things Janet. Doesn’t mean FANG is broken, or anywhere near the end of the growth cycle for these companies. Would I expect more or less people using these services in five years time? I would say emphatically more!

      • Perhaps. My point was that those other fundamental entities that you mentioned, ( Northern Rock etc) DID go to $0 for all intents and purposes, and quickly. We look back now and say “How obvious!” and we probably did just before they went to the wall. What I see is 4 very large companies that dominate their spaces in an ‘unnecessary’ marketplace, that really have pretty poor ‘fundamental’ P/E levels. If they go to $0, for whatever reason that we might look back on as, “Of course!”, then that would be as bigger trigger for a correction as Freddie and Fannie were.
        Twitter is below IPO. Alibaba is too (?). What if Facebook dips below the start price as well? Let’s remember that FB was touch and go as to whether it would go up after the float and fell dramatically. What’s fundamentally changed, except the free debt that has allowed it to become a sure-thing, speculation darling to benefit from adverting expenditure – which itself can dry up at a minutes notice?

      • Janet… this ain’t 1999. FANG are highly profitable. Apple in particular have so much cash that they can’t work out how to get rid of it faster than it accrues. The rest of them have exponential revenue growth (with the possible exception of Facebook). If you think a US crash will be seeded by the large profitable tech companies, you’re barking up the wrong tree.

        Edit: as for your question about ‘what if people stop using them and they go to zero’… that is precisely the same question as ‘what if all the world’s technological use immediately shift back to 1992’. Ain’t gonna happen; ain’t going to even move in that direction… in fact, the opposite is true. In another decade, given the growth potential of FANG to utterly displace every newspaper, cable TV company, most bricks and mortar retailers, and the world’s taxi and truck drivers, today’s stock prices might seem cheap.

      • Remember 2008? When they let Lehman Bro fail and then scrambled to save the others?

        My view is that this time is no different; let the worst / the weakest fail as a scapegoat and then leverage the ensuing carnage to unlock another QE infinity which will save the rest.

      • Imo Lehman Bro failed because it had a ludicrous amount of impaired [fraudulent] assets and Dick Fuld was a megalomaniac who screwed up an easy deal to sort shit out.

      • Well I don’t think its a US issue this time, although they are the centre of it. Commodities and capital flows are likely to be the trigger. Looking at EM nations with high levels of foreign currency debt or too much economic commodity dependency. Couple of them go down it could easily trigger a global lock up.

        Oz is in serious trouble either way, but that situation will accelerate the spiral down

        Malaysia is looking like a good place to start http://www.straitstimes.com/business/economy/malaysias-reserves-fall-to-6-year-low

        Turkey is another

        https://www.foreignaffairs.com/articles/turkey/2013-12-06/six-markets-watch-turkey

  5. Central bankers are watching Marx’s dictum “all that is solid melts into air” play out in global stock markets with a terror informed by the scalding memories of 2008’s global financial meltdown. Once the trap-door opens, there is no bottom without prompt action by the world’s Plunge Protection Teams….. who leap into action when global stock markets threaten to melt down……the last resort is a coordinated buying campaign by all the central banks, acting in concert. This last stand has a rallying cry: Plunge Protection Teams of the World, Unite!

    http://charleshughsmith.blogspot.co.nz/

  6. Investors in shares and commodities are panicking from overwhelming fear about a rapidly cooling China and wider tumult overseas.
    The Dow Jones Industrial Average collapsed more than 500 points yesterday, down more than 1000 points for the week, the worst week on Wall Street in almost four years.

    US crude now has a 3 handle, dip to near a seven-year low on Friday.
    John Kilduff, (Again Capital) predicted oil could fall towards $US20/bbl. But the US still pumped crude in July at the fastest pace for the month since at least 1920, the American Petroleum Institute reported Thursday. (these guys are in the same predicament as Iron ore miners)

    Copper extended its longest run of weekly declines since January, with aluminum, lead, nickel and zinc also dropping.

    Sovereign Debt: Government debt from Australia to Britain also gained this week, driving the average yield on developed-nation bonds to a three-month low.

    The Fin Review will tell you how to sell your house in the next 16 weeks.

    Trade accordingly: WW

    http://www.zerohedge.com/news/2015-08-21/wti-crude-breaks-below-historic-40-level-energy-credit-spikes-record-highs-after-rig

    • What would be a decent defensive strategy in this mess? Sell the house and hold USD or USD ETF? Gold?

      • Sell everything and hold equal amounts of USD and EUR, cash. Then go Surfing, with your family if you have one. This is going to get very very messy, for a very long time.

    • Amazing New Energy Source: Introducing TREES
      Richard Heinberg, August 20, 2015

      Scientists at the Climate/Energy Design and Research institute (CEDAR) have just announced the discovery of an astounding new energy source that promises to solve several of humanity’s thorniest dilemmas at once.

      “This is a paradigm-shifting moment,” says Dawn O’Newday, the engineer in charge of the project. “Whatever your game is, this changes it. Big time.”

      The new energy source, called TREES (Totally Renewable Energy, Emissions capture, and Storage) is, as the name suggests, completely renewable. Unlike conventional power plants, TREES devices use no fuel; and unlike most solar and wind technologies, TREES requires no non-renewable materials for the manufacture of panels or turbines.

      http://www.postcarbon.org/amazing-new-energy-source-introducing-trees/

      • Drones are getting increasingly regulated out of public space and as a safety issue and public nuisance.

        Skippy…. BTW why would you push for or carry the water for Amazon.

      • Electric drones much better than diesel trucks, skippy. Are you too slow to figure that out for yourself? 🙄

        Who gives a f about Amazon anyway; we are talking paradigm shift here. Open your hate-filled eyes.

      • Well Amazon is a hate filled narcissistic cesspool at the admin level, so pointing out does not make me their equal.

        “Electric drones much better than diesel trucks, skippy. Are you too slow to figure that out for yourself?”

        Not that I’m a fan of what has occurred in the last 50ish years, but you need to provide a more comprehensive unpacking of that, than Drones good vs. Trucks bad, just saying.

        Skippy…. I did not know druids did techno utopia w/ administrators presenting personality disorders as crystal time travel informs.

      • Who would be the predominate end user of such a system[?], plucky entrepreneurs?

        I think some have over estimated the capabilities of autonomous stuff operating in a dynamic environment, hackers would have a field day.

        Skippy… You of all, should be careful with the mono biz….

      • R2M, I know your lurking in the corridors.

        After reading your self reported accolades from yesterday’s posting fiasco I’m curious as to what you make of this:

        http://wmbriggs.com/public/Monckton.et.al.pdf

        Yes it’s contains the word Monckton but if you could avoid that for a moment would you mind reading it and supplying some feedback?

        I’m sure that you could possibly dig up a counter argument in regards to that paper? Or even infer your own?

      • Perhaps I can shed some light on the subject. Monkton et al seems to be confusing the IPCC’s ability to predict future GHG emissions and solar forcing with its ability to model the weather. The assumptions about future emissions and forcing are the cause of divergence between modelled and observed temp changes. Pretty silly mistake to make really but, given Monkton’s background and history it is hardly surprising.

        http://www.skepticalscience.com/lessons-from-past-climate-predictions-ipcc-far.html

    • Who said climate skeptics’ hunches don’t pack a punch?

      The liberal media and an overwhelming majority of scientists would have us believe that there is no real debate about climate change. To that I say: I didn’t realize that we were living under a scienceocracy? Why do they get to be considered experts while the rest of us are treated as anything less?

      Know-it-all scientists and their followers all share an extreme, elitist, pro-science, pro-reason bias, which clouds their judgment and threatens the very fabric of our democracy. It marginalizes those of us who challenge the scientific status quo – the data dogma, or the Big Brain of Big Brother.

      What happens when we shed our pro-science bias and start respecting creativity, flair, hunches and guts as much as knowledge, expertise, data and brains? We may be forced to admit that global warming doesn’t actually exist.

    • Fiorina: the next line of defense of climate denialism

      The recent Republican entrant to the US presidential race gave an interview on Yahoo where she spoke about several issues, including climate change. It is an extremely interesting clip to understand what we could call a “moderate” position in the Republican field. Ms. Fiorina’s statements on climate change are in this clip and are summarized in text form on Vox, with the title “everything she said was wrong.” I think it is worse than that.

      Ms. Fiorina is expressing what may well be the next line of defense of climate denialism. She does not flatly deny climate change, as many of her colleagues do, even though she states that it is a minor problem in comparison to others, such as terrorism. But, yes, she admits that it is a problem. So, what should be done about it? Here, Ms. Fiorina puts forward a series of lies and half truths to push for the idea that we wouldn’t/shouldn’t/can’t/ do anything except hoping to be saved by some uspecified “innovations”. Why? Because, you know, coal is too important for us, and even if we fight it, China won’t. And, without coal, the economy can’t work; don’t you see how many jobs are being lost because of these silly environmental regulations? It is much better to work at making coal cleaner, isn’t it? Besides, renewables don’t work because, you know, wind turbines kill birds, they are ugly, and solar plants need a lot of water, etc…

      I think that with this interview we have a glimpse of the future of the debate on climate change. As the evidence becomes undeniable, deniers will shift back to admitting that, yes, it exists and even that it may be human caused. But they will propose to do nothing about it because it is impossible/too expensive/will cause jobs to be lost, etc…. And we’ll be back to square one: we’ll keep doing nothing, for one reason or another.

      So, the fight is still long and hard. And I am afraid that if we don’t change our strategy, we are not going to win it.

      Which reminds me of what Clive Hamilton said about the stages of climate denial … looks like we are getting to the final stage now:

      * There is no evidence of global warming.
      * If there is evidence of global warming, then it is not due to human activity.
      * If global warming is occurring and it is due to human activity, then it is not going to be damaging.
      * If global warming is occurring and it is due to human activity, and it is going to be damaging, then the costs of avoiding it are too high, so we should do nothing.

      • Clive Hamilton has a massive conflict of interest. He has zero scientific credentials and is a paid Climate Change Promoter. You should also quote the bit where he says we need to suspend democracy in order to fight climate change.

        He perfectly represents this whole sorry issue. It is simply a stalking horse for more government control of our lives and the erosion of democracy. Thankfully the public is finally waking up to this deceit and reverting back to a democratic mean.

      • You don’t need to be a scientist to report on the corruption that fuels climate denial and pays for scum to post denier comments to sites all over the internet. Hamilton, a professor of ethics, does an excellent job of that.

        I urge people to read the critique of candidate Fiorina at vox.com
        http://www.vox.com/2015/8/21/9186313/carly-fiorina-climate-wrong

        It is simply a stalking horse for more government control of our lives and the erosion of democracy.

        It’s true that climate change mitigation would probably require most of these:

        ► International cooperation
        ► A move away from pure capitalism to a steady state economy
        ► Government regulation
        ► Payment for the changes (read taxes)
        ► Population control (arguable)

        Getting right wingers to sign up for any of these is extremely difficult. Which could mean that we’re screwed. The stupid, it hurts, and it will hurt even more in time….. 🙄

      • How you find a professor of ethics advocating the suspension of democracy and receives $100’s of thousands annually in promoting the CC scam to be credible is beyond comprehension

      • Craaaaap, Scheissenberg 😈

        Quote Hamilton: “I have never called for democracy to be suspended. So why is this meme prevalent on the Internet? Why is it that whenever I write anything about climate change some commenters feel obliged to wheel it out as if it invalidates everything I say?
        http://clivehamilton.com/suspending-democracy-who-says/

        … is beyond comprehension

        It would appear that there are a lot of things beyond your comprehension. 🙄

        Now awaiting the Scheissenberg apology for lying again ….

        [crickets]

      • I still don’t see him advocating suspension of democratic processes, although he notes others have. I think your basic problem may be reading comprehension (which may also explain your inability to understand the science).

      • Getting right wingers to sign up for any of these is extremely difficult.

        Seems it’s pretty easy to sign them up for pretty much all of those if you can convince them the terr’ists are responsible.

      • Clive Hamilton has a massive conflict of interest. He has zero scientific credentials and is a paid Climate Change Promoter.

        Is that like being a paid Gravity Promoter ?

      • The Traveling Wilbur

        Seems it’s pretty easy to sign them up for pretty much all of those if you can convince them the terr’ists are responsible.

        Too true Dr S. But that provides for a possible resolution – we wait for the next Bush to get elected and then start a rumor that there’s a climate change generator (or hidden Weather Machine Dohickey as the briefing note would put it) in say, Syria. Or North Korea. Immediate funding available. Total commitment from executive branch and Congress. Problem solved. Planet saved. A couple of papers written up by some Masters students no one has heard of is all it should take…

        Worked last time.

  7. After the pontification of whether or not big iron is holding back supply to goose IO prices interesting to see that article saying they are raising guidance to china for this year so I guess that is definitely off the table (so it seems). Which then begs the question what is holding the price up. If it was just front loading steel production before shutdowns then we should be seeing some pretty steep falls in the next few weeks.

  8. BoomToBustMEMBER

    http://www.theguardian.com/commentisfree/2015/aug/20/banks-have-treated-our-housing-market-like-a-ponzi-scheme-and-its-about-to-bust

    Australia’s big four banks are among the largest and most profitable financial institutions in the world. Despite this, it is mathematically impossible that these banks, primarily focused on domestic retail operations, could be as big and profitable as they currently are without one of the following taking place:

    either each of these banks, in their individual capacity, has solved (at the same time, in the same country, and as a first in the history of banking) the ultimate recipe for infinitely profiting from an exponentially-growing stock of private debt; or
    they are all engaged in activity which is incredibly risky.
    Looking at the balance sheets of these four banking leviathans they have clearly taken on abnormal sums of risk to invest in a single, all-in, one-way bet on the housing market.

    Dutton confirms seven men on way to Middle East intercepted in Sydney – as it happened
    Talking points leaked for second day in a row, as Philip Ruddock says citizens should be expected to endorse ‘shared values’ and Indigenous leaders meet Tony Abbott. As it happened
    Read more
    As my colleague Philip Soos and I told the House of Representatives’ economics committee inquiry into home ownership last week, the evidence suggests that on the back of irrational exuberance, Australia is experiencing what can only be described as a classic debt-financed speculative housing bubble with every metric that evidenced the bubble in the US and Ireland present within our economic system today.

    Between 2002 and 2015, the mortgage books of National Australia Bank, ANZ, Commonwealth Bank and Westpac grew by 388%, 435%, 475% and 554% respectively. Put another way, the big four’s mortgage books escalated from a combined $242bn to a whopping $1.13tn, surging at such a consistent rate it would make Bernie Madoff proud.

    What the Australian banking system has developed is an uninterrupted growth model which shares a similar risk profile as a Ponzi or pyramid scheme by lending ever-larger sums of debt to homebuyers and property investors year after year. If this growth model is interrupted, however, and banks cannot expand their mortgage books further, housing price inflation halts and will then plunge.

    Lending an exponentially increasing stock of credit to the public creates a distorted asset market by artificially driving up demand needlessly. In Australia’s case, the target for this debt splurge is the housing market, easily one of the most overvalued and unaffordable in the western world.

    The next time you’re watching an auction in Sydney or Melbourne, wondering where all these buyers managed to muster up so much cash, chances are they have a domestic retail bank prepared to lend them a colossal sum of debt using new equity in their existing property portfolio as collateral that didn’t exist just 12 months ago.

    Despite some notable exceptions, Australia’s mainstream economists and policymakers have either failed to identify, or have chosen to ignore the unmistakable link between the rapid rise in house prices and the eye-watering sum of mortgage debt Australian households have now accumulated.

    On the rare occasion when one challenges the perceived fundamentals of the Australian housing and mortgage markets, the view is often brushed aside and considered a “lazy analysis” versus the mainstream view that high house prices in Australia are a rational outcome of efficient markets, superior risk management and falling nominal interest rates.

    That’s precisely what the Americans, Irish and Spaniards were thinking before hell froze over their property markets and banking systems.

    Government, Treasury, the central bank (RBA) and the prudential regulator (Apra) do not seem overly concerned about booming mortgage debt. By cutting the cash rate to the lowest point in a long time, the RBA has simply furthered the Ponzi scheme running rampant in Sydney and Melbourne, which dominates Australia’s housing market in terms of size and value.

    Analysis People are buying Ferraris, Joe Hockey – that doesn’t make them affordable
    Greg Jericho
    Greg Jericho Read more
    If either of these two major housing markets hits a brick wall, it will burst the national housing bubble. Policymakers and the public, unfortunately, will come to realise there never was a dwelling shortage – rather, a radical oversupply of mortgage debt being the real culprit for abnormally-high housing prices.

    Australia’s economists have not learnt the lessons made obvious by the global housing bubble, especially in the US. While claiming dwelling shortages justified sky-high prices, none except a small number of American economists were competent enough to realise that more than enough dwellings were constructed to house the flow of new households formed over the course of the price boom, and any such shortage would’ve been evidenced by a strong surge in rents (steady yields).

    At Apra, their recent and impotent response has been to implement weak macroprudential regulations. Formed in 1998, they have remained complacent, observing from the sidelines while Australia has built up a mountain of unconsolidated household debt, currently at 119.3% of GDP. And as of early 2015, ranking third place behind Switzerland and Denmark.

    The housing market is sure to follow the path of the mining industry. Policymakers believed the mining boom would last for decades, boosting the economy. With the mining sector now collapsing, the public will inevitably realise rising housing prices cannot last forever. The imposition of grossly inefficient neoliberal financial economics has plagued many nations recently with asset bubbles – Australia is no different.

    • Boom

      You and who you quote haven’t been reading MB very long?

      You would have otherwise read it’s also very much about supply!

      They point to Texas and Germany as models.

      But I’m pretty sure it’s supply of credit (mainly).

      Don’t forget the other stuff. Tax concessions, foreign buyers etc

      • BoomToBustMEMBER

        I’ve been around for a while(been a steep learning curve), I dont agree with all his points especially that we dont have a housing shortage as the stats dont back up that point view. I do agree however that credit is the driver, with out it, everything stops. (yes I have read both his books also)

        It really isnt a free market when governments and CB’s alter policy to allow sectors to grow to bubbles.

      • Boom

        I was being facetious.

        However the govt / CB’s are choosing employment over everything else.

        If they don’t open for business, then we’ll be closed for jobs. This is why rates are low and and certain foreigners can buy into Australia.

        The govt is choosing 10% Roy Morgan unemployment over say (15%)

        I never listen to ABS unemployment figures.

      • To all those concerned, the financialization of the economy started with the economic schools of thought which were funded by multinational corporatist, which became dominate in the early 70s. This was Bernays cortex injected via propaganda under the guise of the “Freedom and Liberty” facade.

      • I’ve been around for a while(been a steep learning curve), I dont agree with all his points especially that we dont have a housing shortage as the stats dont back up that point view.

        Which stats ? The ones on builds, or the ones on available housing ?

        Because the rental vacancy rates in most capital cities suggest supply is pretty tight.

      • Hugh, let me see if I’ve got your position right on this:
        So the poor misunderstood bank executives who have merely been following a deliberate business model to force feed record mortgage debt to the over indebted Australian household in order to justify their ~$10m salary to shareholders – and have recently casually ignored a lenient APRA regulation to cap investor loan growth to 10% – are also the unwitting victim of a plot by all powerful, overpaid planning bureaucrats who in their evil genius have managed to engineer a shortage marked by declining rental yields.
        That makes sense.

      • @Sweeper – rental yields have declined because prices have gone up, as I’m sure you know.

        Rents have been increasing faster than CPI and faster than wage growth for decades – see Nigel Stapleton’s thesis. The lowest quartile of income earners spend more of their salaries on rent than they used to.

        http://www.rba.gov.au/speeches/2008/sp-so-270308.html

        There does seem to be a denial campaign from greens and so-called “progressives” (e.g. Guardian journos) who are desperate to beleive that their prefered land use policies have nothing to do with inflation of housing costs.

      • @john,

        Does your methodology distinguish between single income or dual [adjusted for relevant decades] wrt industry pricing, e.g. prices are administered and intrinsically sticky.

      • John,
        Rent as a proportion of household income has been stable at just under 20% for more than 2 decades. That article you linked to is 7 yrs old btw. Falling yields in response to a shortage in the consumer good makes no sense in any valuation model I understand. As John Quiggin has also noted, if high prices really were the result of development restrictions at the urban fringe, the price gradient would have flattened. In fact it has steepened.

        You have a go at the greens. But do you really think people like Pavletich are interested in a constructive honest debate on urban land use? Firstly, the developer lobby never say what they mean by shortage. Is Joe Hockey capping all rents in the private rental market? Is Joe Hockey capping qty supplied? I have no idea, because they never say. They just rehash the same talking points about Houston, bang on about median multiples (which are irrelevant because you are effectively valuing an asset against an unrelated cash flow), link to a few libertarian articles, repeat the word shortage over and over and never engage in debate.

      • Falling yields in response to a shortage in the consumer good makes no sense in any valuation model I understand.

        Do the models account for a whole bunch of property buyers not really caring about the yield they’re getting, and renters not having capacity to pay more ?

        As John Quiggin has also noted, if high prices really were the result of development restrictions at the urban fringe, the price gradient would have flattened.

        This has been stated, but it hasn’t been explained.

    • “Australia is no different”

      Of course not! You will do well by dismissing nonsense such as “we are different” or “this time is different”.

      “Australia’s economists have not learnt the lessons made obvious by the global housing bubble, especially in the US.”

      True, but that is exactly what you expect. After all, economists in all the other countries did the same, including the American ones. BTW, “obvious” is a flawed concept. After all, there are many things that are obvious to me but not to others.

    • Why is it that the West and in particular the US, need to have a constant “xyz is a threat to world peace?’ Do they have a dart board with a world map as part of the selection process for “greatest threat?”

      • Did you read the article? I guess not. It helps to read the article (as opposed to the title) before commenting.

      • If people stop being scared of things, they might suddenly notice they’ve been robbed for the last few decades.

      • Hey doc, imo this goes back 4-5 decades and I think it’s more to do with the US (& west) wanting to maintain their economic/military advantage.

      • @ dennis
        much earlier then 1/2 a century.
        Shortened: it started big time with annexation of Panama…

        @ Two b1g too fail
        I guess you did not get skippy’s sarcasm on yanks there.

    • 2B2F,

      My comment was one of a general nature considering US history of having to have a constant “threat” to worry about, which the west in general seems to blindly follow (USSR, China, Russia, Iran, Iraq, ISIS, Iran, Russia etc, etc, oh, add China in again).

      Btw, seeing it was Chomsky I wouldn’t have to read it to know it would more than likely be questioning the alleged threat that Iran is said to be, plus I watched the first few minutes of him at Alternet not long ago from a link elsewhere.

  9. “Disruption” isn’t always what you think it is.

    It’s known under a number of names: The Sharing Economy. The Collaborative Economy. The Gig Economy. Because of its “fresh” and “disruptive” model, undeniable financial incentives in the middle of a global economic recession, and its integral connection to the tech startup community, this new business movement has been garnering a whole lot of attention in the last few years. If, like me, you spend quite a bit of time interfacing with tech companies and digital business professionals, you can actually feel the peer pressure pushing you to support companies like Uber, Lyft and AirBnb. If you don’t, your peers are likely to look at you a little sideways, cock an eyebrow, and find a roundabout way of asking you what’s wrong with you. If I look at this with suspicion, I’m old school. I’m stuck on old paradigms. I need to get with the times, right?

    “It’s evolution, man. Business Darwinism happening right before our eyes!”

    “..Here’s an exercise: Imagine a world where nobody has full time jobs anymore, where everyone is a contractor. For some of you, that will probably seem like some kind of entrepreneurial utopia, a libertarian dream. In theory, sure. It sounds kind of cool because “freedom”… but then you realize that it’s the kind of model that we did away with in the early parts of the 20th century, and for good reasons: A “gig economy” cannot produce or support a healthy middle class. It doesn’t factor-in realistic retirement planning or college savings. Because it eliminates income security, it all but eradicates upward mobility. What you end up with is a 1% class (more like a 5%) and a 99% (95%) class, which isn’t super healthy for any economy, as history shows us time and time again. Fully realized, that gig economy looks like this for the 99%: selling and renting everything they possibly can to make ends meet and save a little money here and there. For the 1%, it cuts most of the cost out of running a business, which is kind of the point….”

    http://olivierblanchard.net/stop-calling-it-the-sharing-economy-that-isnt-what-it-is/

    Skippy….. ahh the sweet smell of Freedumb….

      • And you don’t even have to go to the big box store parking lot to transport them back and forth to the job!

      • Ronin8317MEMBER

        And the ‘market’ love it so much, Uber doesn’t even have to make money and the market cap is over 50 billions.

    • Mining BoganMEMBER

      Parrots are well known for being staunch LNP supporters. Make lots of noise, have an ability to learn simple phrases plus shit on everything. They deserved saving.

  10. The Federal Reserve Is Not Your Friend … Zerohedge

    http://www.zerohedge.com/news/2015-08-21/federal-reserve-not-your-friend

    Submitted by Rand Paul & Mark Spitznagel via Reason.com,

    Imagine that the Food and Drug Administration (FDA) was a corporation, with its shares owned by the nation’s major pharmaceutical companies. How would you feel about the regulation of medications? Whose interests would this corporation be serving? Or suppose that major oil companies appointed a small committee to periodically announce the price of a barrel of crude in the United States. How would that impact you at the gasoline pump? … read more via hyperlink above …

      • The Traveling Wilbur

        Given Mr Hugh’s misplaced and over the top response to your comment R2M, it would seem Mr Hugh has a very short memory about commitments he makes (and is also quite an unpleasant fellow given you politely enquired about that commitment and said nothing else), or he’s two or more people who don’t talk to each other and the continual spruiking is in fact worse than 3d’s. Either way I’ll admit to having been conned previously; and either way, he’s outed himself. Well done. Only wish it could have happened sooner.

    • Ugh… Reason.com…. libertarian grotto

      Hugh, it might help if they reconciled the Fed has been run for decades_by_Libertarians.

      Food and Drug Administration (FDA) is run by corporations – fixed

  11. Christchurch Earthquake Repair Fiasco … EQC and Fletchers have major costly problems ahead of them …

    Building industry hits back at claims it is solely to blame for shoddy quake repairs | Stuff.co.nz

    http://www.stuff.co.nz/the-press/business/the-rebuild/71327853/building-industry-hits-back-at-claims-it-is-solely-to-blame-for-shoddy-quake-repairs

    The building industry is hitting back at claims it is solely to blame for shoddy earthquake repairs in Christchuch.

    Builders, speaking anonymously, said the Earthquake Commission (EQC) and Fletcher EQR pressured contractors into doing substandard work and the ones who dared speaking up were shunned from the home repair programme.

    Industry and community leaders have also leapt to builders’ defence and called for a widespread review of EQC repair processes. … read more via hyperlink above …

    • “Over the next five years we’re forecasting that economic growth will improve, disposable incomes will get a boost and consumers will be overall feeling a lot more optimistic about the future, so this will make having children a more affordable and possible option for a greater share of the population.”

      ROFL

      • Willy,

        Some do seem to forget large family units were due to mortality and labour factors [subsistence farming et al] in antiquity, that it became traditional is just environmental indoctrination. Surplus seems to negate that necessity.

      • What I find funny is that by all account, disposable income will continue falling into the abyss. Not the other way around.

    • 80% of the content of Australia’s MSM is quite simply made-up. Why anyone reads any of it (perhaps excepting the sports sections) is absolutely beyond me.

  12. Castle Hill is being carved up and sold to developers. These are groups of houses grouped together (by RE agents) and sold to developers.

    http://www.domain.com.au/for-sale/castle-hill-nsw-2154-2012144290?sp=11
    http://www.domain.com.au/for-sale/42-44-ashford-avenue-36-carrington-road-castle-hill-nsw-2154-2012175457?sp=12
    http://www.domain.com.au/for-sale/castle-hill-nsw-2154-2012176035?sp=2
    http://www.domain.com.au/for-sale/castle-hill-nsw-2154-2011934438?sp=11
    http://www.domain.com.au/for-sale/castle-hill-nsw-2154-2012149880?sp=12
    http://www.domain.com.au/for-sale/castle-hill-nsw-2154-2012039237?sp=14
    http://www.domain.com.au/for-sale/castle-hill-nsw-2154-2011679706?sp=16
    http://www.domain.com.au/for-sale/castle-hill-nsw-2154-2012087643?sp=18
    http://www.domain.com.au/for-sale/castle-hill-nsw-2154-2011906011?sp=1
    http://www.domain.com.au/for-sale/castle-hill-nsw-2154-2011844746?sp=5

    …and in this link, note the following quote from a RE agent:
    “Most people here have no concept of what’s to come … Castle Hill will end up looking a bit like Chatswood.”
    http://www.domain.com.au/news/castle-hill-residents-join-forces-against-developers-over-valuable-land-set-for-highrise-20150220-13jnk4/

    ..and don’t expect this to produce affordable housing:
    Huge demand and sales for apartments in Castle Hill’s yet-to-be-built twin glass towers
    They range from one-bedroom from $595,000 to a level-18, three-bedroom apartment at $1.22 million
    http://www.dailytelegraph.com.au/newslocal/the-hills/huge-demand-and-sales-for-apartments-in-castle-hills-yet-to-be-built-twin-glass-towers/story-fngr8i1f-1227301903624?sv=77327bf263e62e198bc501986df2a009

    Makes one wonder if this the best our town planners can do? uproot a peaceful suburb and build low quality badly designed shoe boxes to satisfy the hunger of speculators both local and foreign.

      • Their plan is flawed as long as more than 20% of new properties are going to foreign investors (in NSW). Add to that the way these houses are being auctioned guarantees the worst product is going to be delivered primarily because a developer, in order to win the auction, has to offer the most cash up front to the land owners (sometimes 2 to 3 times the already inflated market value), and given the significant profit margins some developers are making (way north of the traditional 20%), you can expect lots of corner cutting, bad and low quality material in construction, dysfunctional floor plans, and a hefty price tag.

        It’s growth for the sake of growth not growth for the sake of better quality of life which begs the question why would anyone (who doesn’t have a very strong reason) want to stay in Sydney?

      • DarkMatterMEMBER

        What the hell is the point of Sydney anyway? Why would any sane person want to make it bigger?

        Large parts of it are Godawful ugly brick tumors like some modern Charles Dickens novel. Honestly, dingy dog boxes and pokey little bedsits that appear to be purpose built to crush the human spirit. Sydney is the sort of place a sadist would design to inflict pain and suffering on other people.

        I say nuke it from orbit – it’s the only way to be sure.

      • interested party

        @Darkmatter,
        “What the hell is the point of Sydney anyway? Why would any sane person want to make it bigger?”
        I ask myself the same question often….best I can come up with is it is a living support system for a pretty bridge and an odd building close by.
        If you look deeper you could say the same for many/most cities……they rarely produce anything tangible, they just sort of suck…..everything……and consume.

    • TailorTrashMEMBER

      Funny ……a few years ago I remember thinking as I drove through such areas as Castle hill and Kellyville with their McMansions …….how long before they are bulldozed for apartment blocks ……..the McMansions were sold as the dream to upwardly mobile families as their “dream homes ” ….the apartments will be sold as the new dream ……..smaller but with riches for “investors” .
      ….Australia (Sydney ) surely is different ………….just don’t think of permanency or community here ………..sad indeed ………..”grab yourself some money ” ………..I don’t like what the future holds in all this. …………..

    • I grew up in Castle Hill, spent 40 years in the Hills area but last year I had to leave to escape the madness that is Sydney. What is happening to Castle Hill now infuriates me. Over the last 15 years it has been overrun with greed and any semblance of a nice suburb is being ripped apart by poor planing and a rush to get more people in. Developments are as cheap as can be with no effort to even make well built buildings. I saw one building that was only 10 years old look like it needed demolishing straight away.

      Development greed is just out of control there and it doesn’t bode well for the other surrounding areas as they also looked to be carved up and diminished.

  13. Be curious as to how far people think the Australian mkt can fall, given the cash rate I think cant go below say 1.5%? Given the possible capital flight issues.There is also a lot of equity built up in house prices that might support the economy for a while? Not everyone bought in the last few yrs.

    • A long, long way! It’s not the price of money, the % rate, that actually matters anymore. It’s the capacity to access it. If you think that all the enforced changes that the RBA, ASIC and other Regulators are making right now ( and the ones yet to come) provide more liquidity; more capacity to actually borrow, then there might be some temporary support. But if, as I believe, the debt taps are being turned off, then a long, long way might not adequately describe anywhere near where we are off to…..!

      • In an artificially supported market, they are one and the same! Why have stock markets, everywhere, taken off? Why have property markets, everywhere taken off? “Unconventional means”. The first round, I could understand. Perhaps even agree with, as the idea was to stop utter collapse. The second round? There’s nothing wrong with attempting escape velocity, as long as you don’t run out of fuel first! And that’s what we did – hence rounds 3 and the accompanying ‘wherever it takes’ from all and sundry.
        Now? The fuels been spent; the economic rocket hasn’t escaped gravity..and it’s headed back to earth without power and out of control. The idea is to be as far away from where it ‘lands’ as possible. You may not see the RBA/ASIC/Bank changes as affecting the equity markets as much as the property market. But I do, given that one relies on the other.
        (DLS summed it up well last week. The Aussie economy is stuffed, yet people fail to see how badly it is)

      • “But if, as I believe, the debt taps are being turned off, then a long, long way might not adequately describe anywhere near where we are off to…..!”

        But what will stop them turning those taps right back on if things get too hairy (long term consequences be damned)?

    • interested party

      Been wrong so many times before, got to get one right one day.
      ASX200 target approx 4600……..based off a confirmed head and shoulders on the weekly chart. Last weeks close was the confirmation.

      • The Traveling Wilbur

        Seriously? I’ve got 10 pesos of the banana republic of HolesHolesAndMoreHoles that says that won’t happen by the close of Wed (sydney time obvs).

      • interested party

        Mr Wilbur,
        I cannot take you wager, we are both on the same side ( not by Wed )….but remember, that is weekly charts, so maybe a month or so will get us closer ( if my call is correct )
        We fell 250ish points this week…and only 500 to target. Do-able, but unlikely by Wed.

      • The Traveling Wilbur

        A month? Jeez… I believe we’ll be there in 10 calendar days (@4600). I only said 3 days to give myself a fighting chance! 🙂
        Assuming the mythic Plunge Protection Teams don’t act of course. I can hear them now… “Your mission, should you decide to accept it…”, “CBs Assemble!”, “SIG Captain Glenn.”.

      • Well depending on what side you’re on – or whether you have much faith in technicals – I may have some good news for you!

        Observing the Stochastic divergence to physical across several global indices and time scales, momentum is strongly to the downside. MACDs have confirmed a bearish trend over the last few weeks and late last week several global indicies broke below key short term supports.

        As for the ASX200 – the 76.4 Fib retracement from the recent high has it possibly bottoming out at 3765 – same as the 2011 low which may become support and bounce off it over the short to medium term. Although a few other key supports would need to taken out before this occurred.

        If you want to look further out, the ASX200 could possibly bottom much lower breaking below the 2009 lows. This downside momentum looks really strong to me.. Just my 2 cents.

      • Another key support would be the 61.8 Fib retracement – usually a pretty strong support – which coincides with the 2010 low of 4190. Probably my target low for this year, however I wouldn’t be surprised if it breaks through this too..

      • interested party

        jagster,
        how much fuel in the way of margin lending involved…local….??? That will be the biggest arbiter for an overshoot.
        On the technicals, yeah, room to fall.
        The Fed’s position is large and not likely to be liquidated….so selling pressure may not be as large as 09. Maybe we steadily trend down, after the initial rush…..who knows….we are all guessing here.

  14. One for the anectode is not data files.

    In past years i’ve succesfully predicted upticks in immigration based on the number of demographically specific l-plater cars having driving lessons.

    There’s another wave happening right now so I predict the next direction for immigration stats will be up.

    • Hmm interesting read,

      I’ve noticed and mentioned prior that there’s an unshakeable story going around WA that Kalgoorlie is set to “boom” beacuse gold has been “recently” discovered there.

      Anyone know what the hype is about? Starting to feel bad telling elderly yeild investors that their dreams of 15% and cap gain from million dollar buildings in Kal is nothing less than utter stupidity.

    • Water pipes burst here and there due to the reduced usage?

      WTF is wrong with them? Didn’t they measure and monitor the water pressure?

      If they could afford expensive houses, but not the basic engineering infrastructure or the technical staff who operate it, that pretty much summarizes what is wrong with this country.

      • That’s right.

        The rise of ghost towns was totally predictable. In fact, I had stated as much a few years ago. It looks to me that people fail to grasp the non-linear nature of bubble dynamics.

        Here is a quiz;

        A small town was besieged by a vastly superior enemy force during a war. A 1000 strong armed force defends the town. During the first night of the siege, 100 fled. Another 100 fled the following night. Yet another 100 fled the third night. At this rate, how long can the town defend itself without any reinforcement (assuming that the invading force intends to preserve its strength and does not resort to a full scale attack)?

  15. Holy crap, just saw this one as “sale of the week” on Nine News.

    17 Marriott Parade, Glen Waverley – $6,000,000
    Ok, fine, whatever. Ridiculous, but whatever. It’s a biggish plot in a prime development location.

    But what’s really nuts:

    Last sold in April (four months ago), for $4,710,000
    That’s about +$10,000 a day since its last sale. Just burn this whole country to the ground.

    • Isn’t it awesome! This is absolutely fantastic. I seriously want to see it go even higher. This is shaping up to be a once-in-a-century meltdown. Load up on popcorn and strap yourselves in, kids. This is going to be one helluva ride! Ha ha ha ha ha!

    • Splendid! The Victorian government must be ecstatic. How much did they raise from the stamp duty and the GST of this single transaction?

      I hope they keep selling multi-million dollar houses, preferably every week, so that the government can cut taxes elsewhere?

      They just need to come up with a clever scheme such as “If you transact 5 times in a month, we will waive stamp duty for the 6th”

  16. St JacquesMEMBER

    Hey skip, I agree. Drones are going to be a real public menace, in terms of nuisance (noise) and safety for low flying aircraft, privacy as the ferkers fly around your house videoing everything, and security – being used to case out your house or even weaponised drones being used by criminals and terrorists. I can see the ferkers being shot out of the sky, caught in nets, knocked down by anti drone drones, being hacked into and crashed or stolen by hackers or simply being heavily restricted or outlawed by fed up citizens.

    • St JacquesMEMBER

      “The Rich Mates Act amendment bill” – classic Michael West. How this truth teller survives in Domain is beyond me. Perhaps they need a couple of truth tellers like him and Martin to retain any scrap of credibility.

      • St Jack,
        I guess that’s because he doesn’t comment on the RE situation; I don’t ever recall him talking housing or the vested interests there. Gotta give him a free pass on that one otherwise he’d not be employable anywhere.

      • St JacquesMEMBER

        Yep, RE isn’t Michael West’s forte but showing up the utter hypocrisy of the government is and what a service he provides. However Peter Martin has raised big questions about RE, so more power to him. Guess it helps give Domain’s propaganda something of a “balanced” look.

    • Lol. Some cute free market fairies dancing on the tax provisions … West is an anomaly that’s for sure.

  17. “Using international data starting in 1957, we construct a sample of cases where fast-growing economies slow down. The evidence suggests that rapidly growing economies slow down significantly, in the sense that the growth rate downshifts by at least 2 percentage points, when their per capita incomes reach around $17,000 US in year-2005 constant international prices, a level that China should achieve by or soon after 2015. Among our more provocative findings is that growth slowdowns are more likely in countries that maintain undervalued real exchange rates.”

    http://www.nber.org/papers/w16919

    Record capital flight from China as industrial slump drags on.

    I’m sure it was Ambrose claiming there was nothing to worry about in China just a couple of days ago ?

    “China’s state media decries “unimaginably fierce resistance” to economic reforms, a sign that president Xi Jinping is becoming furious with incompetent party officials”

    http://www.telegraph.co.uk/finance/economics/11817185/Record-capital-flight-from-China-as-industrial-slump-drags-on.html

    Fading Economy and Graft Crackdown Rattle China’s Leaders

    “A slowdown could mark the end of fast growth, while a campaign against official corruption has continued longer and reached higher than most had expected.”

    http://www.nytimes.com/2015/08/23/world/asia/chinas-economy-and-graft-crackdown-rattle-leaders.html

    IMF official says ’premature’ to speak of Chinese crisis

    “China’s economic slowdown and a sharp fall in its stock market herald not a crisis but a “necessary” adjustment for the world’s second biggest economy, a senior International Monetary Fund”

    http://www.reuters.com/article/2015/08/22/us-china-imf-idUSKCN0QR0JJ20150822

    • GunnamattaMEMBER

      why is it that when I see references to IMF officials saying it is premature to talk of crisis I assume they will announce they have one next week……….

      With the money pouring out of emerging markets at the moment I think there is a plausible case for saying they have one now………With crude where it is anything more emerging than the Saudi’s has massive issues

      • Yep agree, as I said further up commodities and capital flows, just wondering which will kill someone first ,maybe both. Malaysia , turkey and the like are in serious capital flow strain, Saudis and the like, including oz in commodities pain.

  18. (John Mauldin) “Every Central Bank for themselves!”

    If there are simultaneous shocks in both China and Europe, we will see a deep global recession. That will spark a real currency war. The small skirmishes we’ve seen so far are tiny in comparison to the monetary missiles that central banks would launch at each other….people are wondering why the euro and the yen have recently been strengthening against the dollar. It’s because the US stock market is finally rolling over, and money is going to those areas of the world where quantitative easing is still being practiced with a vengeance. Is that logical? Market players have bought the narrative that quantitative easing means a rising stock market, and they’re going to stick to that narrative until it falls flat on its face.

    http://www.mauldineconomics.com/frontlinethoughts

    • interested party

      Janet,
      Is it fact that the worlds central banks are owned by the same crowd…rothschild et al.? As I understand it that is the case…..and if so, then they may only be ‘for themselves’ superficially. Sort of keeping up pretensions…optics.

      • St JacquesMEMBER

        One shouldn’t confuse influence with control. The major East Asian powers built their economic power on predatory mercantilism and now are having difficulty rebalancing to internal consumer led growth and at the very point they need to pump up internal growth are getting it in the teeth from a leaner and meaner mercantilist Europe. The US can only tolerate a rising USD for so long. So there is jostling between the CBs but they all know going nuclear would be an all round disaster. My bet is that as the global situation deteriorates, Europe will be forced to become a little more domestically expansionary, ie, move away from strict government austerity..

      • interested party

        St J,
        No confusion as far as I am aware, if you consider that the if CB’s are owned by a certain group, and global growth runs at 2.5% ( hypothetical ) then it matters little as to where the profit is actually generated…it still all flows to the same destination.
        http://www.centralbanksguide.com/central+banks+list/
        There are not many places left that don’t have a CB.
        If you consider that global growth is really just a huge zero sum game where some countries ‘gain’ for a period then lose to the “benefit’ of others…..it is only logical to capture all streams to guarantee profit, as it seems the owners of the CB’s appear to have done.
        Where Janet’s OP was about Mauldin and every CB for themselves…….merely optics in the big picture.
        Yes, they will individually make choices and act independently to some degree….so what. The profit still flows to the same destination.

      • St JacquesMEMBER

        To a degree fair point but I didn’t think the Rothschildes, et al are invested in the great east Asian and Russian CBs. Mind you it’s all madness and what Janet points out is that madness being raised to another power.

      • interested party

        St J,
        Agreed……and if the countries that you mention are independent, might explain the military angst towards these recalcitrant nations.
        Don’t know, myself. Just hypothesising……..seems to fit the jigsaw.
        All that is certain here is that stuff is getting weirder day by day and will continue.

  19. Fairfax is having a property pornathon on the front pages today. Its all “millions above reserve”, “rich to get richer” and “dumps smash records”.

    A smug fuckfest of criminal money launderers and lunatic Strayan specufestors on their hands and knees, begging to participate in the debauchery – “please sir, can I borrow some more????”

    It is by far the most maniacal this ‘irrational exuberance’ has been. Its way, way outta hand.

    Maybe we’ve stumbled on the first bubble that wont ever burst?

    L O L

    Tick fn Tock.

  20. Jeremy Corbyn wins economists’ backing for anti-austerity policies

    Former adviser to Bank of England among signatories to letter dismissing criticism of economic plans, saying they are ‘not extreme’
    More than 40 leading economists, including a former adviser to the Bank of England, have made public their support for Jeremy Corbyn’s policies, dismissing claims that they are extreme, in a major boost to the leftwinger’s campaign to be leader.

    The intervention comes as the Corbyn campaign reveals that a Labour government led by the MP for Islington North would reserve the right to renationalise Royal Bank of Scotland and other public assets, “with either no compensation or with any undervaluation deducted from any compensation for renationalisation” if they are sold at a knockdown price over the next five years.

    The leftwinger’s economic policies – dubbed Corbynomics – have come under sustained attack in recent days, including by members of his own party, with Andy Burnham warning his party in an interview with this paper not to forget the lessons of the general election about the importance of economic credibility.

    But with just under three weeks until Ed Miliband’s replacement is announced, Corbyn’s credibility receives a welcome endorsement as 41 economists make public a letter defending his positions.

    In the letter to which Danny Blanchflower, a former member of the Bank of England’s monetary policy committee is a signatory, the economists write: “The accusation is widely made that Jeremy Corbyn and his supporters have moved to the extreme left on economic policy. But this is not supported by the candidate’s statements or policies. His opposition to austerity is actually mainstream economics, even backed by the conservative IMF. He aims to boost growth and prosperity.”

    http://www.theguardian.com/politics/2015/aug/22/jeremy-corbyn-economists-backing-anti-austerity-policies-corbynomics

    Skippy…. Ideological inflection point?

  21. In addition to the above….

    “Economists and lawyers often approach the topic of money differently because they have different philosophies underpinning their professions. […] For example, many economists think money arose as a transaction cost reducing, utility enhancing device to overcome the absence of a double coincidence of wants that hampers barter, while many lawyers and institutionally minded economists think the origins of money is the state (Goodhart 1998). Economists mostly think of money as a medium of exchange (Kiyotaki and Wright 1989) because this function relates to trade and commerce, while law emphasises money as a means of payment (Proctor 2012): whether one party has discharged their obligation to another. In emphasising the settlement of obligations, law draws attention to money’s role in non-commercial transactions such as taxation and transfers. And while economists treat money mainly as an indicator or intermediate target for influencing real, macroeconomic variables, lawyers typically think about money in the context of individual cases and adhere to the doctrine of nominalism.

    Despite these different points of emphasis, this blog has tried to show that understanding money requires joining legal with economic perspectives. For example, while for a long time lawyers saw bank deposits simply as loans, economists much earlier appreciated their wider bearing on inflation and output. However, if economists want to explain why certain claims like bank deposits are money, while others are not, they must look at their legal attributes and socio-legal history. ”

    http://bankunderground.co.uk/…/monies-joining-economic-and…/

    Wow. Wow. Wow. So good to hear this coming from the fucking BANK OF ENGLAND (notwithstanding the crude and patently false philosophical binary between the professions). Particularly given how familiar it sounds….

    • DarkMatterMEMBER

      My take on that would be the complete absence of any acknowledgment that money and finance can only be explained with reference to thermodynamics, entropy and complex dynamic systems. What will the lawyers do when it becomes obvious that money no longer equates to a unit of human labour? They will backtrack and patch their models to try and make reality conform to their legalistic views. Ditto with economists.

      We are in a similar position to Europe back in the time of Galileo and Copernicus. They were using new ideas to successfully explain the nature of the solar system. Of coarse, the Church held the opinion that only theologians and bible scholars were qualified to decide how the planets moved. The religious point of view was unenforceable, so there followed centuries of backpedalling, obfuscation and bullying in an attempt to retain power and influence.

      I think we will see the same thing. The old views of money, power and economics will fight a rearguard action to the bitter end. In spite of this, the overwhelming force of technology change will defeat them, just like the church was defeated.

      • I’ll stick with anthropology and sociology, thermodynamics, entropy and complex dynamic systems wrt humans, sounds a bit like THX1138.

  22. Credit Bubble Bulletin weekly commentary
    http://creditbubblebulletin.blogspot.com.au/2015/08/weekly-commentary-its-always-worse-than.html
    This week saw indications of what has the potential to erupt into an Asian and EM banking system crisis of confidence. Faith that Chinese and EM government officials have the situation under control is surely being shaken. This is a game-changer for global finance and for the world economy. Financial conditions are tightening around the world – and this has zero to do with a possible September Fed (“baby step”) rate increase.

  23. Mining BoganMEMBER

    Can all you Brisbane folk please do me a favour and boycott this place for me?

    http://www.couriermail.com.au/news/queensland/casual-staff-at-capalaba-sports-club-given-72-hours-to-sign-contracts-that-eliminated-all-penalty-rates/story-fnihsrf2-1227494375206?sv=b6a8ffdd182c9926bfb314c0f1c22626

    The future. Take your shades off, it’s not that bright. Corey was wrong.

    Edit: No! Timbuk 3 it was. My apologies to Corey Hart. Although he probably owes us one for Sunglasses at Night.

    • This….is the way it is in most of the rest of the World, New Zealand included. It’s part of why the wages structure is so unncompetitive in Australia? Penalty rates; Long Service Leave etc went the way of the Dodo ages ago elsewhere….It will happen there as well. It’s only a timing issue, just like 6 pm pub closing; weekday only banking and closed shops after 1 pm on Saturday afternoon were.

  24. Mining BoganMEMBER

    Well, who would have thought?

    “Specifically, when billionaires get their wealth because of political connections, that wealth inequality tends to drag on the broader economy, the study finds. But when billionaires get their wealth through the market — through business activities that are not related to the government — it does not.”

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11500864

    Good to see Oz holding their own.

  25. Apartment boom will mean fewer one-bedroom flats, say experts
    Google title if blocked
    http://www.afr.com/real-estate/residential/apartment-boom-will-mean-fewer-onebedroom-flats-say-experts-20150731-giohon
    “If Sydney’s housing prices kept rising at the current pace, even two-bedroom apartments could move beyond the reach of investors and first-home buyers, he said. “And young families might be sharing one-bedders,” Mr Chittenden said.”

    WTF Australia turning into a third world country.

    • Experts forgot to factor in the mother of all corrections. Lets see what those apartments are worth two years from now.

  26. The Real State of Unemployment

    Submitted by Paul Craig Roberts on August 17, 2015 – 5:22am

    Do you remember when real reporters existed? Those were the days before the Clinton regime concentrated the media into a few hands and turned the media into a Ministry of Propaganda, a tool of Big Brother. The false reality in which Americans live extends into economic life. This month’s employment report was a continuation of a long string of bad news spun into good news. The media repeats two numbers as if they mean something—the monthly payroll jobs gains and the unemployment rate—and ignores the numbers that show the continuing multi-year decline in employment opportunities while the economy is allegedly recovering.

    The so-called recovery is based on the U.3 measure of the unemployment rate. This measure does not include any unemployed person who has become discouraged from the inability to find a job and has not looked for a job in four weeks. The U.3 measure of unemployment only includes the still hopeful who think they will find a job.

    The government has a second official measure of unemployment, U.6. This measure, seldom reported, includes among the unemployed those who have been discouraged for less than one year. This official measure is double the 5.3% U.3 measure. What does it mean that the unemployment rate is over 10% after six years of alleged economic recovery?

    In 1994 the Clinton regime stopped counting long-term discouraged workers as unemployed. Clinton wanted his economy to look better than Reagan’s, so he ceased counting the long-term discouraged workers that were part of Reagan’s unemployment rate. John Williams (shadowstats.com) continues to measure the long-term discouraged with the official methodology of that time, and when these unemployed are included, the US rate of unemployment as of July 2015 is 23%, several times higher than during the recession with which Fed chairman Paul Volcker greeted the Reagan presidency.

    http://www.economicpopulist.org/content/real-state-unemployment-5816