Australia faces calamity

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Macro Afternoon

I am not going to sugarcoat this. There is enough of that in the mind control property media to make a freedom-loving liberal chunder. Australia faces calamity.

The formulation of the gathering catastrophe is simple. Coronavirus is loose in China. The Chinese Communist Party has declared war upon it and must win lest it jeopardise itself. As the virus explodes, the base case for that is now to progessively shut the country down for six-to-nine months. There is still an upside risk case that the CCP succeeds in choking the virus sooner, or a miracle drug appears, but with each passing day material economic harm well beyond SARS is being done to China. And there is an even higher probability risk case that the CCP fails and the world succumbs to a pandemic unseen since the Spanish Flu of 1918.

The second component is that Australia has the worst government in living memory. Morrison’s administration is much worse than that of Tony Abbott or Malcolm Turnbull. It is stupid, corrupt and entirely absent policy process. It can’t manage good times and it is fantastically inept in the bad.

A six month Chinese shutdown puts at risk $7tr in economic activity. Who knows how much of it will be lost. Enough is the simple answer.

Enough, that is, to trigger a credit event in China. Nothing so crude as a banking freeze. The government owns the banks. They will lend. But interest rates will rise with a rush of bad loans as private sector credit sources dry up and blow away like ashes in a Wuhan crematorium. Regardless of stimulus efforts, which won’t work when nobody can leave home, China’s massively over-leveraged corporate sector will go under. Expect a deluge of monetary support and crashing yuan, which may destroy the trade deal.

In the broader sweep of history, this will materially accelerate China’s historical slowdown as its great credit machine turns zombie, accelerating the process of ‘Japanification’ by several years, and turning what was a managed policy goal, of exiting the high debt investment model, into an acute adjustment of balance sheet recession.

When the virus passes, there will be an impressive snapback in activity but China will never fully recover as its economy will have to chew through a Himalaya of bad debt for as far as the eye can see, made worse again by another misallocated stimulus wave, as well as accelerated supply chain exits.

The global fallout from this will be equally large. Europe and emerging markets are very export-dependent upon China. In the base case, both will see growth crash. Europe’s broken banks will see casualties in the recession.

Across the Atlantic, the US fortess economy is largely free from direct Chinese contagion. But it’s stock market is exposed to a global recession via shrinking multinational profits, probably made worse by a rising USD safe haven bid. Wall Street is wildly overvalued for the good times, let alone the bad. The base case will drop it by one third, enough to destabilise corporate balance sheets fully loaded with debt for buybacks that have so inflated shareprices. Pain will be exacerbated by the oil price plunge that drives up spreads in the junk bond market.

Which brings us to Australia. All commodities will be wiped out in the next six months including, and perhaps most especially, iron ore, both coals and LNG. There’ll be some offset in gold and an Australian dollar nearing 50 cents.

As commodity prices hit bowel shaking lows, and the local Chinese-fed services ponzi implodes, the Australian budget will turn deep red just as the domestic economy cries out for stimulus. There will be some spending but nothing like during the GFC. The Morrison Government will always keep one bung eye on the sovereign rating and constrain public spending, even though there is absolutely no need to do so in a world of QE. As budget revenue is gutted, the faltering fiscal pulse will not be enough to prevent a big spike in unemployment.

Nor will the RBA’s last two rate cuts and quantitative easing. Indeed, the last will be needed not as a growth measure but as a crisis management tool to prevent bank spreads from blowing out with the global debt crunch. The banks won’t pass on the cuts. Indeed, they’ll be having acute balance sheet problems of their own as the consumer bunkers, under pressure from economic fallout amd possibly the virus itself. Without enough policy support for the economy, not to mention the calamitous newsflow from abroad, a multi-generational shock will roll house prices into a double dip recession as immigration craters.

A global coronavirus shock is not just a cyclical event. It is structural shunt that leaves everything changed; the bursting of the “everything bubble” created by central banks in the aftermath of the GFC. In a sense its final chapter. If the virus goes global, it could be depressionary.

For Australia, this calamity widens every crack in our already sick economic structure: Chinese over-exposure; household debt borrowed from offshore; reliance on mass immigration over productivity policy; distortions of the resources curse, and the rise of the psychopolly to cream it rather than manage the national interest. The end result of choked incomes will turn income implosion.

It is almost as if nature itself has gotten fed up with the aged generational bulge that disgorged a misshapen world of bottomless greed. It’s decided to kill them off and liberate the young to finally buy it all on the cheap.

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Comments

  1. It’s a doozy of a Black Swan.
    Remarkably, the ageist coronavirus may resolve China’s demographic timebomb. Children hardly affected but lethal for the elderly.
    For Australia, our over reliance on China was always going to cause problems at some point. Let’s just hope the virus doesn’t take hold here.

    • Agree with your black swan !!!!

      We are only months away (April) from the Aust Banks needing.a bail out, houses prices in Australia will be down 30 to 50% this time next year, we are heading in Ireland 2.0, but worse. We have Entered “The Great Australian Housing Crash, The Big Australian Short and we are headed into the next World Great Depression
      As we now head into extreme low cycle 24 April the global financial system is about to deleverage and collapse, we are now headed into the greatest financial crash we have ever seen.

      Remember 1987 Stock Market Crash occurred bottom of SC 21
      1997/98 Asian Financial Crash occurred at the bottom of SC 22
      2008 Lehman collapse GFC bottom of SC 23

      2020 low SC 24 is more extreme than all above, the global crash is going to be larger and for longer

      As we head up into Solar Cycle 25 Q4, many markets are going to turn up

      This is going to catch many by surprise and when everyone starts selling at the bottom mid year there will be opportunities to start buying into financial assets that are currently not very leveraged

      You’ll never see property prices at 2017 highs again in our lifetime

      I don’t want to sound like that arrogant hairy faced egotistical wanger from the AFR, I said last June this was coming in April 20

      Get ready we are now on the edge of no return

      Morrison RBA can’t do anything the momentum down will be too powerful

        • You will be sailing off into the sunset but will be actually sailing into the storm
          The thing I love about you Reusa is that you have been consistent on your view but unfortunately for you it’s been consistently wrong

          • lol,
            despite the entire caricature that is reusa, for the last 20+ years he has been completely right.

          • BJ
            I wrote the other day he was actually always wrong and destined for failure because he never takes profit never goes short
            Nothing goes up for ever and never has never will

            Reusa would have been the greatest legend of all time if he pulled the sell trigger in Q419, but he didn’t, he stayed long…..

          • I’d say that the caricature that is Reusa is so far ahead in capital gains that he doesn’t need to take profit…

            There are plenty of Boomers who don’t need to do a thing, really – maybe sell a few places to close out debts (to $1 from paid off ;)), then site back and live off the rents, like teh new aristocracy they are

      • Start preparing not only financially but mentally

        Start watching movies
        Angela’s Ashers
        Defiance “Daniel Craig”

        Maybe Mad Max that’s coming but not yet but a good watch

        I’ll list more out, you need to psychologically prepare

    • rob barrattMEMBER

      Agreed. Why be negative? Instead of announcing a 2% mortality rate they should be trumpeting a 98% survival rate. Great for business confidence. Mind you, I don’t think I would go long on the Chinese Live Bat market trade…

  2. Following on from Ronin, if you accept that Hubei province is likely deeply dysfunctional (shortage of test kits and system overwhelmed), then it makes sense to look at what is happening in other mainland provinces. No one likely knows anymore what is happening in Hubei

    So I looked at the increase in 7 provinces over the past 34 hours using bnonews

    https://bnonews.com/index.php/2020/02/the-latest-coronavirus-cases/

    All times UTC

    Province; Cases at 1021 UTC 2 Feb; Cases at 0002 UTC 1 Feb; % increase last 34 hrs
    Guangdong; 632; 436; 45%
    Zhejiang; 661; 537; 23%
    Henan; 493; 352; 40%
    Anhui; 340; 237; 43%
    Sichuan; 232; 178; 30%
    Beijing; 191; 139; 37%
    Shanghai; 182; 135; 35%

    Total; 2,731; 2,014; 36%

    Put another way, 1/4 of cases now were not cases 34 hours ago.

    • ApproachingZero

      Did you notice yesterday that China only released death statistics for Hubei? They seem to have conveniently skipped all the other provinces. On previous days, roughly 40% of deaths happened outside of Hubei.

    • Ronin8317MEMBER

      The figures for Zhejiang is a bit ‘rubbery’. They came from nowhere to overtake Guangdong province as the number two spot. The local government was a bit slack in implementing protection measures when Wuhan went into lockdown, so I suspect they’re still in cover up mode right now.

      There are five key provinces : Guangdong, Jiangsu, Shandong, Shanghai, and Beijing. The other provinces can become leper colonies but these five cannot go into quarantine. The first three provinces represents 10% of China’s GDP each, while the last two are political centres. What happens there will decide future Chinese Central government reactions.

      If things gets bad enough, expect all those infected to be transported to Hubei to either die or recover by themselves.

    • The scary thing is that all of these people were infected more than a week ago.
      Some may have even been infected BEFORE they quarantined Wuhan.
      Actual infections now will only show up in 1 – 2 weeks.

      Given the end of Spring Festival hundreds of millions will travel back home and commence work. The infected will travel across China, infecting as they go without even knowing it, and bringing their deadly virus back to their normal places of residence.

      China will not be able to contain this without locking the whole country down. It is game over.
      By the end of Feb all of China might look like Wuhan now.

    • V
      Unfortunately it’s a nightmare that’s coming
      I know it’s coming and it truly frightens me
      I’m not sure what it means for people who have no idea what’s ahead
      Traumatic

      I think I might switch off the doom and gloom and start watching a few feel good Netflix series

      It’s going to be very painful

      Start mentally preparing now everyone

      Start getting notes and coins etc

      Just listen to BOOMS wife

      We may need to all help each other

      I’ve been trying to find a second hand van, like one of those MCG food vans

      I’m going to start a soup truck for charity which I’ll pay for to feed the poor and homeless, I’ve been looking for 12 months and been talking with people that can help = Gav I may need advice on the correct van truck

      THATS not the homeless you see now

      It’ll be widespread poverty and starvation, we will all need to be kind and help each other with skills and recourses we have combined

        • Peachy you are coming to help no money in soup,
          It’s about be caring and compassionate
          Suicide, starvation, disease, extreme financial hardship, mental health issues depression
          We all need to find a way to be caring for those needing help

          We are moving from a greedy and corrupt society to an empathetic society

          • The way to move from a greedy society to an empathetic society is for all the greedy people to die.

            And for the empathetic people to look on as the greedy ones die.

            😉

          • Peachy I’m not sure they’ll die but they’ll lose all their money and go bankrupt poverty
            My soup van will have gourmet soup for an extra $1

          • Sorry to disappoint you BC but the rich and greedy will be the last to fall into poverty and die.
            As always the most disadvantaged will bear the brunt.

      • Making some big calls, but I don’t agree house price falls anytime soon, the local punters have no idea on the Global impact on their properties, they will keep spruiking on cheap debt, mum and dad loans will keep flowing, it’s not until heavy job losses in Sydney and Melb that we see prices start to fall

        • You are absolutely correct, I could be wrong on what I’m saying now, I just haven’t been wrong on many things over the last 12 months but yes absolutely i could get this wrong and I’m willing to admit it

          I hope C Joye admits he’s wrong when his 2019 predictions of 30% up will be out by 60% when prices fall at least 30% in 2020

      • bcnich,
        hats off to you on making such a big call over the next few months. Its a ballsy move, and I will be watching closely to see if there is any merit in this “solar glow” you speak of. However, at the moment I think the solar glow might be coming from the cone in your bong (no disrespect – I do enjoy your posts).
        We will find out soon enough.

  3. Scomo will go the full law and order manifesto as the economy crashes and unemployment turns into theftployment. If this thing really gets out of hand our tourism sector’s collapse in tandem with a shortage of foreign students will send a host of small businesses to the wall, quickly followed by retail, services and eventually state governments laying people off in droves to hold onto some kind of credit rating. With ScoMo and recessionberg in charge along with the RBA we have zero hope of riding this out without a massive loss of income and eventually wealth.

    Long USD, a maximum of $250k cash in the bank and make sure you catch the virus now, rather than when there are no ICU beds left

    • MD
      You are very brave to put $250k in the bank
      I was at $100k
      I’m now at $25 to $50k I’m uncomfortable

      They just won’t be able to protect $250k

      Banks will collapse restructure re open and collapse again and so forth, it won’t be one bail out

      Bail in merger nationalise I guess anything is on the table

      I hate saying this but banks are a great short here, just don’t get caught shorting too low, it’s a bit like your get sick now theory get short now not later

        • Peter I’ve been asked my view many times over last 2 months, I don’t believe anything is safe but I’d prefer to be running short positions in equities dow and asx and hold very short dated paper in US AUST (I know short maybe too much risk for most and it’s just my personal view.i feel that equities rarely run away that far to upside, I like short commodities but again it’s too much risk for most.
          $250k might be ok, but I don’t trust politicians, regulators, bank CEOs etc
          They’ll look after themselves first but if you have trust that’s ok
          On odds you’d have to say $250k should be ok
          I’m not willing to wait and see
          I told peachy that I felt short equities at 7000/7100 was less risk than bank, everyone has an opinion and so you need to do your research and feel confident in what you are doing

          I wouldn’t be long gold and any other commodities, I wouldn’t be holding long dated bonds, I wouldn’t be long AUD, I wouldn’t be long any equities but that’s only my view

        • bcnich. The problem with what you say is that it’s not really advice that most investors/punters can use. Shorting implies using CFDs and other derivitive financial products that most people honestly are way out of their depth with. Firstly they don’t have trading accounts set up that are able to do CFDs and secondly they simply have very little chance of understanding the whole business unless they spend a year or so immersing themselves in it. I think simple advice like “try to get your wealth out of Aussie dollars” would be more useful, even though not technically what you mean exactly

          • Arthur
            It’s not advice
            It’s trading ideas based on what HnH writes or what a trader might do, it’s really just a recap view of markets and answering
            If you have a nice home you live in with a fixed rate, and a little gold hidden, cash in a tin to last your 3 months some good shares, just go to the pub or the beach and don’t worry

            The discussion is really about market moves but it’s irrelevant for most

            I rarely would buy options, don’t even know what CFDs
            I lost quite a lot shorting RIO via warrants back in 16, and would rarely do, I also bought quite large AUD puts in 16 and that’s when Chinese did there stimulas, I rarely make money

            I did get lucky last week, I bought ASX puts at 7100, just got lucky, stay away from all that leverage stuff

            I’m probably talking about what a baby boomer with ok money in SMSF might do.

            Instead of being in debt holding 3 investors properties and long shares and long bonds and might even have a home loan they’ve used to buy shares

            They are going to get hammered

            If you are under 40 with home a little cash few shares relax, it’s not for you, don’t go and spec on inverse this and that

            Ian has a nice long term position he’s holding a long Gold ETF in NY, I like it
            It’s holding USD and gold and he’s not leveraged, he has no borrowing and he’s really comfortable, that’s better than having a bond ETF with long duration bonds

            For me if you have a SMSF with
            Australian shares ASX
            Bond portfolio
            And investment property with a SMSF loan at 6% that banks charge think 2020 will be a bad year for them

            Think if in 30s don’t speculate

    • happy valleyMEMBER

      Te LNP will go from the current benevolent dictatorship to the full blown version – all in the interests of national security and economic prosperity, of course.

        • Scomo will be gone in a few months
          The Q us who is next

          I’d say similar to 1930s when hitler rose, as markets collapse and we head into depression

          It’ll be a right wing fascists
          Probably Dutton and Abott ??? Joining with Pauline Hanson ??

          We will follow others into a authoritarian type government structure

          • Indeed.

            Once Dutto gets there the hammer will really start to fall.

            And still the bleating will be about “socialism”.

          • +1 on the Dutton thesis.

            So, ZUSD and and YANK.

            If I can get my hosue exchanged this week/next and sit on the cash we might find the timing to buy is good

            Although we’re a regional bolt hole, so might find a lot of SYD and MEL sea/tree changers this way, we shall see.

          • Haroldus you’d have to say Sydney is most vulnerable with Melb behind
            Think good regional might be ok
            Especially to get away from the Chinese.
            They don’t go to regional much
            I said to my GF, i this (when) goes pear shape, I’d like Gold Coast is it ok ??

          • BC – lots of Chinese movement via GC. So if the ban in incoming remains, might be ok.

            However, the ban does not apply to citizens, permanent residents and their immediate family (not sure if immediate family includes granny etc, seems not: https://www.theage.com.au/national/very-confused-tired-families-split-as-travel-ban-prompts-airport-chaos-20200202-p53x02.html)

            I guess it’s hard to model as you don’t know who has been mixing with who and when.

            I am meant to fly to Syd and visit Chatswood for work Wed arvo, and should be ok right now, but in 4 weeks time, who knows.

            Applying the ban is good but gee with people already in the air when it was applied….

  4. No escaping recession now but the fear pawn over the virus itself is getting a little tiresome.

    Other than that, the hit to tourism and education is enough to tip us over.

    • – Infectious while in incubation and no signs of said infection
      – 20-30% of patients need ICU
      – mass air travel still going on
      – nothing to see here

      I wonder how many folk from Wuhan have been sent to the Uighur province…?

    • I think the coronavirus is quite serious. What’s interesting is that the number of recovered cases is about equivalent to the number of deaths(which is likely under reported). This thing is nasty and highly contagious.

    • You think it might be a bit over blown 32 Million people have died from AIDS – 700,000 last year alone.

      130 people have died from Coronavirus. That many people died from Measles in Samoa last year alone – an highly infectious contagion.

      Yes – its slightly overblown,

      “there is an even higher probability risk case that the CCP fails and the world succumbs to a pandemic unseen since the Spanish Flu of 1918.”

      There have already been 3 separate vaccines developed the first to be trialed on humans in about 8 weeks. One in Hong Kong, one in China, and one in the UK – the US are also said to have one already.

      “The virologist said China is releasing data on the new coronavirus “in a really timely way” and has been very open and transparent in reporting cases, severe cases and deaths, which helps scientists to determine how quickly it will spread.”

      https://www.msn.com/en-gb/news/world/the-race-to-find-a-vaccine-can-coronavirus-be-cured/ar-BBZwb64?li=BBoPRmx

      But yes – the global economy is probably going to collapse because of 131 people dying of the flu.

      • Well done Harry. The only sane comment here.

        It’ll all be over in a few months. Airlines will have taken a decent hit. And that’s about it.

        The machine that is China will continue surging along. Chinese money will still flow to Australian real estate (in fact they don’t even need to travel to Australia – e.g. using aus citizen proxies etc.)

        The impressive snapback after the virus is contained will actually push Aussie real estate prices higher and will be a source of fluff for the Aussie media and property industry to spruik.

        I’m not sure that commodity prices will collapse let alone even be lower in six months time. Interest rates sure as hell aren’t going to go higher.. in this lifetime at least.

      • I’m with Harry. Awful lot of people here being exposed for panic merchants. When this all blows over I’ll remember to take their opinions with more than a grain of salt.

      • They got bird flu now, they just getting over the swine flu, either way, that place is ###%#$, maybe they can build a few more subs to support growth, what sort of return do you get on navy?

  5. Hope I’m wrong. But it reminds me of the video you see on the news of people working in an office before en earthquake. 30 seconds before, it is business as usual. And then it isn’t.

    • Steve it’s really amazing how things can go from boom to bust in such a short period.
      I was out with my brothers mates last night and all talking about the age said house prices going up 13% this year.
      Think the only people aware something is not quite right are people on here

  6. The article below is just one which mentions the pulmonary receptor molecule for corona virus is an angiotensin converting enzyme 2. The ACE2 is in higher concentration in ethnic Chinese lungs than it is in Caucasians. I think this will be a disaster for China, but may be less severe for western nations.

    Receptor recognition by novel coronavirus from Wuhan: An analysis based on decade-long structural studies of SARS
    Yushun Wan, Jian Shang, Rachel Graham, Ralph S. Baric, Fang Li
    DOI: 10.1128/JVI.00127-20
    ABSTRACT
    Recently a novel coronavirus (2019-nCoV) has emerged from Wuhan, China, causing symptoms in humans similar to those caused by SARS coronavirus (SARS-CoV). Since SARS-CoV outbreak in 2002, extensive structural analyses have revealed key atomic-level interactions between SARS-CoV spike protein receptor-binding domain (RBD) and its host receptor angiotensin-converting enzyme 2 (ACE2), which regulate both the cross-species and human-to-human transmissions of SARS-CoV. Here we analyzed the potential receptor usage by 2019-nCoV, based on the rich knowledge about SARS-CoV and the newly released sequence of 2019-nCoV. First, the sequence of 2019-nCoV RBD, including its receptor-binding motif (RBM) that directly contacts ACE2, is similar to that of SARS-CoV, strongly suggesting that 2019-nCoV uses ACE2 as its receptor. Second, several critical residues in 2019-nCoV RBM (particularly Gln493) provide favorable interactions with human ACE2, consistent with 2019-nCoV’s capacity for human cell infection. Third, several other critical residues in 2019-nCoV RBM (particularly Asn501) are compatible with, but not ideal for, binding human ACE2, suggesting that 2019-nCoV has acquired some capacity for human-to-human transmission. Last, while phylogenetic analysis indicates a bat origin of 2019-nCoV, 2019-nCoV also potentially recognizes ACE2 from a diversity of animal species (except mice and rats), implicating these animal species as possible intermediate hosts or animal models for 2019-nCoV infections. These analyses provide insights into the receptor usage, cell entry, host cell infectivity and animal origin of 2019-nCoV, and may help epidemic surveillance and preventive measures against 2019-nCoV.

    I wonder if one of the angiotensin-receptor blockers
    Azilsartan (Edarbi)
    Candesartan (Atacand)
    Eprosartan.
    Irbesartan (Avapro)
    Losartan (Cozaar)
    Olmesartan (Benicar)
    Telmisartan (Micardis)
    Valsartan (Diovan)
    might be useful prophylactically?

    • I get that ACE2 seems to be the entry receptor for coronavirus.

      I can’t see how an ARB (working downstream) would change ACE2 expression in the lung – maybe it would, but not intuitively.

      ACE inhibitors operate on ACE1 rather than ACE2.

      Then again, there is mixed data about ACE2 in ARDS. Good effects and bad effects. But mice with low ACE2 levels do worse with ARDS, while mice with over expression did better.
      https://www.hindawi.com/journals/ijpep/2012/256294/ Section 7

      I am sure it will all be tried.

      • Angiotensin receptor blocker [“ARB”] meds sit on the receptor and interfere with the attachment of other things, for example, perhaps, nCov-2019. If nCov-2019’s ability to attach to pulmonary epithelium is reduced, the infectious load of the virus on the lungs [and perhaps other tissues] is reduced.

        Why do ethnic Chinese have more antiotensin agonist receptors? Could be that eons ago caucasians etc also had the same amount of these receptors but were weeded out by a pandemic long ago. Could our forbearers have been bat eaters??
        As we discuss this I am sure some bright folks in several labs have started in on testing this hypothesis, even given that it is Sunday.

    • The ACE2 gene is mostly in Asian males idea comes from a single study of 41 “donors” (ie corpses) with a single Asian male in the group. Way to small a sample for all the inferences being drawn from it.
      https://www.researchgate.net/figure/ACE-II-genotype-frequency-in-different-populations-countries_tbl2_5642354
      The above survey of older research shows the genotype across a range of different ethnicities, with larger, but not large enough, sample sizes.
      In Oz, perhaps 20-30% of the population are likely to be susceptible. How lucky do we all feel today?

      • The prevalence of Angiotensin receptor II phenotype [across multiple studies involving many hundreds of patients] is quite a bit higher in Chinese and Japanese than in Caucasians [see table 2, https://www.researchgate.net/figure/ACE-II-genotype-frequency-in-different-populations-countries_tbl2_5642354%5D.

        It will be interesting to see how all of this plays out in the real world. Bad enough that the Chinese and Japanese may be at increased risk, I hope that [for various reasons] we avoid a similar fate.

        • There’s also a high incidence of smoking, pollution damaged lungs, old TB infection scars and type 2 diabetes in Chinese populations than Caucasian populations. These factors are likely to affect mortality rates as well.

          • Good point.
            I don’t know exactly what percentage of 60 year old Chinese men smoke but it has to close to 80% from my casual observation, and many smoke at least a pack a day.
            so maybe it’s just smokers that are at risk …I hope so

    • Arthur Schopenhauer

      Thanks for posting that link. A well reasoned and informative paper.

      From the conclusion:
      “Our findings suggest that independent self-sustaining human-to-human spread is already present in multiple major Chinese cities, many of which are global transport hubs with huge numbers of both inbound and outbound passengers (eg, Beijing, Shanghai, Guangzhou, and Shenzhen).”

  7. Won’t the injection of money into the economy resulting from the. Bush fire and flood rebuild efforts go some way to offset the downturn? Plus won’t scumo ramp up imigration to even higher levels to also try to offset any economic downturn.

    • Immigration will be interesting to watch. There’s the possibility borders will be shut. I am still reeling over the fact they’ve basically closed to border to Chinese non citizens. That means we’re now in a world of anything is possible. There’s no guarantee immigration at very high levels will continue. Plus if our government continues its shit performance you might get quite a few people choosing not to come to such a crappily governed country, esp if we burn again next summer. Olds justgot back from a week in Laos they said everyone knew about thefires. First thing some Chinese touristssaid to them when theyfound out they were Aussie was fires so bad animals dead and your pm on holiday. The Aussie narrative is changing overseas. Interesting times, it’s gonna be fascinating watching this all play out.

      • darklydrawlMEMBER

        I just came back from Thailand. Same story – lots of random locals asked me if the ‘jungle’ was still on fire and about all the animals that died once they found out I was an Aussie. The general vibe was “Australia used to be a nice place, but I wouldn’t want to got there now”.

  8. If an ARB is blocking the angiotensin receptor, then the virus is blocked from using that receptor as an attachment point for invasion of the cell. So, if this pans out, ARBs might be suggested as a prophylactic treatment to reduce the risk of acquiring this disease [but probably of less value to treat established infections,]

    • There was an article floating around recently saying that this virus has HIV insertions – a man made virus, in other words. A bio-weapon.

      I tried to paste in a link here but was unable, for some reason.

  9. happy valleyMEMBER

    Nah – nothing to see here, move on. Josh Rainbowberg, Scotty from Marketing’s chief lapdog and PM with training wheels on (Josh can see it happening), was on Insiders yesterday and basically said that everything is awesome. The only salient point for us great unwashed to remember was that the LNP is still fixing up Labor’s mess.

    Poor old Labor – just think about the legacy mess that the LNP will leave them if Labor ever gets back in to government again … this century.

    • How about we stop the mudslinging and settle for “government’s fault” – both parties are as inept as the other, although I confess Morrsons’ Govt is making a strong push for the worst ever.

  10. Something to ponder ….

    RE: “2019 Novel Coronavirus … Uncoating …”

    This link contained reference to Social Representation Theory (SRT)

    [https://www.degruyter.com/downloadpdf/j/nor.2011.32.issue-2/nor-2017-0109/nor-2017-0109.pdf]

    “The theory offers a new approach for studying how the media and citizens construct societal and political issues colouring our age, or some specific time period.”

    On first look it appears suggestive of ways to better understand the operations of agnotology. Perhaps agnotology constructs its batteries of confusion to deliberately confound the way Humankind assembles “collective meaning-making resulting in common cognitions”.

    In context from my ASM [American Society for Microbiology] link yesterday.

    It’s understandable that some may be overwhelmed, or even frightened, by news about the outbreak. What can one do about these worries and concerns? One of the most important things that can be done is to monitor reputable sources like the CDC, WHO, and other expert agencies and people.

    The rapid dissemination of information, including misinformation, during an outbreak is a relatively recent development. Facebook, Twitter, Instagram and Snapchat were still years away from being founded in 2002, when severe acute respiratory syndrome (SARS) rattled southern China, infecting more than 8,000 people and killing nearly 800, including 44 Canadians. In today’s age of social media, there is a plethora of sites from which anyone can obtain information, and many of them are not credible or vetted by medical or scientific experts. A misinformed tweet, post, or photo can easily convince someone to disregard proper hygiene or create shock value about the risk of contracting an illness.

    It might be worthwhile to tune out social media or other non-reputable sources if it creates panic. I always tell my students, friends and family members that “microbes don’t read the book” with regards to our understanding them. The microbes don’t read or listen to social media either. Try to stay informed, and listen to experts and sources that do offer facts but not sensationalism. – snip

    https://asm.org/Articles/2020/January/2019-Novel-Coronavirus-2019-nCoV-Update-Uncoating#.XjZm3ecT-yQ.twitter

    Seems an inoculation against for profit journalism and ideological based youtube videos would be a first rule in protection – as everything starts with the mind.

      • Oh thanks for asking! I posted elsewhere. So the after hours doctor came by and asked if we’ve been to China.
        But then, when the GPs opened, we took him to these bunch of GPs a few burbs away that I know are good. The ones with the middle eastern last names are good anyway.
        Doc took one look at him and said “yeah, bacterial. Panadol wont work for this, neurofen is what would work for fever, but what he needs is anti biotics”
        And that had been true, for two days, panadol was doing nothing and neurofen was merely keeping the fever to mild.. it never really went away. 48hrs on antibiotics and fever was gone. PHEW.
        Keeping him home for another week away from daycare until all the cases are known after the border shut. We had decided to keep him home until they stop letting the infection in…. I am on mat leave anyway, so might as well.

        • ErmingtonPlumbingMEMBER

          Good to hear.
          I dropped my kids at School today after keeping them out all of last week (they missed 3 days) but am ready to pull them out depending on how thing develop.
          Fingers crossed it doesn’t come to that

  11. Ronin8317MEMBER

    The good news for Australia is that the vaccine will be available before our flu season in June. In China they’re going to bypass testing on animals and fast track to human.

    The bad? news is that our education/immigration export market is stuffed. Even after the lifting of the quarantine, the Chinese student currently stuck in China will neither forget or forgive. There will be a huge drop in number of Chinese going overseas afterward due to Chinese economic downturn and belatedly realizing student visa holders have very little rights.

    Expect our universities (except for ANU) to go bankrupt.

    • Arthur Schopenhauer

      Reckon the group of eight would be the last standing. Maybe Griffith too.

      The Universities are very wealthy institutions. They have an enormous casual workforce they can furlong. Emails have already been sent telling the tenured staff their casual teaching budgets have been reduced for this semester.

      • ErmingtonPlumbingMEMBER

        They’ll be looking for a handout, but it won’t be the the Libs saving the day with their Small Government, balanced budgets and Austerity.

        Labors time to save the day is coming.

    • Nah, what they wont forget is their own govt’s mishandling of this and quarantines before any other country stopped flights. I expect a LOT more will want to get out of China after this, and uni admissions will have a surge.

  12. There is already a study out in The Lancet (highly respected medical journal) where they have calculated likely duration of the epidemic under various scenarios. Even in a worst case, assuming if it affects all of China, the peak in cases and drop off of infections has things back to normal by July. So 5 months from now.

    The unknown, however, is what happens outside of China.

  13. If only the situation were this simple.
    This Coronavirus Virus is going global there’s no stopping it now.
    Within a month we’ll have sustained human to human transmission of the virus in every country in the world with no identifiable China connection in the virus transmission path. At that point it is game-over for any localization and containment strategy, the world either shuts down or it accepts the virus and when it is time ,simply pays the piper.
    I’m certain that Aussie Politicians don’t have what it takes to quarantine an entire city and what would be the point when the city to be quarantined would be either Sydney or Melbourne or both. Seriously how would that work?
    No within 2 months we’ll be just accepting virus death as a cost of living and hope that it remains primarily a cost that’s paid by the over 60 generation. I like to believe it’s simply karma.

      • I don’t see the problem….lots of empty homes on the street to play in.
        but lets be honest neither nanny nor Poppy will be available to watch the kids once those little sniveling virus factories get exposed to nCor. I suspect it’s time to invest in Caravans, Landcruisers and Yachts…I’m already planning my big loop of the land.

      • Pandemics leave political change in their wake.
        One can only hope for political change .
        I guess if the over 60’s are all scared and hiding in their homes (or too busy attending funerals) than it will be the next generations turn to hold the reins and direct the country.
        Lets start with some targeted taxation of assets especially RE, maybe accompanied by drastic reductions in tax on all Earned income, if it were up to me I’d go all-in and make all profits from Entrepreneurial investments tax free for 5 years.
        There you are, these ideas will so pi55-off our current generation of self serving leaches that I’d expect the half spared from the virus to drop dead from the shock of real change.
        but real change is what we need…so bring it on

        • Arthur Schopenhauer

          I’m not sure 🤔 the virus 🦠 only attacks the aged and unhealthy. And even if it does, it’s rate of mutation is high and the susceptible cohort could quickly change to the fit, healthy & young.

          • As I said above, it doesn’t matter the virus has already jumped all the containment lines that we’ve setup. It’s game-over for containing this virus to China, the virus is going to do whatever it’s going to do and there-after the living will get on with their lives.

      • Arthur, an excellent book is “A Paradise Built In Hell” that looks at how society/community solves the problems caused by a disaster – WITHOUT the help of government.

        The key takeaway is when we’re faced with disaster we end up happier, because ordinary life is for most people an ongoing small disaster and the life-threatening, life changing event of a disaster when coupled with a sense of community purpose makes us realise all the shit we worried about before was pointless.

        The big problem is government (and by this I mean the sociopaths who climb over everyone to be in charge) lack the empathy and understanding of community to do the right thing.

        • TBH I’m already happier. I’m appreciating what I have more and taking joy in all the small good moments and this thing has only just started getting going. To me the concerning thing is the asymptomatic transmission, the possible R0 of 4 and the approx 20% case severity. And believe me I know from 17 year living in China that there is no quick resumption of activity even if they get this under control. The fear and desperation is off the charts over there. You don’t recover from that and pick up old behaviours quickly. This is going to have an unimaginably large impact on China.

  14. Arthur Schopenhauer

    There’s an old saying from a group that had a hard time in Europe for the last thousand years, “Just remember, when it can’t get any worse, it does…”
    Barnyard is challenging for the Nationals leadership. 😀👍

  15. As usual there is no explanation provided for the mechanism by which interest rates will rise

    They didn’t rise in Japan when it faced its crisis so why are they rising in China ?

    Why are they rising in Australia?
    The RBA will buy whatever bank debt it needs to

    Sure a supply shock might increase inflation , but by how much ?
    It all seems unfortunately not enough

    Hard assets are the place to be (esp land as Chinese migration intensifies)
    Cash to be devalued again

    Don’t fall for the same mistake again

    • Yes, it does not make any sense to be arguing that interest rates will rise.

      Especially when we all we hear day in day out is the RBA must cut interest rates because private bank credit is the only permissible way of expanding the money supply. How is that going to happen if interest rates rise.

      China ‘might’ experience inflation if the Chinese government seeks to support economic activity directly by injecting money at the bottom via tax cuts or an expansion / introduction of social security and that might result in interest rate increases in due course but there is very little prospect of that happening in Australia with our privatised public money true believers running all major political parties and writing most of the copy for our mainstream media/blogs.

    • I’ll have a go, if you like.

      Rates will rise because of inflation. Inflation will occur because of supply chain disruption. Commodities may not be in huge demand but people still need to eat and consume.

      Straya has large quantities of foreign debt which needs to be refinanced on an ongoing basis. If foreign investors get cold feet on Straya’s prospects rates will need to rise to attract capital here. That foreign debt cannot be refinanced in the domestic market – a small portion, but not the bulk of it.

      • Yes supply shock is the postulated mechanism

        Unfortunately, food and oil wont be affected because they dont come from cities or from china

        Ok maybe trinkets and electronics will get more difficult to come by. Hard to imagine its going to result in substantial inflation given all the other deflationary factors that are ongoing

        There is a lot of wishful thinking here from people who are heavily in cash/bonds/gold, cognitive biases at work

        Honestly don’t think we’ll see inflation as a problem in our lifetimes

        • I have to say that I couldn’t disagree more on the inflation front – you cannot have three central banks print $100bn a month (plus whatever is being produced by the commercial banking system) and not eventually have a huge inflation problem. That defies every economic law and, call me controversial, I’m not ready to accept that the laws of economics have been suspended. When it arrives, it will arrive abruptly and CBs will be powerless to stop it. Just to add, we haven’t even had MMT or UBI yet, which will be hugely inflationary.

          Just a note on cash/bonds/gold: if you believe deflation is coming, cash and bonds (and any cash-like instrument are precisely where you want to be). Stocks are a no-no in a deflationary environment. Gold is good in both because of the policy ramifications of a deflationary environment i.e. massive monetary stimulus. The worst environment for gold is a goldilocks scenario in which there is gentle money supply growth along with relatively low inflation.

          • Now you’re changing your hypothesis

            $100bn is going to the 0.1%

            The rest of the population isn’t seeing that

            As long as there’s oil and food for the peasants , inflation is considered under control

            Edit: and now oil is crashing

            Yep no inflation

          • I think you’ll be proved right on the above and what you said below. According to quite a few macrovoices guests inflation has been gently picking up for a little while now despite measurement dishonesty. I have a feeling many people are going to be caught out, and will be surprised at the speed of change.

        • The cure for low prices is …. low prices. And what with ‘ethical’ money avoiding investment in fossil fuel projects, the future is undoubtedly high prices. You wait till unleaded is $2+ a litre here and listen to the howls.

          $100bn doesn’t go to the 0.1%, it simply boosts asset prices – this printed money finds its way into the economy via a number of channels. Let me see, umm, deficit spending! The gubbermint pays its staff, assorted bills, contractors and funds welfare by issuing debt bought by central banks with printed money. So the idea that money printing is a direct gift to the super wealthy is not quite how it all works.

          • And yet here we are
            They’ve been at it for 12 years and still no inflation

            Any day though now, I’m sure

        • Yep, because if it hasn’t happened up till now, it won’t happen. Interesting logic.

          As I mentioned above: slowly, then all of a sudden. And will catch people like you, cold.

          On the bright side you have an esteemed economist in your camp: one Benjamin Shalom Bernanke. He’s on record as saying that central bankers have ‘tamed inflation’. On the down side he’s also on record as saying a heap of things just ahead of the GFC that turned out to be a pile of utmost garbage, generally along the lines of: there’s nothing to worry about 😉

          • The rapture hasn’t happened yet either

            Doesn’t mean it won’t though

            And as we speak bond yields are crashing

        • Hey C, I’d have to disagree about oil. Once upon a time, when we did our own refining of imported and local oil, sure. But now? Most of our fuel is refined in Singapore and we import finished fuels. And given the ethnicity of Singapore, do we think refining capacity there will be unaffected? I note that Singapore is only just missing out on a bronze for infections, seeing the way it’s spreading in the Chinese provinces, I’m not sure Singapore is going to stay aloof.

          • Lenny Hayes for PMMEMBER

            How does the Corona virus impact Oil ?.

            No way Singapore will let one of their biggest industries languish – they will throw everything at it to keep it operating.

        • You don’t think bond yields might just be crashing because of the ‘flight to virus safety’ as opposed to a morbid fear of deflation?

          Most people don’t understand inflation, but that’s okay — for me, if not for them. 😉

  16. Imagine the panic that would set in if a group of Australians contracted the Corona Virus while attending a Saturday house auction.
    A super spreader cell if you like ……..!

  17. David, you mis-understand China, in my opinion. They do not operate a market economy. They can simply write-off their bad debts and print money. They will avoid Japanification.

    I would rate the chances of your scenario above as 10%. Business as usual after discovering the virus isn’t as bad is 90%.

    • If it were that easy they would have already done it. The problem is China now needs external investment to fund the ponzi – think further external investment in manufacturing, investment flows etc. If you write off the debts at print money that will devalue the RMB this will 1) Put off major companies/investors from the country due to the the FX risk 2) Would impact their trade deal with the US as they have agreed not to significantly devalue the RMB – if they do devalue I’d expect them to be slapped with more tariffs.

      • China already has done it on multiple occasions – they have absorbed several collapses last year alone. During their rise during the 1990’s the basically wrote it all off – and did it again early 2000’s – what you are asserting the “would do if they could” – has been done, repeatedly.

        If it were to devalue the RMB – they would do it more. (Not entirely sure how much you follow China).

        If they were to devalue the RMB the US would slap more tariffs on them ? Lols – ok. The US is the single biggest currency manipulator in the world – quantatative easing 1,2,3,4,5 – then there is the EU unrelenting pumping into the banks.

        I don’t think you have been following world markets much – at all ?

        • So the economic situation/not to mention the debt levels of China of 1990’s and 2000’s are the same as now. Righto.
          Must be some strong stuff you are smoking.

  18. The media’s focus is solely on the first-order consequences: the number of infected people and fatalities, government responses such as quarantines, and so on. The general expectation is these first-order consequences will dissipate shortly and life will return to its pre-epidemic status with virtually no significant changes.
    If we consider second-order effects carefully, we draw a much different conclusion: China will experience social unrest and economic dislocation that will unleash self-reinforcing chaos in global markets. This is not a mainstream opinion, of course, because the mainstream assumes second-order effects simply won’t matter

    http://charleshughsmith.blogspot.com/

    • Yep, that’s what I wrote above
      everything that we’re doing, we are doing far too late to change the outcome, the virus is reproducing exponentially beyond our containment lines and within a month it’ll be impossible to say who, when, where, how any particular virus transmission occurred. it’ll be pointless to even try to track the 1000’s of possible people that could have spread the virus and the tens of thousands that they all came into contact with, and by the time you complete that task you’ll be looking at repeating but with 100K infected.
      follow this series and you quickly get to stupid numbers this many people are impossible to hospitalize, impossible to vaccinate, impossible to follow, to be honest we’ll be lucky if we can bury the dead fast enough to stop them rotting in the streets.
      Scary stuff BUT that’s what the raw infection data is suggesting.
      maybe it is time for me to take that month long solo sailing expedition.

  19. For noting:

    Had an update this AM in our Monday morning meeting from our exec director (I work in health)

    No one is panicking but lots of work behind the scenes

    I note the Australian Health Protection Principal Committee advised the government (amongst a range of measures)

    https://www.health.gov.au/news/update-on-novel-coronavirus-from-the-australian-health-protection-principal-committee-ahppc
    **
    That to substantially reduce the volume of travellers coming from mainland China, AHHPC recommends additional border measures be implemented to deny entry to Australia to people who have left or transited through mainland China from 1 February 2020, with the exception of Australian citizens, permanent residents and their immediate family and air crews who have been using appropriate personal protective equipment. This also applies to passengers transiting in Australia, unless they are Australian citizens, permanent residents or their immediate families.
    **

    I mentioned to my colleagues the two local Bunnings are out of P2 masks [“just sayin’”]. Everyone looked at me like I was
    weird.

  20. Scummo’s weakness is also his strength. He’s a unrepentant liar with no ideology, so he’s not really backed into any corner.

    He’ll drop a load of monetary stimulus like a load in Engadine when it’s necessary.

    • Jumping jack flash

      This!
      Just pull a Bush in 2000 and “somehow” get everyone to borrow as much money as possible to head off an economic inconvenience.

      Admittedly it was a bit easier back then because they hadn’t already exhausted the interest rate manipulation path, but I’m sure the current batch of eggheads will think of something.

  21. Yuval Legendtofski

    When is property gonna dip coz it’s peaking more than Eddie Maguire at a Magpies After-Party at the moment!!I went to some inspections on the weekend, one of them, in ‘DEPRESTON’ had a queue, in the rain, no less, longer than a Courtney Barnett BLOCKBUSTER, heck ‘Swamplands’ down the road never gets those queues! The tattooed and bearded millennials seem to have MILLIONS of grandma and grandpa dollars to spend. Yes? No? Maybe? Are you receiving me #SCOMO and #FRIEDO ??

    • thanks for the post – not what the denialists want to see but hey, anyone who has experience with China and Chinese wouldn’t be surprised …

      hope readers are reviewing their personal preparedness plans for the black swan impacts as well as the [seemingly] inevitable spread of the virus …

    • Ronin8317MEMBER

      We will experience the same in Australia (if not worse) if there is an outbreak here reaching thousands. Once the hospital runs out of bed, what else can they do??

      • Haven’t read that article (I’m out of free NYT articles) but I would not be surprised if we were a ground zero outside of China on a per capita basis. We let in an awful lot of people, have more than half the population directly affected by the bushfires (so smoke damaged lungs) and have a dumb af federal gov. Not a good combo! It is not beyond the realms of possibility borders will be closed to us. Oh the irony!!!

  22. Jumping jack flash

    “A six month Chinese shutdown puts at risk $7tr in economic activity. Who knows how much of it will be lost. Enough is the simple answer.”

    $7tr? Bah! Play money!

    Lower the rates a bit more. Implement QE and everything else that we can.
    House prices to the mooon!

    Surely we can get close enough to that “Enough” of the 7tr we’re losing from China due to the coronavirus, using debt dollars, to get us out of this minor inconvenience?

    After all, debt dollars are not distinct from actual productive dollars in any way, shape or form, right? Well, you wouldn’t think so by the way they’ve been handed out over recent years.

    Everyone, do what’s right for your country. We’re already at about $2tr. Just another 5tr to go. Should be easy.
    Come on! Visit your local bank today and load up on debt.

    Seriously, its just more of the same strategy we’ve been employing for the past decade and a half, so we should be really good at it by now.

  23. David WilsonMEMBER

    Lets hope that an antidote is found in the next 60 days as has been suggested and this terrible situation is sorted within 4-5 months from a health perspective.
    Is it time yet to go down to the bank and get out all of our cash and put it into gold????
    Just asking!

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