Macro Afternoon

See the latest Australian dollar analysis here:

Macro Afternoon

by Chris Becker

Stock markets are having mixed sessions across Asia with gold continuing its big falls from overnight, cracking the $1900USD per ounce level going into the London fix, with silver also crashing through the $24USD per ounce level:

In mainland China, the Shanghai Composite was down sharply before the lunch break, almost by 2% but has managed to fill half of that gap to finish nearly 1% lower at 3310 points. In Hong Kong the Hang Seng Index has eked out a minor gain after its big move yesterday, reaching only 0.2% higher to be just below 25000 points again. Japanese stock markets had modest sessions with the Nikkei 225 closing 0.4% higher at 22843 points, with the USDJPY pair continuing to lift, now through its July support level at 106.70 (upper black horizontal line):

The ASX200 was down most of the day, not helped by poor earnings result from CBA and others, including gold miners, but rallied towards the close to eventually finish only 0.1% lower at 6132 points. Meanwhile the Australian dollar broke through key support at the 71.40 level on the latest consumer sentiment figures, but it too has covered half of that loss in the afternoon in line with other undollar assets, but almost making a new two week low:

Eurostoxx futures are down 0.5% while S&P futures are up slightly with the S&P500 four hourly chart still showing growing support at the ATR level around 3330 points. The key index to watch remains the NASDAQ, which remains in dip mode at a two week low:

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Comments

    • – I expect silver to down to (deeply ??) below $ 10 (again). Not in one straight line but that’s the direction for me.

    • – Didn’t you see what the US 10 year & 30 year did yesterday ?
      – End of the 40 year or 30 year bull market in T-bonds ???

    • Arthur, there really is little prospect of onshoring much manufacturing until (unless), the price of land falls, wages fall and the fat is cut from regulation book.

      You may not like him or what he says – but he’s right: if you insist on Made in Straya you are paying a much higher price for goods. Strayans like the idea but they don’t like higher prices — particularly not in a global depression.

        • What did he say, skip? Has he discovered a magic spell that suspends the laws of economics?

          Edit: he’s just another quack with ludicrous ideas – honestly, you don’t think he has an ounce of credibility do you?

          • I thought as a profound economic mind you would be aware of such events as they apply to the market place of ideas. I mean he was pivotal in advancing your groups agenda of over the years as a Chicago boy E.g. savvy investors would never blow up the worlds financial – capital markets or anything. Hence the need for a light touch by Gov or better yet industry write the laws – ALEC et al.

            Anywho he’s had a McNamara moment and questioning the investor lead stamped to offshore Mfg so wages could be crammed down [inflation hysteria excuse], but yet buy cheap stuff from overseas to keep them politically malleable, and then to make things better push the FIRE sector economic paradigm of let them eat equity …

            Then some wing nuts start banging on about high re prices and international competitiveness … wheee …

            PS. economic laws are not Newtonian … and here I thought you gave up neoclassical.

        • Skip, you can’t have it both ways, chief: off-shoring is a direct result of the debt -based money system that you love so much. Trying to suggest that classical economics doesn’t marry with a debt -based money system is like saying two homosexuals can’t have kids biologically. Well, duh!

          It should be emphasised that a debt-based money system goes hand in glove with both Keynesian and monetarist theory and that’s precisely why they exist (in harmony) today. #NotACoincidence.

          AET is legitimate at all times, but it really works only insofar as a sound money system exists (or politicians are always prudent).

          Gold is your future, skip – don’t fight it – come to the bright side! 😉

          • Money has been debt [contract] since time immemorial, where gold is a commodity that has been used as a token of exchange in settling contracts, all of which is established by government laws. Lets not forget before government set the price gold and silver crashed hard after every major gold field discovery. So claims about store of price is historically inaccurate, not to mention its use in subjugating lesser nations and peoples, so the debt = slavery meme is an oxymoron.

          • Offshoring was driven by libertarian views on environmental and regulatory arb to buff equities, see Summers memo for an example or for a more libertarian dystopic future see Hopple et al.

          • Crikey, skip, I hope you’re not suggesting Summers is a Libertarian — he’s an interventionist like the the rest of the establishment.

            Very keen to tell other people where they’re going wrong — yet no self awareness at all. Funny that.

        • Saying that gold was granted value (or controlled) by Govt is the most absurd statement I have ever heard. Gold has value because the market gave it value — the fact that people all round the world recognised its value (and have done for thousands of years), by choice and without coercion, is proof that it is not a Govt-sanctioned ‘token’ as you call it. Look at Bitcoin – did the Govt instruct people to use it? Of course not – the people gave it value: $12,000 thanks very much. Nothing more democratic than the free market.

          Market economies work beautifully with gold at its centre — but are fcked up when debt-based money is introduced. Lo and behold, our sick and ailing global economy is proof of this. And gold’s continued rise will provide further proof. You’ll fold eventually — when gold has cruised through $10,000 and it dawns on you how wrong you’ve been. Or perhaps your ideological ties are so strong you’ll perpetually live in denial.

          • Nothing more democratic than the free market.

            In a democracy, one person = one vote.

            In a market, one dollar = one “vote”.

            Hopefully I don’t need to elaborate any further as to why markets are not “democratic”.

          • Smithy, I recommend you hop on this blog to learn something rather than to share with us all your (largely warped) view of the world. The ‘free market’ is where every individual on the planet freely expresses their needs and desires by purchasing the goods and services they either need or desire. The fact that money may be involved in these transactions is irrelevant, given that money is legal tender and these transactions may be a trifle difficult to effect without it. That’s democracy, but instead of being influenced by political campaigns people may or may not be influenced by marketing campaigns instead — perhaps that’s what concerns you.

          • FMD

            Apparently I do need to elaborate.

            When ten average people vote in a democracy, all their votes are worth the same. So the outcome is driven by how many people agree about something. Ie: it is democratic.

            When ten average people get together to “vote” for something in a market, some of them have “votes” worth orders of magnitude more than others. So the outcome is driven by the couple of people who have more money than the rest combined. Ie: it is not democratic.

            Your idea of democracy is a wolf, a cat and some chickens deciding what’s for dinner.

          • smithy, you have to be the most brain dead fck I have ever come across — not a single thread of your argument has any substance (as usual).

        • There’s really no need. The global economy is often thought of in sovereign terms but this is erroneous – countries don’t trade with each other, people do. One company in one country would like to sell products to people in other countries — and that’s it. It’s about ‘relative advantage’ – everyone plays to their strengths. That’s when the global economy is at its most efficient and the citizens at their most prosperous. Once you start down the road of tariffs and protectionism that’s when it all breaks down.

          • I just had an inkling of an idea.

            What happens if you realise you can’t compete, or don’t want to compete. So you set your policy settings around that.

            So we get straya then?

          • Bingo! Harry gets the cigar (again).

            We’ve rested on our resource laurels and a dumb economy is what you get.

      • Need energy to fall as well.

        That said, if you make foreign wages non-deductible, manufacturing will shift back pretty quick.

      • Jumping jack flash

        If there was not such a need for such enormous quantities of debt then wages could possibly fall, and then prices for essential living expenses could also fall, and more people could perform mundane and typically lower paid work and still afford a standard of living.

        Nobody who wants to buy a starter house for a lazy 600K or more is going to be able to take a job packing boxes in a manufacturing plant for $23/hour or less. Best to leave those jobs for the 3rd world slaves who have no immediate desire for obtaining enormous debt piles.

        However, if nonproductive mortgage debt was incredibly difficult to get, and so the house was 1/10th the price based on a sensible amount of savings from a modest income over a proportionate amount of time, then possibly 23/hour could cut it, all other things being equal, and we would have workers who would be able to perform those kinds of tasks and still live reasonably well from the income offered.

      • Arthur Schopenhauer

        From someone who worked in manufacturing automation, I can tell you it is entirely possible. The Germanic countries can maintain a self-sufficient manufacturing base due to Government policies and a deep understanding that it is a primary defense policy. Dipshts like that guy, have been white anting our country for 40 years.
        Make a choice, give away the country’s sovereignty, or make stuff here.
        The lessons learnt in WW2 have long been forgotten.

        (You might want to research which country is pumping out 2 amphibious assault ships a year. That’s a country that can make stuff. And as an extension exercise, mull why a peace loving country would do that?)

        • Arthur Schopenhauer

          What is didn’t say is that it takes a considerable amount of capital, a lot of robots and favorable tax policies.

          So, I agree Dom, with the current set of twits running the country, it would be unlikely, but it’s the policies not the final unit cost that would kill it.

          • If I had a considerable amount of capital and a lot of robots, I’d have my eye on Parliament house.

          • At the end of the day, the Govt is responsible for creating an environment that is either conducive to a particular activity or it’s not. Whether that be a taxation issue or a regulation issue – whatever. The environment is hostile to manufacturing because policy in this country is archaic — and as someone on this blog pointed out yesterday, energy policy means we pay way more here than we should — we’re exporters of fossil fuels, ffs! Again, bad for investment in manufacturing.

            As an aside, the regulatory environment here is beyond ridiculous — and I say that from first-hand experience. I reckon there are more staff working in the public sector in a regulatory oversight capacity than there are in a manufacturing in its entirety. What a complete croc.

            As, for Apple iPhones I read an article the other day saying the value-add in China is around $7 per phone. Just FYI. The buggers just assemble the things and little more. The parts come from countries with proper high-tech industries like Japan and Korea.

        • But why is manufacturing off-shored if it can be done here for the same price? Out of spite?

          Of course not – the decision is economic, plain and simple. This is what I can’t understand about the proponents of local manufacturing – they think there’s some kind of conspiracy in place that prevents it. The manufacturing that gets done in the West is high-tech, high-value stuff. Straya just doesn’t have a history of doing it – they prefer to dig dirt. We’ve never had to build a massive war machine – twice in recent times. We are geographically disadvantaged by not being near the centre of global supply chains. We cannot be competitive in most of these sectors – that’s a fact.

          • Arthur Schopenhauer

            Nah, that’s typical Aussie soft talk. It’s not out of spite, it’s a lack of foresight and plain stupidity. (Although, when seeing it play out in a boardroom, it is easy to mistake for spite.)

            If Israel can have a vibrant manufacturing base, we can too. Every country surrounding Israel says the same thing, we can’t do it here, it’s to expensive or their geography precludes it. In the end it’s just the willingness to do it.

            It costs pennies to ship stuff to and from Oz. In the end it’s people, process and product. If the tax incentives that applied to property applied to manufacturing instead, there would be more manufacturing and affordable RE.

            People who say Western nations should only do the sophisticated high value stuff are living in the past. It’s only possible to do fancy manufacturing if a country has mastered the basics. We have forgotten the basics. We don’t even make high rise facades anymore.

            China can do fancy. Pull that phone from your pocket. That’s some fancy sht right there.

      • “here really is little prospect of onshoring much manufacturing until (unless), the price of land falls, wages fall and the fat is cut from regulation book”
        we’ve been trying to out compete Bangladesh on cost for years. Has it worked?
        The issue isn’t cost. There is inadequate demand. Interest rates are zero. If you cut wages in manufacturing it won’t encourage more manufacturing it will just lead to lower prices and the same margins, same production & employment.
        What is needed for more manufacturing is more demand. But Keating, being a genius, decided to divert demand for domestic manufactured goods to foreign goods by cutting all tariffs. Which is just brilliant. Then we were told we don’t need a car industry, now we don’t have one. But hey we don’t have tariffs.

        • “We need more demand” — do you not think that the second largest private debt-berg in the world (as described here multiple times by the MB crew) has created enough ‘demand’?

          This is where contemporary economic thinking is so ludicrous – there is NEVER a lack of demand. Demand is near infinite. The ‘means’ to articulate that demand, however, is finite. So, you’ve maxed your debt to the eye-balls and there is still a ‘lack of demand’? That means your debt-driven economy has hit a brick wall — it’s not rocket science. A period of deleveraging is ahead — what is there not to understand about that?

          • debt doesn’t add to aggregate demand it just rearranges existing demand from creditors to debtors (in current period), then back from debtors to creditors in later period.

            Interest rates are zero, so there’s a surplus of capital and non-existent required rate of return. Problem is they can’t sell, so why produce more?

        • “…debt doesn’t add to aggregate demand …”

          How so? Debt brings demand ‘forward’ – consume today, forgo consumption tomorrow (hint: we’re entering the forgo period).

          Your argument is that borrowing is the mirror image of saving — but you’re wrong.

          The reason you’re wrong is because you don’t understand how the monetary system works.

          Allow me to enlighten you: banks don’t lend out deposits — they create deposits every time they create a loan. Kinda changes the dynamics, right?

          • No doesn’t change the dynamic. someone still has to want to hold the deposit as an asset otherwise the bank can’t create it. So the sequence is irrelevant. I’ve had this argument with a heap of MMTers over the years.
            If anything high debt hurts aggregate demand because you get to a point where the debtor can’t spend and the creditor doesn’t have to

        • “someone still has to want to hold the deposit as an asset otherwise the bank can’t create it.”

          No, sweep, that isn’t how it works – when a bank creates a loan they create a deposit of an equal amount. If that borrower transfers $2,000 to a vendor of something, the vendor simply takes the 2k and deposits in his bank. The recipient’s bank doesn’t turn around and say: Sorry we’re not accepting the 2k!

          Banks don’t lend money – they create money every time they extend a loan.

          Likewise, every time they receive loan repayments their loan book reduces.

    • “He encouraged middle powers like Australia, France and Japan to “seize the mantle of leadership” and promote free and fair trade.”

      Yeah, we’ll be stupid enough to try that ‘level playing field’ BS again. Been such a success.

      • But why is a ‘level playing field’ even an issue? Precisely who are we competing with and on what grounds? Car manufacturing? High tech equipment manufacturing? Lol. We are not competing with anybody for anything. That’s the truth.

  1. What no story today about NZ’s wonderfully successful elimination strategy? Because it’s a pipe dream not a real solution

        • Explain this for me Mig – you think it’s acceptable to walk around trying to start fights with strangers so you can give them a good kicking, but it’s ok because they aren’t women?

          And I’m the psychopath…..

          • migtronixMEMBER

            Yes that’s exactly, I’m willing to get beef on with some other agro pr!ck and if I come off much worse it will be OK if I get some in.

            Not women.

            You think it’s OK to choke hold a chick and then think the OG poster is jumping to conclusions re NZ.

            Psychopath.

          • So it’s ok for a chick to chokehold a guy? What if it’s a big chick absolutely belting some small guy who was completely innocent but that chick was walking the streets looking to give someone a good kicking (psychopathic behaviour you admit to enjoying) and he accidently looked sideways at her.
            I do not approve of that cop at all, but you can’t be walking around the streets looking for trouble and admonish others you hypocritic windbag. Stfu

          • She was spitting in his face apparently. So he was trying to keep her head facing the other…I mean…I don’t wanna defend the…but…
            *walks out backwards*

          • Son, the way you go on about women , suggests you may have some of that PTS , this can happen if your missus has left you.
            A gentle suggestion, either go to a Mens Shed group, or get yourself some help..its not healthy the way your goin

          • @Jigga thanks so much /s

            Got any wise words for Mig? Do you even know what is being discussed here? Mig is the one who thinks it’s ok to walk the streets trying to fight random strangers. This has nothing to do with the cop or women, it’s all about mig the hero of the world that’s a lulu goose.

            Fck you muppets are wankers. Without TTW this place has gone to sh!t

        • Imagine being and indigenous person in the past where so called classical societies were bent on finding gold, silver and precious stones to fund wars and personal wealth for the fun of it ….

          • Skip, every view that grates against your own is blamed on Libertarianism.

            FFS, 99.9999% of the population of the Western world wouldn’t have the first clue what a Libertarian was, nor what they stood for.

            It’s like the ‘Alt-Right’ label. I never knew what ‘they’ were talking about then realised that ‘alt-right’ meant “any view that didn’t conform to the thoughts laid down in the Progressive Bible”. Now I know this, I sleep better at night. 😉

          • FFS, 99.9999% of the population of the Western world wouldn’t have the first clue what a Libertarian was, nor what they stood for.

            Including pretty much all Libertarians, given how rubbery and inconsistent their beliefs are. About the only one you can rely on is “me want, fuck you”.

          • Neoliberalism is a far right agenda – see Powell memo et al.

            You really seem to think your musings have meaning, yet can’t attribute to anything to support them, you’ll get that when you ponder stuff and then what pops out the others side slap the “rational” label on it and have a sad when humans don’t conform to it.

    • 400 people at your wedding? No way, but Islam must be accommodated.

      When infidels are in Islamic lands, they must abide by Islamic law.

      As this example makes clear, when infidels are at home in their own, non-Islamic lands, they must also abide by Islamic law. That’s just the way it is for non-Muslims.

      To do otherwise would be racialist, even though Islam is not a race.

      I hope they all catch the Chinese plague and choke on their own mucus.

      • Volatility rules! You need BALLS of steel to trade PMs. The wise buy physical, relax and drink hot chocolate.

        • Was listening to family on the radio that put their life savings into physical gold in the highs of 2012 because they were told it would go to the moon and the system is breaking down etc etc. Well that didnt work out and they had to sell at a loss to pay down some debt. Everytime it gets to these levels everyone come out and say it going to 3000, 4000, 5000. Then they say the world is going to end and as the price drops they say i dont care about paper gold price, my price is in weight. Then it drops more. And then they say its all about long term holds. And as the recession grips, soon enough they are on the radio talking about how they bought at the peak in 20-21……

          • 2012 was 4 years after the GFC. We’re 5 months into this and there’s no indication of the world going back to normal. Negative rates are coming everywhere, massive stimulus for years on end.

            I’m no gold or silver bug though.

      • Mining BoganMEMBER

        Nah, now that she’s been caught out telling fibs the MSM will just ignore that she said anything. They got the headlines they wanted.

        I see L’etape has been postponed until March. A bunch of us had planned on that being our first big outing after the lockdown. We need to get somewhere for a ride and a big drink.

    • The Bushfires were predominantly a State matter. The ludicrous obsession has reached max out. Arsonists, living in fire zones present risk. Act accordingly.

    • Won’t matter, 52/48 again at the next NewsPoll, Scummy with 60 odd % approval. They do dumb sh1t because voters are even fvcken dumber.

    • Narapoia451MEMBER

      Where do they think they are? How could they think anything that batcrap stupid is going to go down well in new Zealand? It’s not the US.

    • reusachtigeMEMBER

      Rack is easy to get though. All kinds of rack actually. Racking up off a rack has never been easier to be honest.

    • “Thanks for the word on the street.” I think you mean teat.

      Give em all cannabis and watch the pizza business boom.

    • There is no better trade driving. Only worse than everybody else on the road, or worser.

    • Sooo…prison inmates can’t get meth (though tensions are high) and violence in indigenous communities is down.

      What’s not to like?

      Also, foreign “students” can’t find work and are starving. Immigration, including so-called “students” has plummeted. House prices are cratering, property speculators are losing money hand over fist, there’s less traffic in on the roads…

      Call me crazy, but the Rona ain’t all downside…

  2. migtronixMEMBER

    Listening to the reports from kiwi TV on YouTube is pretty funny.

    “Pacifica family, dad first showed symptoms, worked at meat packaging place, other workers now sick, family went to brothers, uncles, friends, holiday spot. Worries about Pacifica demographic not being up front with contact tracing cause visa issues”

    And there was no social distancing or mask until today 😂😂

    They’ll be worse than Victoria soon who still had all the distancing requirements etc when the towers were shut down….

      • Potentially. Apparently it was one of the unspoken reasons why Jacinta went hard lockdown the first time around. Maori and the islanders have extensive extended families with family and friends frequently moving between households. Givey many of these people are obese or are unhealthy at best, CoVid will spread like wild fire as infected people move between family units. Victoria on roids.

        • Very interesting and I’m sure you’re right.

          My comment was sarc, aimed at MB’s determination to contrast Vic badly with Nsw, NZ ( I agree with the latter )