Gottiboff: Bow to China or it will crash your house price

Gottiboff has joined some dribble stains on his bib today:

Australia must brace itself for the next round of the war of words and actions with China – an attack on the price of iron ore and the nation’s key revenue base.

My China contacts tell me that the anger China is currently displaying over issues like Australia’s call for a COVID-19 inquiry and journalistic disputes is minuscule compared to the fury in China created by the recent jump in the price of iron ore.

Rightly or wrongly, Chinese President Xi Jinping believes that Australia has ruthlessly exploited the COVID-19 pandemic to force China to pay exorbitant prices for iron ore. Xi is determined to teach us a lesson as early as next year, but certainly in the years to come.

…To slash the price China is looking to increase local production…is encouraging Brazil to open up new mines and new deep water ports to enable the Chinese supercarriers to take Brazilian ore to China at costs that are comparable or lower than to transport from Australia…hopes to open the massive Simandou iron ore mines in Guinea.

China believes that the Australian currency is vulnerable to a big fall in the iron ore price, given its huge deficits and dependence on borrowing. And so a collapse in the iron ore price will inflict significant punishment on the recalcitrant nation down under.

Who are Gottiboff’s China sources?  There is a history of China being angry at the Pilbara cartel. Pre-GFC it exploded into the open when RIO and BHP mulled a merger. And again afterward when BHP broke the contract system. It is true as well that RIO is withholding volumes to support the price today.

But is that what is driving Chinese anger now? Or is it just part of the annoyance? Prices will not be above $100 for long, half what they were during previous upsets. The iron ore supply story that Gottbioff ascribes to today’s CCP anger has been in train for many years.

As for our currency being vulnerable, I certainly hope so. Both Gottiboff and the CCP need to acquaint themselves with forex and interest swaps plus QE if they think the offshore debt matters anymore.

That’s the rub, for me. If Gottiboff doesn’t understand these basics then it calls into question his entire, doddering thesis. Not to mention that the fastest way possible to decouple Australia from China is to crash house prices and the currency together.

This looks like another attempt to strike fear into Australians to soften them up for the CCP overlordship Gottiboff has been campaigning for.

David Llewellyn-Smith
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Comments

  1. Xi’s just like so many dictators. If you don’t do what he tells you, he gets angry. Well, we saw Hitler and Mussolini in their graves and more recently we’ve our-lasted the Soviet Union and our American cousins and their middle eastern friends dispatched Saddam, Osama and Gaddafi to the here-after.

    So, Xi, bring it on…. us Anglo-Saxon peoples are a tougher breed than you realise…

  2. TailorTrashMEMBER

    Who are gottiboffs China sources?…….well he likes to “yarn “ with Harry ……so I guess the miserable old sod is getting in his ear as all this China biffo
    won’t be good for sh1tbox sales .

  3. I cannot see the problem with less expensive real estate. Make China withdraw its agents, money and fake students and the bonus is increasing housing affordability- multiple wins all round.

  4. SnappedUpSavvyMEMBER

    every time i think this is getting real my Indian friend/production manager keeps telling me this is nothing compared to whats happening in India. They are nearly at war and the chinese are hated

    • Someone ElseMEMBER

      An Indian frontier unit, made up of exhiled Tibetans and Ghurkas, took 30-something strong points in the disputed zone, including a PLA camp.

      The nationalist indian media has been crowing about how the chinese ‘boy emperor’ soldiers are no match for their ‘real men’ soldiers.

      There have been shots fired in the ‘no gun’ zone and photos of the chinese soldiers all armed with spears.

      Both sides need a distraction from internal troubles so sh!t’s getting real!

    • Lol wonder what our universities are going to look like when their two biggest customer bases hate each other but have to be around each other at uni campuses.
      They must be thanking the stars for iso that keeps them geographically apart right now.

  5. Re Iron Ore – China are going to increasingly push the big miners to settle their sales in RMB and leave the currency exposure/conversion to the individual companies.
    Over time this will reduce the dependency on the USD for China. When the Brazil ore comes back online expect Chinese customers to start offering producers above market prices to switch.

    • Jebus, who on earth would accept RMB as payment? May as well give the stuff away for free. I doubt there even exists a mechanism for accepting RMB as payment, unless they opened an account in China itself. The miners want Dullahs (the US variety).

        • I’d be curious to see the mechanics of these transactions (if they actually exist). I don’t think Yuan accounts can actually exist outside of China, if you see what I mean. Or perhaps they can by having a correspondent bank (Chinese) in another country.

          In any event I wouldn’t be hanging on to my RMB very long — I’d be hedging or selling it for something a little more solid. These miners have probably done a random transaction in RMB for goodwill reasons and nothing more. Pretty much all commodity transactions (globally) are Dollar-based.

          • Jumping jack flash

            Its too easy to use dollars. Everyone including China already has a stash so they can buy oil. To use something else means you need to buy some of that currency and frankly who could really be bothered?

  6. The amusing thing is that 5 + years ago when I pointed out that we had enormously pricing power in Iron Ore few would listen.
    https://theglass-pyramid.com/2015/05/29/iron-ore-a-national-iron-ore-export-volume-auction-is-the-best-solution/

    Back then everyone insisted that iron ore was an abundant commodity, Australia was a price taker.and prices were ready to crash at any moment when Vale ramped up S11 and mythical African mines were opened.

    Now here we are 5 years down the track and iron ore is at $100 rather than $20 and the Chinese are squealing with 5th column Gotti whispering sweet nothings.

    But the huffing and puffing by the Chinese does show that just slapping a tariff on exports to China would be a particularly bad move as it would play right into Chinese claims we are picking on them.

    A National Export Volume Auction avoids those criticisms as all exports destinations are treated equally and it will not be difficult to make a national interest argument (Dutch disease, etc) as to why we want to limit the volume of annual exports of a particularly commodity.

    Although we have flushed billions down the toilet by allowing our miners to compete with each other there is still time to extract loads more loot from the communists without giving them an excuse for whinge.

    And if they really want to whinge perhaps we should implement some immediate Quality Control on exports until Chinese stockpiles run dry and they find they need to shutter some steel works and all those public works that keep the Chinese work force happy and not cracking out in riots.

    • Jumping jack flash

      “it will not be difficult to make a national interest argument (Dutch disease, etc) as to why we want to limit the volume of annual exports of a particularly commodity”

      No, but good luck.
      Everyone in the meat industry fumes about the US quota…

      Besides what would we do with it?

      • Ask China about rare earths
        Ask Norway about oil
        Ask Opec about oil for the 40 years until US fracking

        Plenty of countries regulate the production and export of goods to avoid finding themselves hooked on a few customers or a few cash crops.

        Clownistan Downunder has managed to do both with China.

        What would we do with it?

        Leave it where it is. It’s been sitting there for millions of years a few more years is not going bother it.

        Everybody fumes about US quotas on beef yet the US still has quotas. Amazing. It’s almost as though they think it is in their interests to limit our access to their markets like the Chinese, Europeans and just about every other country does.

  7. > If Gottiboff doesn’t understand these basics then it calls into question his entire, doddering thesis.
    I suspect he does understand them but his readers are the type that pay for foreign cars and european holidays for whom.. low aud = bad and that is all they care about. And gottiboff understands THAT!

  8. Australia. Grow some balls. The sooner we tell China to f&@$&$k off, the sooner we can start making stuff locally again. Why get into bed with a communist, plagiarist country that stealthily builds by poaching other nations ideas. The sooner this housing bust happens, the better.

  9. If you ask me China has Australia lined up for a world class ripstart.
    They’ve been stuffing us with beads for almost 20 years, but now it’s time to pull the string.
    If you look closely you can see that our Pollies are already totally frothin, just from the jerk job, once they pull the string this whole place will blow.
    we’ll be mopping it up for decades!

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