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Buy my bonds!, no buy mine !!, no mine !!, no mine !!

As our astute readers would be aware the Australian Banks have a large exposure to foriegn debt markets as they must continually rollover debt to support their enormous and ever-growing loan books. One of the major risks is therefore a repeat of the “Credit Crunch” where the debt markets freeze up, or the cost of

Latest posts

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China with foot on brake pedal, may use handbrake

As we have been warning since we started this blog, Australia’s over reliance on China to provide economic growth while ignoring its own productivity and developing its own economic capabilities is very dangerous. It is the expected behaviour for a country suffering Dutch disease, but that is no excuse for our economic leaders not to

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Prosperous New Year ?

As we have stated earlier in reference to falling levels of debt issuance and its effect on the economy. When the music stops the asset values stop appreciating but the debt still exists. All of sudden people start to realise that they might actually have to “pay” the debt back and that it isn’t going

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Reader Question about ANZ

In a recent post we made reference to an ANZ bond buy-back and said. In other banking news we also note that ANZ’s risk management department has been overruled by the profit department. A reader Ian sent us an e-mail to query what this meant. Would it be possible to further discuss the implications of

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Is this legal? and if so, why?

Firstly, we are not legal experts. So this is a question not an accusation. But we read an article today in the Herald Sun that set off alarm bells. The paragraph in question is this one. With Melbourne’s property market cooling in the wake of interest rate rises late last year, most real estate experts

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Queenslands’ Disaster

Queenslands’ flood disaster, possibly the worst in decades, is going to be an economic one as well. Treasurer Andrew Fraser described the disaster as being “of biblical proportions” following a tour of flood-stricken Bundaberg. He has been forced to delay delivering the mid-year Fiscal and Economic review to factor in enormous costs from the floods.

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China Bubble: Now the Locals are Worried

Alarm over China’s bubble economy continues to grow. First, Western commentators, led by Jim Chanos and Vitaliy Katsenelson, warned that China’s economy is over-dependent on fixed asset investment – i.e. building infrastructure, real estate and manufacturing plants. This over-investment in fixed assets, which now comprises a whopping 60% of China’s annual GDP, has caused China to build far

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Economics 101 in action

Back in May 2010 just after we started blogging we made a little humourous post about the rules to follow if you want to be a successful economic spruiker. Rule 4 and 5 were. Rule 4: Even in the face of complete failure claim the higher ground by misquoting some theory and demanding that reality

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Still can’t see the airport

As we have said previously in response to the “soft landing” rhetoric for Australian Property. Some may say this is a “soft landing”, we say it has only just begun , the landing gear is still up and we can’t even see the runway yet. And yet again today, we are completely unsurprised that housing

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Happy New Year

Happy New Year !!! A year full of challenges that is hopefully prosperous for our readers. It is a new year but also the end of the month, so here is the latest stats graph for the blog. As we expected we couldn’t keep up our “to the moon” exponential readership growth, but given that

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Question: When will the AUD correct?

It has been a little while since we had a reader question, but since we just noted. The Australian dollar’s record-breaking run continued today, with the currency touching a fresh high against the greenback and the euro. The dollar hit 101.98 US cents at 12.45pm eastern daylight time, the highest level since the currency was

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Economic pollies start the "soften".

We get the feeling Admiral Swan has been tapped on the shoulder by someone, we don’t know who , but his latest words sound rather bullish in comparison to his usual tirades about the strength to the economy. In light of the near-collapse of the Irish banks and surging inflation in China, the Treasurer, Wayne

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More Debt Issuance Casualties

Once again we note that debt issuance contagion is moving into the broader economy and is now starting to bring down whole companies. The private equity owners of Colorado Group have been forced to reassure a syndicate of lenders about its financial position. The lenders have also sought from the Hong Kong private equity group,

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Another Commodities Bubble?

Between mid-2007 and late 2008, the price of all tradeable commodities skyrocketed, headlined by oil reaching nearly $US150 per barrel in July 2008. At the time, fundamental economic forces and demand and supply were being blamed for the sharp rise in commodities prices. Take, for example, this explanation from Jeffrey Harris, chief economist of the CFTC, the US commodities futures

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Nervously watching Queensland banks

As our readers would know, Queensland is the head of the pack in the downfall of a debt driven economy. The Gold Coast and parts of Regional Queensland are already showing signs of economic contagion and issues for banks. It is already public knowledge that Bank of Queensland it having some trouble, and that Suncorp

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Desperately spruiking into the New Year

As our Christmas guest blogger mentioned last week, the real estate machine has given up on certain areas of Australia, hoping that no one will notice if they don’t talk about them and focus on the areas that are still showing growth. Today we note that they may have also given up on the first

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Is Australia Running out of Luck?

An interesting article appeared in yesterday’s Sydney Morning Herald entitled “Slugging it out over our future direction” (hat tip to John Murray for alerting me to it). In the article, investment ‘experts’ are asked to make predictions on the Australian economy for 2011. While a number of analysts are fairly positive on China and the

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More on Chinas’ brake pedal

Yesterday it was suggested in a WSJ report that there will be change in policy stance from the Chinese government in the way it handles some of its economic issues in 2011. Today we note that it seems that this was more than just a suggestion. China’s Premier Wen Jiabao said measures to curb the

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Foreign Investors Shun Australian Bank Debt

The Australian banks’ excessive borrowing from foreigners, which has been used to fund the Great Australian Housing Bubble, is something that I have warned about since starting this blog. This issue first entered my consciousness in 2009 when reading fellow blogger, David Llewellyn-Smith’s brilliant book, The Great Crash of 2008. Amazingly, this issue has received little attention from mainstream Australian

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Debt issuance contagion rolls on

Again today we see more evidence of debt issuance contagion leaking out of the property market and into the wider economy. Firstly a warning from the Urban Development Institute of Australia on Queensland jobs. Queensland could lose almost 40,000 construction and retail jobs by the middle of next year, an urban development body has warned.

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Beware the wolf in sheeps clothing

Buyers’ agents are supposedly entities representing a buyer in a real estate transaction. Due to this you would expect that companies and businesses that represent themselves as “buyers’ agents” would be best representing their clients by talking down the property market at any opportunity. The problem however is that most buyers agents are just practicing

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China hits the brakes again. Foot may stay on pedal.

As we continue to report and warn about Australia’s reliance on China, they have touched the brakes again and this time may leave their foot there. China has decided to raise interest rates for the second time in slightly over two months, signaling the authorities’ resolve to combat rising inflation despite concerns over intensifying capital

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Need more debt ! But from where ??

Christmas hang over almost gone… Time to slowly get back into blogging. One problem with our Christmas, the kids seem happy enough but it turns out we didn’t spend enough. Consumers are being begged to spend up big today and save Queensland businesses from going broke. Queensland retailers are set to rake in about $11

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China Bubble: More Bearish Commentary

The holiday season has not stemmed the flow of commentary questioning the strength of the Chinese economy. On Christmas Eve, Australia’s own Karen Maley of Business Spectator wrote a nice summary of the challenges currently facing the Chinese economy. Here’s an extract of what Maley wrote: As we head into 2011, the biggest cliffhanger for Australia is

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Merry Christmas to our Readers

Merry Christmas to all our readers. It has been a very exciting year in blogging for us and we obviously wouldn’t have had this experience without everyone out there in internet land reading along and providing input. 2011 promises to be an exciting year, and we hope we can continue to do our little bit

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More on Son of Wallis – Andrew Selby Smith

Today we note that the article on the Son of Wallis Challenge outcomes has been published on a couple of other news sites. The Age Sydney Morning Herald Andrew Selby Smith is the another Son of Wallis Challenge entrant. Andrew did an excellent job of explaining alternatives to the current system of banking and his

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Westpac drops mortgage lending standards

Earlier this month I warned of the unintended consequences of increased bank competition. This article described how the intensification of competition for mortgage lending in Australia from the mid-1990s caused credit standards to drop and offshore borrowings to explode. The resulting increase in the availability of credit arising from this increased competition, combined with unresponsive housing supply, has caused the housing bubble that

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Son of Wallis Challenge Winner

Regular readers would be aware that I was a co-sponsor and judge of the Son of Wallis Challenge, a privately run competition to promote a comprehensive government inquiry into the Australian financial system. Today the winner was announced and I congratulate Kaon Li for her winning entry.  Thanks, too, to all of our contestants. I can honestly say that all entries were excellent and it was a closely