So I know all of us are currently more focused on the US markets and Bernanke's failures but what about China? There seems to be a huge bubble in China at the moment especailly in the property sector, if and when it comes to a pop what do you guys think would happen to Australia who relies on a lot of exports to China? And how or if this would affect our economy as well as PMs prices. http://seekingalpha.com/article/238912-how-big-is-the-chinese-property-bubble http://www.telegraph.co.uk/finance/...bble-on-borrowed-time-as-inflation-bites.html http://www.csmonitor.com/Commentary/Opinion/2010/0316/China-the-coming-costs-of-a-superbubble http://www.fark.com/vidplayer/6124287
We will hear the pop in the Chinese real estate bubble in the popping of our own bubbles. All leveraged Chinese speculators in the Australian market will liquidate and repatriate capital to meet their domestic obligations. Given that 50% of the real estate market in capital cities has been Asian speculators, that's going to hurt Aussie home prices. Further, the selling pressure on the AUD from the repatriation of capital will commence the decline of the AUD, which will be finished off by the drying up of the Chinese export market in commodities and the associated rise in Australian unemployment. The deficit spending, big government model will then begin to crumble as tax revenues drop off the cliff and the dole queues start getting longer. That is when you will be able to trade out of your speculative PM position for a new house and vineyard, while still retaining your core. I think we really underestimate our exposure to a capital exodus. The gotcha here though is what if the China event occurs simultaneously with the USD collapse . . . because they are very interrelated.
I hear you Gino. All sounds sensible and is pretty much what I said to a property investor I know. His answer was that it didn't matter if it was all a bubble, because when they go to war they'll need all the coal, gas, iron ore, etc. they can lay their hands on. Not sure whether he was just talk, but it made me think.
Deja vu! The flaw in that argument is that no one will be able to afford a sustained WWII type industry re-building war. They will reach for the nuclear option very quickly. It will not only be currencies and economies that will be decimated, but whole cultures and societies. I am surprised that Gaddaffi hasn't escalated the conflict in this way already, but maybe he is holding out with the other mid-east wars to break them financially - seems to be working. However, when the "Allies" encroach on the essential supplies of the Russians or Chinese, or they escalate the wars further in the middle-east, it will go nuclear quickly. Don't forget the "mad dog" defence of the Israelis, who will cut loose if seriously threatened in any way. There's a big difference between the 1930's and today. There was no Israel, no North Korea, no Pakistan, no militarised Saudi Arabia, no nuclear weapons and the world was a much bigger place. I don't see war playing the role of economic saviour it had in the past. Not today. Not with the people in power, not with what's at stake and not with all manufacturing relocated off-shore in China.
Yeah, good points all valid. You are no doubt right about there being no hope of economic salvation through total war without a lot of cheap energy. But perhaps China would be more interested in asserting itself more regionally?
Wow, what country are we talking about?...sounds like it's ripe for the picking, lets invade before the Chinese do!
LOL - Australia's been invaded by different cultures many times over. But, as yet, we haven't even considered the failure of Japan in our little scenario. If you were in Japan, with a nuclear disaster contaminating your food and water, earthquakes and volcanoes popping off around you and the central bank flushing your savings down the toilet, what would you be doing? Japan Quake Takes Bigger-Than-Estimated Economic Toll as BOJ Cuts Forecast Who are our top 3 trading partners again? http://www.dfat.gov.au/trade/focus/081201_top10_twoway_exports.html 1) China - Bubble popping? 2) Japan - Officially a basket case with falling production and demand. Just had its debt downgraded and who knows how many run away nuclear reactors. 3) USA - In rapid decline. What do we export, again? 1) Coal 2) Iron ore 3) Education services 4) Gold Now re-consider our prospects and the prospects for the AUD. The AUD looks more like it is in a bubble the longer this rally in it goes on and the economies of our trading partners get progressively unhealthy. I had a meeting yesterday and was advised that the exchange rate was over 1.09. Nothing about gold, nothing about silver, just the value of the fiat currency. No one I know is saving that transitory value. Just buying more stuff online or traveling to the Americas because it is so cheap. The AUD is still at 1.09 USD as I write this. Pop!
No. It's the USA who like to invade and blow things up. The Chinese are smarter and just buy everything and then exert 'political' influence. The only thing that would force China to war is if the world did a 30's Japan blackban on them and withdrew the resources they need for their economy - then there'd be a problem.
Their economy slows down hard all of a sudden there's a hundred million people standing around. All of them with a declining standard of living. All after having had a brief taste of an industrialized economy. They'll not be standing around pissed off for long I'm telling you. But don;t worry, the government will find something for them to do . . .
Well that was starting to bug me, so I had another look and here is one article that I found. Developers court overseas buyers amid fears of greater urban sprawl "MAJOR builders and developers on Melbourne's urban fringe are selling up to half of some new housing estates to overseas investors and those hoping to migrate to Australia." Read more: http://www.theage.com.au/business/p...s-of-greater-urban-sprawl-20110206-1aihd.html As I said, I read it a few times in different articles. One I recall was in relation to auction competition and how the foriegn buyers were pricing out Aussie families, with an interview with an auctioneer. Anyway, it was not something I just made up to support my view, but something that has informed me to define my view.
Thanks Gino. The article is a bit different to what you said, but it does definitely support your argument that any problems developing in the Chinese economy will further weaken our housing market. Good find.
Once Singapore gets pulled down by a collapsing china, the eurozone collapses and north korea blows up south korea, we can team up with New Zealand to weather the storm lol
