AUSTRALIAN-RELATED LINKS:

Aussie Banks Addicted To Foreign Borrowing, Daily Reckoning, 18 Jun
“The deposit base of Aussie banks is ‘too low’. Aussie banks are over-reliant on offshore money. This entire situation is a ‘threat to economic recovery’. So it appears Aussie banks are addicted to foreign borrowing and are currently suffering from withdrawal symptoms… Australia’s property boom was bought with borrowed money. Both residential and commercial property values soared with the credit boom. If you think the banks are fine because they don’t have a subprime problem, think again. The banks have a property problem, and you can find it on the asset side of the balance sheet.” Well said. Our robust and conservative banking cartel hasn’t had to account for a property crash. Yet. Green shoots commentators claim that high unemployment is the only factor that may cause a dip in property prices, ignoring the role of the wholesale foreign funding required to keep the Aussie Ponzi scheme alive and kicking. We put ourselves in hock to foreign creditors to create the illusion of doubling or tripling house prices. Collectively, we are all the Greater Fool.

Jenman Property Report, 12 Jun
Brickbat alert as Jenman Fights Back! From the far reaches of the outer galaxy come claims that the FHOG is not that relevant in explaining why low-end property prices are holding up well and further claims that economists are naturally pessimistic. Oh yeah, that whacky Steve Keen better bloody well check his models as they don’t take into account emotional factors unique to the Australian psyche. Some people just don’t get it… like debtdeflation.com readers. Contributed by Peter.

Falling Housing Starts Leave Building Groups As Sick As A Brick, SMH, 18 Jun
“Figures showing a continued slump in housing activity in Australia in the March quarter have all but confirmed the upcoming full-year profit season is going to be ugly for companies such as Boral and Wattyl. Figures from the Australian Bureau of Statistics for the three months to March 31 show a 24.7 per cent dive in housing starts compared to the previous year.”

New Housing Boom Set To Go Through The Roof, SMH, 18 Jun
Stop the press! Ignore that last link as it’s all set to go through the roof now! “As NSW recorded its lowest figures for construction of new homes, developers have predicted the worst is over and the state is on the verge of a housing boom.” When was the last time that the real estate industry said that it was a bad time to buy? “’There will be a boom,’ said Stephen Albin, chief executive of the Urban Development Institute of Australia.”

House Prices Tipped To Lift By 2012, The Australian, 14 Jun
Steve writes: “Soon as I read the headline I thought “This has to be another BIS Shrapnel report”…and sure enough… Incidentally, have BIS (or is that BS?) Shrapnel EVER been right with ANY of their supposed forecasts?  Me thinks not.” Michael also noted that the Courier Mail also regurgitated the same data.

Home Buyers’ Stamp Duty Surprise, SMH, 16 Jun
Not so surprising. What to do when the first home cannon fodder has run out? “The Rees government will provide a $64 million boost to people buying new homes, cutting their stamp duty by half.” It reminds me of Freddie Mac – in the early days of the property boom the quasi-public sector body subsidised low-income minorities. By the end it was offering subsidised interest rates on Jumbo loans (greater than $500k) for upper-quartile income earners in California and other boom states.

Cash Rolls Into Real Estate Trusts, SMH, 19 Jun
Whose cash I wonder? There’s a “high level of demand from institutional investors”. Could that be your superannuation fund on the line? Or your future tax payments? If you look around and can’t spot the sucker in the room then he’s probably you.`

Business Borrowing Dives, Housing ‘Bubble’ Grows, ABC News, 15 Jun
Full-time media whore and part-time economist, Steve Keen, tells ‘em where it’s at: “We have been living in a bubble economy, and you don’t get out of the trouble caused by a bubble by making it grow even bigger.” In another celebrity appearance, Steve offers diet sound-bites on the deregulated banking system and follows up with a full-fat radio interview (business borrowing is down 70% and the business sector is battening down for a serious economic downturn).

Net Interest Margins Higher Than Before Global Financial Crisis, The Australian, 18 Jun
Never waste a crisis.

Plastic Less Fantastic As Credit Card Use Falls, SMH, 18 Jun
“’Despite early signs that the global economy is stabilising, consumers continue to remain cautious, shunning debt at every opportunity… Credit card lending is actually contracting in annual terms marking the weakest reading in since records were maintained 14 years ago.”

Mild Recession A Digression, Michael Stutchbury, The Australian, 18 Jun
Classic delusional thinking worthy of Charlie Aitken. “The big news of the past few weeks is that Australia’s recession looks much milder than the deep downturns of the early 1980s and 90s… We’re still not out of the danger zone given that the big fall in iron ore and coal prices is yet to fully hit. But the consensus now suggests the official budget forecasts of zero economic growth in 2008-09 and a 0.5 per cent contraction in 2009-10 are a touch too pessimistic.” “And, when the recession is over, the R-word itself might lose some of its scare-factor stigma.” “Recessions happen. The trick is to make sure the economy is in reasonable shape when they hit and manage them prudently.” Phew. All that worry for nothing.

Let The Gongs Sound For The World’s Greatest Treasurer, SMH, 16 Jun
Do you think this headline is tounge-in-cheek? Yes, I did too before I had the misfortune to read the story. He’d get a gong from me, “Hey Hey It’s Saturday” style. And while Swan is lauded China gives Rudd a bollocking for being a Keynesian dinosaur. Poor Kevin.

Worst Of Downturn Is Over: Economists, SMH, 19 Jun
This is getting boring. “’With the Australian economy avoiding a technical recession, defined as two consecutive quarters of negative growth, we think that the worst of the slowdown is over but expect weak growth to continue for most of 2009,’ Melbourne Institute research fellow Michael Chua said in the body’s latest monthly bulletin.”

GLOBAL ECONOMY / BANKING / FINANCE:

U.S. MBA Mortgage Applications Index Fell 16 Percent Last Week, Bloomberg, 17 Jun
“Mortgage applications in the U.S. fell last week to the lowest level since November as the jump in borrowing costs over the last month caused refinancing to plunge further.”

China’s Economy in Turmoil: Bubbles in a Downturn, China Stakes, 13 Jun
“There’s ice on the export side, while there’s flame on the real estate market side, and China’s effort to create internal demand is being distorted. China’s economic stimulus, which is bulldozing ahead, is causing problems for China’s economic recovery. Manufacturing is steadily declining, employment and consumption growth are weak, but bubbles are beginning to gather in the real estate industry.” Contributed by Hugh. More from China Stakes as “shrinking real estate sales are spreading, from Shenzhen northwards to Shanghai and Beijing”.

Foreign Investment In China Tumbles, The Age, 15 Jun
More gloom from Australia’s great red hope. “Foreign direct investment in China fell for an eighth month from a year earlier as companies cut spending to weather the worst economic slump since the Great Depression.” And they’ve raised their export tax rebates seven times this year (so far) after exports dropped 20% in the first quarter.

TrimTab’s CEO Provides Realistic View On the Economy, Zero Hedge, 18 Jun
Reality strikes back. CNBC interviewer: “The retail investor is back. Why is that such a contrary indicator? Why can’t the retail investor be signalling that this new money coming in is a positive?” Guest: “Well, they’ve always been wrong before… they invest with their eyes on the rear-view mirror and their foot on the gas and wonder why they crash regularly.” Unlike Wall St experts and superannuation fund managers. This 5 min video is well worth watching.

The Debt Conundrum Part 1, Seeking Alpha, 13 Jun
Good summary article highlighting the lunacy behind the current bear market rally. Examines what a “return to normal” means.

Crisis Of Faith For High Priests Of Rational Markets, FT, 15 Jun
“A new realisation has dawned among the most fervent advocates of financial analysis and collective investor wisdom – markets are not always rational… The British CFA recently asked its members for the first time if they trusted in “market efficiency” – and discovered that more than two-thirds of respondents no longer believed that market prices reflected all available information.” The other third were all working in academia.

Why Economists Failed to Predict the Financial Crisis, Wharton, 13 May
This is a bit rich coming from a major US business school but in these tough economic times we need to stay flexible. “”It’s not just that they missed it, they positively denied that it would happen.” “”The most remarkable fact is that serious people were willing to commit, both intellectually and financially, to the idea that housing prices would rise indefinitely, a really bizarre idea.” Contributed by Peter.

Big Banks Suffering As Subprime Mortgages Get Repaid, Market Skeptics, 13 Jun
Great story: “I can’t emphasize how much I am loving this development”. Also noted by Michael here.

Random Walk Down Madison’s Golden Mile, Zero Hedge, 13 Jun
A picture tells a thousand words. 18 pictures of closed store-fronts tell even more. Also see comments.

German Credit Crunch Deepens, Telegraph (UK), 14 Jun
“A DIHK survey of German industry, to be released this week and obtained by Der Spiegel, found that over a third of all large companies are still seeing credit conditions tighten further, if they can borrow at all. Terms are now tougher than they were at the height of the global crisis over the winter.”

The Crucifixion Of Latvia, Telegraph (UK), 14 Jun
Compares the collapse of Argentina in 2001 to poor old Latvia. Naomi Klein’s “Shock Doctrine” comes to mind here. For a much more in-depth and revealing look at these issues, see Michael Husdon’s piece on Iceland (or watch the 17 min video interview).

Idle Railroad Cars, Where Do They Go?, Mish Shedlock, 15 Jun
Zeitgeist watch. “The economic slump has idled about 70,000 Union Pacific railcars, now sidetracked wherever space can be found.”  Ayn “Atlas Shrugged” Rand would be lying smugly in her grave bitching about how the government causing all this. I doubt she’s too fond of her number-one fan, Mr Greenspan.

Do the Treasury Proposals On Securitization Go Far Enough, Naked Capitalism, 16 Jun
“Credit became more dependent on securitization than many realize. By pretty much any metric, the role of banks relative to other players has declined since 1980, by some measures as much as a 50% drop in market share… in case you missed it, securitization has slowed down to a trickle.” “Going back to old-fashioned lending would require banks to have much larger balance sheets, hence more equity. The banks are having enough trouble coming up with enough capital to support their current footings that raising even more equity would seem to be a non-starter.”

Thai Exports Tumble the Most in at Least 17 Years, Bloomberg, 19 Jun
“Thailand’s exports fell the most since at least 1992 in May as the worst global recession since the Great Depression eroded demand for products. Shipments dropped 26.6 percent from a year earlier.” Worse than the 1997 Asian Crisis then.

Tracking Economic Recession and Recovery in America’s 100 Largest Metropolitan Areas, Brookings, June
Good source of data for US economic decline.

Consumer prices edge up in May; inflation in check, Yahoo Finance, 17 Jun
“Consumer prices rose less than expected in the month of May and posted the steepest annual drop in 59 year… fresh evidence that the recession is keeping inflation in check.” So deflation is now spun as “keeping inflation in check”. Tell that to Japan.

States In Deep Trouble Over Plunging Income Tax Revenues, Mish Shedlock, 18 Jun
US collapse watch. “Total personal income tax collections in January-April 2009 were 26 percent, or about $28.8 billion below the level of a year ago in states for which we have data. In April 2009 alone (April being the month when many states receive the bulk of their balance due or final payments), personal income tax receipts fell by 36.5 percent, or $18.2 billion.”

What’s Next For The US Economy, or What’s Left of It?, The Sanity Check, 11 Jun
A new post from an expert on financial corruption, one of the founders of the movement that exposed systematic naked short selling. “It’s ugly, folks. About as ugly as one could imagine… remember that predatory interests don’t really care whether economies or currencies get wrecked or not – they benefit mainly by massive volatility, in either direction, caused by their actions. They know the timing as they engineer the swings, thus are perfectly positioned to profit from everyone else’s loss.” I suggest you also read the comments in detail.

GEOPOLITICAL:

De-dollarization: Dismantling America’s Financial Military Empire, Michael Hudson, 13 Jun
Must-read link-of-the-week by one of the best GFC pundits. “When China and other countries recycle their dollar inflows by buying US Treasury bills to “invest” in the United States, this build-up is not really voluntary. It does not reflect faith in the U.S. economy enriching foreign central banks for their savings, or any calculated investment preference, but simply a lack of alternatives. ‘Free markets’ US-style hook countries into a system that forces them to accept dollars without limit. Now they want out.” “US interest-rate and tax reductions in the face of exploding trade and budget deficits are seen as the height of hypocrisy in view of the austerity programs that Washington forces on other countries via the IMF and other Washington vehicles.” “Foreigners see the IMF, World Bank and World Trade Organization as Washington surrogates in a financial system backed by American military bases and aircraft carriers encircling the globe.” Too many quotable quotes to list here…

BRICs May Buy Each Other’s Bonds in Shift From Dollar, Bloomberg, 16 Jun
In case you thought Hudson was making it all up. “Brazil, Russia, India and China are considering buying each other’s bonds and swapping currencies to lessen dependence on the U.S. dollar, Russian President Dmitry Medvedev’s top economic adviser said.” The next day Bloomberg poo-pooed this story by claiming that the return on US securities was higher than BRIC issued securities so they would be foolish to diversify. Nice try. More from MercoPress.

Current Account Trade Deficit Drops To $101.5B, Yahoo Finance, 17 Jun
“The deficit in the broadest measure of trade plunged sharply in the first three months of the year as the country’s deep recession depressed imports of oil and other goods… a 34.5 percent decline from the deficit in the fourth quarter. It was the lowest current account deficit since the final three months of 2001 when the country was mired in the last recession.” This has huge implications for the USD, as the current account deficit is plugged by foreign creditors buying US treasuries thereby propping up demand for the USD. Time for more QE.

April Net Foreign Sales Of Long-Term US Securities, WSJ, 15 Jun
Short but not so sweet. “Net foreign sales of long-maturity U.S. securities totaled $8.8 billion in April, following purchases of $36.5 billion the month before, according to a U.S. Treasury Department report released Monday. Meanwhile, the report shows that China, Japan and Russia – three large purchasers of U.S. Treasurys – all trimmed their holdings of U.S. debt.” See some meandering spin on the subject by Bloomberg.

USDA Deliberately Misleading Investors To Hide Looming Food Shortage, Market Skeptics, 17 Jun
MS has been writing about food shortages for months now. Is he right? I don’t know but it’s worth keeping in mind.

The Strange Inconsistencies Behind the $134.5B Bearer Bond Mystery, Underground Investor, 16 Jun
Probably the best article on this fantastic story so far. Other pundits think that they may be not be fakes but a way in which the US has unloaded debt sales on the sly.

Global Systemic Crisis In Summer 2009: The Cumulative Impact Of Three “Rogue Waves”, Leap2020, 17 Jun
If you think the other links are depressing then puck up and read this… “Because the origins of the crisis remain unaddressed, we estimate that the summer 2009 will be marked by the converging of three very destructive ‘rogue waves’ [massive unemployment, serial corporate bankruptcies, crash of USD, UST and STG], illustrating the aggravation of the crisis and entailing major upheaval by September/October 2009.” “These three waves do not appear in quick succession… they are even more dangerous because they are simultaneous, asynchronous and non-parallel. Hence their impact on the global system accentuates the risks because they hit at various angles, at different speeds and with varying strength. The only certain thing at this stage is that the international system has never been so weak and powerless to face such a situation.” Does anyone want to share the costs of a subscription?