The Poolroom week ending 14th October 2011

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World Econ­o­my

Rep­re­sen­ta­tive in Chi­na, RBA, 30th Sept

The Reserve Bank of Aus­tralia is estab­lish­ing rep­re­sen­ta­tion in Chi­na. An office, locat­ed with­in the Aus­tralian Embassy in Bei­jing, will begin oper­a­tions in mid Octo­ber and will assist in the Bank’s ongo­ing mon­i­tor­ing of eco­nom­ic and finan­cial con­di­tions in Chi­na. It will also help build rela­tion­ships with var­i­ous gov­ern­ment agen­cies and pri­vate enti­ties.’

Be Afraid, The Econ­o­mist, 1st Oct

Unless politi­cians act more bold­ly, the world econ­o­my will keep head­ing towards a black hole.

Here we go again, The Econ­o­mist, 8th Oct

The Euro­peans are push­ing the glob­al bank­ing sys­tem to the edge…The chief exec­u­tive of one embat­tled insti­tu­tion, Mor­gan Stan­ley, sent a memo to employ­ees reas­sur­ing them that the bank’s bal­ance-sheet was dra­mat­i­cal­ly stronger than it was in 2008, when Lehman Broth­ers col­lapsed.’

Chi­na sov­er­eign wealth fund buys bank stocks, The Aus­tralian, 11th Oct

Chi­na’s sov­er­eign wealth fund plunged into the mar­ket yes­ter­day as a high-pro­file buy­er of the coun­try’s bank­ing stocks in a sign Bei­jing is again rat­tled by tum­bling share prices and the risk of an eco­nom­ic hard land­ing.’

US Sen­ate pass­es bill to pres­sure Chi­na on yuan, BBC News, 12th Oct

The US Sen­ate has vot­ed through a bill that aims to aims to put pres­sure on Chi­na to increase the val­ue of its cur­ren­cy, the yuan.’

Some sought bold­er action: US Fed min­utes, The Aus­tralian, 13th Oct

When they met three weeks ago, Fed­er­al Reserve offi­cials left a series of options on the table which they could use if the US eco­nom­ic recov­ery fal­ters, includ­ing the con­tro­ver­sial step of buy­ing more secu­ri­ties.’

Cred­it Suisse thumps Chi­na’s banks, Macro Busi­ness Superblog, 13th Oct

It’s still at the periph­ery, but more invest­ment banks are flip­ping to Chi­na bears. Inter­est­ing­ly, this Cred­it Suisse report (h/t Zero Hedge) pro­jec­tions a huge jump in Chi­nese banks non-per­form­ing loans based upon pre­cise­ly the two stress test out­comes that I described via the IMF ear­li­er this week, a com­bined real­ty and exporters crunch. It is inter­est­ing to note that CS sees the like­li­hood that 80% of bad loans will emanate from these two sec­tors.’

It’s tough dri­ving in two-speed econ­o­my, says econ­o­mist, The Aus­tralian, 14th Oct

Emi­nent econ­o­mist Lar­ry Mey­er is con­fi­dent the US will avoid a dou­ble-dip reces­sion, but fore­cast­ing has nev­er been more dif­fi­cult in a two-speed world.

A tril­lion here, $500 bil­lion there, The Econ­o­mist, 15th Oct

The pen­sion hole just keeps get­ting big­ger. The assets owned by pen­sion schemes have gen­er­al­ly been falling in price while their lia­bil­i­ties have been relent­less­ly ris­ing. One of the cul­prits is quan­ti­ta­tive eas­ing (QE), a tac­tic devised by cen­tral banks to revive the econ­o­my.’


Will Aus­tralia Catch a US Cold?, RBA, 21st Sept

Through the 1980s and into the 1990s, devel­op­ments in the Aus­tralian econ­o­my showed a close cor­re­la­tion with those in the US econ­o­my. It was par­tic­u­lar­ly strik­ing that the reces­sions of the ear­ly 1970s, ear­ly 1980s and ear­ly 1990s were high­ly syn­chro­nised between the two coun­tries and had many sim­i­lar­i­ties in their nature and ori­gins. As a result, it was com­mon in the 1980s and 1990s to hear the phrase ‘when the US sneezes, Aus­tralia catch­es a cold’. ’

Bank fund­ing costs move sharply high­er

The Age, 4th Oct

A key mea­sure of Aus­tralian bank fund­ing costs has shot up to the high­est lev­el since the glob­al finan­cial cri­sis, on ris­ing fears that Europe’s deep­en­ing trou­bles could trig­ger a world­wide cred­it crunch.’

Mort­gage com­pe­ti­tion hits pre-GFC lev­els, The Age, 5th Oct

Com­pe­ti­tion between banks and oth­er lenders for home loan cus­tomers has returned to lev­els last seen before the glob­al finan­cial cri­sis.’

Tax forum told of plan for young work­ers to use super pay­ments for home deposits, The Aus­tralian, 5th Oct

Work­ers in their 20s and 30s should be able to use their super­an­nu­a­tion for a house deposit, and Labor’s “Mick­ey Mouse” first home saver scheme scrapped, accord­ing to a Keat­ing-era eco­nom­ics advis­er who helped devise Aus­trali­a’s super plan.’

Fears sur­face over Chi­nese debt amid lend­ing prac­tices, BBC News, 6th Oct

With its deep pock­ets and buoy­ant growth, Chi­na has been tout­ed as a white knight for the world econ­o­my. But fears are grow­ing that the coun­try may face its own debt cri­sis as its econ­o­my shows signs of a slow­down.’

REITs face fund­ing dilem­ma, The Age, 10th Oct

Investors in list­ed real estate invest­ment trusts face being forced to shoul­der the bur­den of anoth­er round of cap­i­tal rais­ings as $7 bil­lion in debt falls due this finan­cial year. The con­cern has arisen as the sec­tor eval­u­ates the sting from expo­sure to lend­ing syn­di­cates involv­ing tee­ter­ing Euro­pean banks.’

Busi­ness con­fi­dence sur­pris­ing­ly resilient, The Age, 11th Oct

NAB index for busi­ness con­fi­dence index rose for Sep­tem­ber. “The depre­ci­a­tion of the Aus­tralian dol­lar dur­ing the month is like­ly to have helped alle­vi­ate some stress on busi­ness­es com­pet­ing on the glob­al mar­ket, while the height­ened expec­ta­tion that domes­tic inter­est rates will be low­ered by the RBA may also have pro­vid­ed some relief,” said NAB chief econ­o­mist Alan Oster said.

Pub­lic not moved by region­al relo­ca­tion, The Age, 11th Oct


In NSW ‘few­er than 50 house­holds have signed up to a state gov­ern­ment scheme to encour­age relo­ca­tion from urban to region­al areas in its first three months, cast­ing doubt over a fore­cast take-up of 7000 a year.’

Hous­ing afford­abil­i­ty: the sum­mit we real­ly need, The Age, 11th Oct

Var­i­ous car­toon­ists and polit­i­cal jokes ran mis­in­formed lines about sundry “ele­phants in the room” dur­ing last week’s tax forum but they all missed the biggest one: hous­ing afford­abil­i­ty.’ (Clear­ly a major issue among Aus­tralian peo­ple, the arti­cle was ranked no. 1 ‘Top Busi­ness Arti­cle’ 12th Oct.)

Mas­ter Builders Aus­tralia sur­vey warns of job loss­es, Her­ald Sun, 11th Oct

Build­ing activ­i­ty and prof­its in the sec­tor are expect­ed to fall, pos­si­bly lead­ing to job loss­es, a sur­vey shows.’

Lib­er­als to sup­port ‘cov­ered bonds’ bill, The Aus­tralian, 12th Oct

Aus­trali­a’s banks, build­ing soci­eties and cred­it unions yes­ter­day won bipar­ti­san sup­port to issue “cov­ered bonds”, after the fed­er­al oppo­si­tion agreed to vote in favour of the gov­ern­men­t’s bill to intro­duce the debt instru­ment.’

Bad debts hit Bank of Queens­land prof­it, The Age, 13th Oct

A near-dou­bling of impair­ment charges caused by its expo­sure to the ail­ing region­al com­mer­cial prop­er­ty sec­tor has seen Bank of Queens­land’s annu­al prof­it slide by 13 per cent to $158 mil­lion.’

Job­less rate in sur­prise fall to 5.2 per cent, The Aus­tralian, 13th Oct

Aus­trali­a’s unem­ploy­ment rate fell to a low­er-than-expect­ed 5.2 per cent last month, with the econ­o­my adding more jobs than expect­ed.’

Aus­tralia not immune from slump: IMF, The Age, 14th Oct

THE Inter­na­tion­al Mon­e­tary Fund says a severe glob­al slump would wipe 2 per­cent­age points off the econ­o­my’s growth rate, and cause the min­ing invest­ment boom to be scaled back sharply.

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.