Welcome Guest [Log In] [Register]


Reply
Iron ore - supply and demand rides again
Topic Started: 30 May 2014, 03:23 PM (44,292 Views)
peter fraser
Member Avatar


newjez
18 Jun 2014, 07:47 PM
It's about time. I'm lucky, as I've been receiving good pay rises, but I generally stick them in my pension or invest them, so I do appreciate how those on fixed wages have been suffering. Low cost supermarkets and high cost supermarkets have been booming. Whereas middle of the road have been suffering. Gives a good indication of how the nation was affected. Hopefully we will get some balance now.

F Europe starts qe and starts recovering, that will be a huge boost to the UK. All the Spanish may return home, trade will pick up, and rates may have to rise to slow things down. Not a bad thing as house prices are going crazy.
Draghi commenced QE in Europe recently.

I think it took some time to get the mechanics sorted out, as well as the other nations on board.

If we ever see another incident like this again they will go directly to stimulus, they won't mess around with austerity again.

My concern is therefore what happens when they overindulge in stimulus, someone will at some time if not already.
Any expressed market opinion is my own and is not to be taken as financial advice
Profile "REPLY WITH QUOTE" Go to top
 
Lef-tee
Default APF Avatar


Thanks for explaining that Peter.

I agree that tourism should see a decent boost in the event of a sharply falling $AUSD - I'm just not sure that would be enough.

I think a sharply lower currency would increase the amount of growth that drains out of the economy through the current account because we would be getting less bang for our consumer buck and we don't have much in the way of local producers ready to step in and fill the gap - we would simply be obliged to send more of our spending overseas while getting less for it.

More expensive consumer goods and services will likely act as a constraint on demand - in the past, the private sector would just keep increasing it's borrowing.....how much further can we take that now? I think there's perhaps one more decent growth spurt in it before ZIRP. For manufacturing employment to increase substantially, firms will need to see a sustained increase in demand for locally-produced goods - they will need to be able to compete with imports while still remaining profitable themselves in the probable absence of solidly rising private sector borrowing. How many of them would be able to do that? Many firms might actually experience a rise in input costs via a falling currency since so many components of so many manufactures are actually imported and local alternatives went the way of the dinosaur long ago.

Add in the current in-vogue status of austerity that our policy makers have and I tend to feel we have a recipe for weak demand - unemployment does not tend to fall when demand is weak, more likely it rises.

Sooner or later our country would find a way to pull through this of course - I'm just concerned at the prospect of a rough transition. If all else fails, perhaps we could do like the UK and export ownership of our homes en masse.

24 years without a recession has made me wary. Hopefully, I will be wrong about all of this.
Quote:
 
If we ever see another incident like this again they will go directly to stimulus, they won't mess around with austerity again.


You would think so but look how willingly they ignored the destruction that they wrought on weaker Euro countries for so long - has anything about their thinking changed? I can't see it. The most powerful EU nation is deeply anti-fiscal stimulus, this is embedded in it's culture and renders the political difficulty in making such a policy move fairly extreme. Borrowing and "printing money" are culturally associated with the humiliation of the Weimar republic which in turn constrains the number of policy choices available.

You would think that they have surely learned their lesson by now but I'll believe it when I see it.
Edited by Lef-tee, 18 Jun 2014, 10:34 PM.
Profile "REPLY WITH QUOTE" Go to top
 
peter fraser
Member Avatar


Lef-tee
18 Jun 2014, 10:26 PM
Thanks for explaining that Peter.

I agree that tourism should see a decent boost in the event of a sharply falling $AUSD - I'm just not sure that would be enough.

I think a sharply lower currency would increase the amount of growth that drains out of the economy through the current account because we would be getting less bang for our consumer buck and we don't have much in the way of local producers ready to step in and fill the gap - we would simply be obliged to send more of our spending overseas while getting less for it.

More expensive consumer goods and services will likely act as a constraint on demand - in the past, the private sector would just keep increasing it's borrowing.....how much further can we take that now? I think there's perhaps one more decent growth spurt in it before ZIRP. For manufacturing employment to increase substantially, firms will need to see a sustained increase in demand for locally-produced goods - they will need to be able to compete with imports while still remaining profitable themselves in the probable absence of solidly rising private sector borrowing. How many of them would be able to do that? Many firms might actually experience a rise in input costs via a falling currency since so many components of so many manufactures are actually imported and local alternatives went the way of the dinosaur long ago.

Add in the current in-vogue status of austerity that our policy makers have and I tend to feel we have a recipe for weak demand - unemployment does not tend to fall when demand is weak, more likely it rises.

Sooner or later our country would find a way to pull through this of course - I'm just concerned at the prospect of a rough transition. If all else fails, perhaps we could do like the UK and export ownership of our homes en masse.

24 years without a recession has made me wary. Hopefully, I will be wrong about all of this.



You would think so but look how willingly they ignored the destruction that they wrought on weaker Euro countries for so long - has anything about their thinking changed? I can't see it. The most powerful EU nation is deeply anti-fiscal stimulus, this is embedded in it's culture and renders the political difficulty in making such a policy move fairly extreme. Borrowing and "printing money" are culturally associated with the humiliation of the Weimar republic which in turn constrains the number of policy choices available.

You would think that they have surely learned their lesson by now but I'll believe it when I see it.
You've been listening to flawse and David far too much.

Our balance of trade was better and less volatile when our dollar was only worth 60 cents USD. Take this chart back to 1971 and see what you find.
http://www.tradingeconomics.com/australia/balance-of-trade

Our big deficits have occurred since the boom.
Edited by peter fraser, 18 Jun 2014, 10:52 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
Profile "REPLY WITH QUOTE" Go to top
 
Lef-tee
Default APF Avatar


There isn't much point trying to make such a point too far back beyond about 1990 Peter - you're not comparing apples with apples for starters because you're drifting back into the era of industrial protection. Government spending which supported the economy rather than austerity was in vogue if you go back as far as you suggest. There are plenty of significant differences between now and then.

All I'm doing is bringing forward the notion of hysteresis - that the path the economy takes is strongly influenced by where it has been before.

I submit that a falling currency may not bring the kind of benefits it may have brought in the past - not sufficiently rapidly at least - because of the changes that have occurred in the interim. That's all.
Profile "REPLY WITH QUOTE" Go to top
 
peter fraser
Member Avatar


Lef-tee
18 Jun 2014, 11:15 PM
There isn't much point trying to make such a point too far back beyond about 1990 Peter - you're not comparing apples with apples for starters because you're drifting back into the era of industrial protection. Government spending which supported the economy rather than austerity was in vogue if you go back as far as you suggest. There are plenty of significant differences between now and then.

All I'm doing is bringing forward the notion of hysteresis - that the path the economy takes is strongly influenced by where it has been before.

I submit that a falling currency may not bring the kind of benefits it may have brought in the past - not sufficiently rapidly at least - because of the changes that have occurred in the interim. That's all.
I guess we will find out.
Any expressed market opinion is my own and is not to be taken as financial advice
Profile "REPLY WITH QUOTE" Go to top
 
newjez
Member Avatar


Lef-tee
18 Jun 2014, 10:26 PM
Thanks for explaining that Peter.

I agree that tourism should see a decent boost in the event of a sharply falling $AUSD - I'm just not sure that would be enough.

I think a sharply lower currency would increase the amount of growth that drains out of the economy through the current account because we would be getting less bang for our consumer buck and we don't have much in the way of local producers ready to step in and fill the gap - we would simply be obliged to send more of our spending overseas while getting less for it.

More expensive consumer goods and services will likely act as a constraint on demand - in the past, the private sector would just keep increasing it's borrowing.....how much further can we take that now? I think there's perhaps one more decent growth spurt in it before ZIRP. For manufacturing employment to increase substantially, firms will need to see a sustained increase in demand for locally-produced goods - they will need to be able to compete with imports while still remaining profitable themselves in the probable absence of solidly rising private sector borrowing. How many of them would be able to do that? Many firms might actually experience a rise in input costs via a falling currency since so many components of so many manufactures are actually imported and local alternatives went the way of the dinosaur long ago.

Add in the current in-vogue status of austerity that our policy makers have and I tend to feel we have a recipe for weak demand - unemployment does not tend to fall when demand is weak, more likely it rises.

Sooner or later our country would find a way to pull through this of course - I'm just concerned at the prospect of a rough transition. If all else fails, perhaps we could do like the UK and export ownership of our homes en masse.

24 years without a recession has made me wary. Hopefully, I will be wrong about all of this.



You would think so but look how willingly they ignored the destruction that they wrought on weaker Euro countries for so long - has anything about their thinking changed? I can't see it. The most powerful EU nation is deeply anti-fiscal stimulus, this is embedded in it's culture and renders the political difficulty in making such a policy move fairly extreme. Borrowing and "printing money" are culturally associated with the humiliation of the Weimar republic which in turn constrains the number of policy choices available.

You would think that they have surely learned their lesson by now but I'll believe it when I see it.
Who said you couldn't export bricks and mortar?

In my house when I turn on the hot and cold taps together, it reduces the pressure a bit on the hot. When I turn the cold off, the hot comes steaming out. Australia's reverse dutch disease will coincide with the US and UK raising rates. Still not sure if this will be a good or bad thing for Australia.

Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
Profile "REPLY WITH QUOTE" Go to top
 
Foxy
Member Avatar
Zero is coming...

Not concerned about bricks and mortar, what about iron ore on the water.

Or perhaps meeting the priests daughter.
:bh:


Peter :bye:

Edited by Foxy, 19 Jun 2014, 02:31 AM.
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
Profile "REPLY WITH QUOTE" Go to top
 
newjez
Member Avatar


Mustapha Mond
19 Jun 2014, 02:25 AM
Not concerned about bricks and mortar, what about iron ore on the water.

Or perhaps meeting the priests daughter.
:bh:


Peter :bye:

I have this weird catweasel mustapha star wars thing going around my head.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
Profile "REPLY WITH QUOTE" Go to top
 
Lef-tee
Default APF Avatar


peter fraser
18 Jun 2014, 11:41 PM
I guess we will find out.
Well do you think that a sharply depreciating currency would not reduce purchasing power for a nation of consumers who import practically everything? The demand might still be there but it would be notional demand rather than effective demand as Marx would have said - people might demand things but if it isn't backed by spending power then they can't buy them.

Have you been watching wage growth decelerate to the slowest pace on the official record? Why do you think it will take off in response to hikes in the cost of living via the tradable sector? This isn't the 1970's where labour union power was at it's zenith as they represented over half the workforce - they are a pale shadow of their former selves representing only about 13% last I looked and just don't have the power to engage in anything resembling a 70'-style wage-price spiral.

My concerns about the CAD are different to those expressed by flawse - I am not concerned about the existence of the CAD per se but rather by the situation it represents in the context of what is beginning to happen now. "Growth is flowing out through the current account" are not originally my words but those of Australia's foremost MMT proponent, Bill Mitchell. The fact that in order to consume most of what we do, the bulk of that spending must flow out the external sector is not a problem as long as the lost spending is replaced. We have long been running on one of two sources - net government spending or increasing private sector borrowing. Net government spending is out of vogue and austerity is in - and how much scope does the private sector have to increase it's borrowing? It's been going sideways since the GFC and interest rates are at half-century lows with not a great amount of ammo left.

Have you been wondering why the situation that has caused the Kouk's backflip even exists? We have the biggest resource investment boom in history and interest rates at half-century lows - the economy should be absolutely red-hot. Yet domestic demand remains too sluggish for employment to grow - did you see this situation emerge once the stimulus was withdrawn? Net government spending is not going to be a source of growth unless they change their stance.

Government won't supply growth and the central bank can't supply much more in the form of lower interest rates - what are the possible scenarios once the tidal wave of investment spending being injected into the economy goes dry?

Surely we will adapt to whatever comes but I'm not yet convinced of a smooth, quick baton change given the facts above. Is that not a reasonable position?
Profile "REPLY WITH QUOTE" Go to top
 
Foxy
Member Avatar
Zero is coming...

http://www.macrobusiness.com.au/2014/06/daily-iron-ore-price-update-no-bottom/


The surplus cash from the iron ore stash
Appears to be declining.

Where would that surplus cash be stashed??

A pile of bricks and sticks??

Little better than a beaver, poor thing with a fever.

Just imagine beaver fever.

Or worse still home owner pneumonia,

Peter


http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
ZetaBoards - Free Forum Hosting
Fully Featured & Customizable Free Forums
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy