The banks inflated house prices (by direction of politburo) to get municipal government to construct ghost cities to: - to keep construction jobs going - to meet GDP targets set by politburo
They deflated because they saw the devastating effects of 2008 crisis.
But there's no rhyme or reason to inflating the Shanghai SE. Why? Is it for wealth effect because Western consumption ergo Chinese manufacturing is slowing? Are they inflating it so that the common Chinese man can go out and spend money in their transitional service economy?
What does inflating the SSE hope to achieve? At least the China construction bubble had reasons to them.
Nobody has given an Occam's razor explanation to the politburo wanting to inflate their stock market.
The banks inflated house prices (by direction of politburo) to get municipal government to construct ghost cities to: - to keep construction jobs going - to meet GDP targets set by politburo
They deflated because they saw the devastating effects of 2008 crisis.
But there's no rhyme or reason to inflating the Shanghai SE. Why? Is it for wealth effect because Western consumption ergo Chinese manufacturing is slowing? Are they inflating it so that the common Chinese man can go out and spend money in their transitional service economy?
What does inflating the SSE hope to achieve? At least the China construction bubble had reasons to them.
Nobody has given an Occam's razor explanation to the politburo wanting to inflate their stock market.
The main reason why the CCP has made it easier over recent years for the average person to invest in shares is due to one main reason - Debt. (Local Government Debt, State Enterprise Debt and CCP Debt (Chinese Communist Party).
The goal was to inflate stock prices and as you say create a wealth effect which would drive the values of companies listed higher, creating a higher valuation and the ability to borrow at lower rates, restructure debt, make quick profits and sell to recapitalise state assets. The list goes on but you get the point. The reason for allowing margin loans for small investors was to transfer risk from the State system to the small investor. Get the small investor to use there savings (Chinese are great savers) invest in shares and then borrow on those savings and invest in shares. This further propels the share market higher.
It is my opinion many wealthy and connected people (officials) offloaded shares while the market increased due to millions of small time investors to deleverage themselves. Is it a co-incidence that so many Chinese have been buying property overseas.....why. Perhaps those who have the inside knowledge of what is unfolding knew this was a likely outcome. Hedge your bets against a complete economic collapse in China by buying land over seas. Australia is only one of many destinations where Chinese money has flooded in over the past few years.
The problem the Chinese have now is much of the stellar rise of the stock market was on the back of debt, margin loans. As each day more losses trigger new margin calls, which results in more loses and then more margin calls. Panic sets in (already happened) and the masses start selling, more margin calls. We could easily be looking at the Chinese stock market falling 50-75% over the next few weeks or months, it is already down 30% from its peak in early June. 30% lost in just 3 weeks.
So the question that will be asked is what happens to the broader economy. 90 million Chinese have invested in the stock market, many millions with margin loans perhaps many tens of millions. The savings the used to buy the shares is wiped out, if they use property as collateral they will need to sell the property to pay the debt in an already falling property market. The share market collapse could spark huge falls in Chinese property prices across the nation. These twin effects will shatter consumer confidence, many millions of unemployed and perhaps Chinese first modern Recession if not far worse a depression. To me this as an a remarkable similarity to 1929.
Massive over capacity in infrastructure and production which in turn leads people to invest the new wealth into the share market for ever greater returns. In the roaring 20's in the US it was massive over investment in production which lead to the market collapse, the consumers did not exist for the products produced was the basic cause which lead to every thing else. Similar in China, massive debt fuelled over investment in infrastructure by all levels of Government forced it to the only lever it had left, inflate the share market as a last gasp measure to keep the economy going. Next comes quick cuts to interest rates as the Chinese head to ZIRP. They do have over 4% of rate cuts they can use but making debt cheaper is not the problem. Confidence is already shattered, panic has set in, people are not going to borrow more money right now to invest. The CCP will need to step in with massive amounts of money, many hundreds of billions in new spending (super stimulus) much like Obama did when he won the White House to restore confidence or at least some faith the Government will not allow a collapse to happen.
If the market continues to fall and I am expecting a huge sell off on Monday (a bloodbath) where it ends is anyone's guess. We are headed into unknown territory. We know how a stable Democratic nation deals with severe economic events and they test our stability at times, but we have elections to vent our frustration to force change, we can protest without being jailed or shot. How does an autocratic communist party deal with an economic collapse and make no mistake that is what is now unfolding in China. It will either rise to the occasions or be unable to cope with events. With nearly $3 trillion wiped of the value of shares and more to come even the Chinese resources will not be enough to correct this situation.
The X factor is Greece. If we get a no vote then European markets will be rattled with perhaps $280 billion in loans at risk of default and potential losses as Greece refuses to pay or do the reforms needed so it can pay. What effect will a Greece economic collapse have on Europe which just happens to be Chinese largest export market. Greece is a far smaller problem then China, but the double affect on markets could lead to savage losses globally on share market.
Of course China could rebound, new policies and spending might restore confidence, bargain hunters may move into the market but I think that is unlikely at this point. The market has more to fall first. However this is the one event which will send a huge economic shock Australia's way and also through most of our Asian trading partners who heavily reliant on China for there own economies. How will this impact Australia. Worst case bears will get there property market crash of 20-40% perhaps worse in some locations. Sydney will be hit hardest as it is the financial capital of Australia most vulnerable to share market crashes and reliant on overseas buyers, plus it has inflated the most with experts calling it bubble. Next would be Melbourne then Perth.
I moved all of my shares, superannuation into a defensive position last week as I expect Australian shares to be savaged over the coming months. We could see similar losses on share markets as what happened during the GFC, maybe not as bad or could be worse. The direct impact on Australia with economic collapse in China could be a much harder impact then a Wall Street crash in the US. It is really unknown. We have been through many Wall Street crashes, we know what is likely to follow. This is the first Chinese stock market crash.
Can anyone point me to a stock market crash, where 30% or more is wiped out and it does not lead to a recession, financial crisis of some sorts or at least stagnation. All of which would be a disaster for China. I cannot think of any but I am no expert on share market history, so why would China be any different.
How has this impacted me personally, well I was looking to buy land for a new development but seeing events of the last 3 weeks makes me think I may be able to buy land in the near future for much cheaper if things continue to worse.
This next week is the most critical week since the collapse of Lehman Brothers and the US response to that crisis. The twin crisis of the Chinese stock market crash and Greek debt if they continue to worsen will be catastrophic. If Chinese shares resume there large falls, well I have no doubt the Chinese economy will soon follow in the coming months. How that impacts Chinese society under communist rule is a Pandora's box I do not want to see opened. If the Greek banking sector collapses and a no vote on the package offered by the creditors wins, then Europe will also be in turmoil.
Just for kicks, throw in a few hand grenades like the Ukraine, Syria/Iraq (ISIS), South China Sea, North Korea, Iran anyone of these events or all of them could flare up into full blown war during times of economic collapse. Distract the population with war is always a good survival option for a Government at least for awhile.
Already the Chinese authorities are investigation foreign manipulation of the share market, trying to paint it as some sort of US plot to the destroy the Chinese economy. Luckily for the US all they had to do was watch from a distance as China repeated the mistakes the US has made in the past. We know the US can survive massive and prolonged economic shocks. Now it seems we will get to see if China can do the same. Lets hope China can weather the storm or where we end up in a few years from now is anyone's guess.
I don't want to scare people but just contemplate this in the back of your mind as a worst case outcome. The worlds 2nd largest economy, most populous nation that produces most of what we buy, 2nd most capable military on the planet in terms of size with nuclear weapons collapses or splinters due to the economic collapse and resulting political collapse. Perhaps a coup will take place, open rebellion by the population. Does China have the stability to be able to absorb an economic collapse, maybe I hope so for all our sakes. Autocratic government normally lash out into war when faced with an existential crisis. Would China provoke war in any one of its many territory disputes.
One thing is for sure, hold onto your hats, rough seas ahead. Hopefully we can sail through the storm without to many going overboard.
I don't want to scare people but just contemplate this in the back of your mind as a worst case outcome. The worlds 2nd largest economy, most populous nation that produces most of what we buy, 2nd most capable military on the planet in terms of size with nuclear weapons collapses or splinters due to the economic collapse and resulting political collapse. Perhaps a coup will take place, open rebellion by the population. Does China have the stability to be able to absorb an economic collapse, maybe I hope so for all our sakes. Autocratic government normally lash out into war when faced with an existential crisis. Would China provoke war in any one of its many territory disputes.
One thing is for sure, hold onto your hats, rough seas ahead. Hopefully we can sail through the storm without to many going overboard.
Japan crashed in the 80's and 90's while the rest of the world boomed from 90's to 2008. Same thing will happen with China. The world will go on its relatively merry ways.
I think there will be no contagion as the Shanghai Exchange is limitied to locals. The Yuan is decoupled from other currencies apart from US. There are no derivative plays on the Chinese market.
Greece has the potential. But I don't know if China has. If anything, it will only cause a recession in Australia (already started). That's it.
Politically, they will get smashed if they try to drum up nationalism in South China Sea. They are contained by US allies. They're still weaker than US military.
I think the politburo can hold China together as they can always direct their 1 million strong army on dissenters. There will be internal purges, but I don't see a civil war scenario.
So you finally understand Mike, but somehow think Perth prices and rents wont collapse after being propped by this joke all these years.
Australia was propped by this joke all these years.
The bulls told me that China would grow and support us for the next thirty years and that the gfc was over. Unable to see the obvious outcome, basic 101 economic scenario and the only way it can end.
Like ghost cities, the chinese have produced more dirt cheap products than the world actually needs, thanks to the levels of debt expansion madness going on over the last decade or so.
They have destroyed their own jobs and wages as a result. Their wages will fall if anything from here placing more western jobs and wages at risk of decline.
Just the massive world windown after 70 years of debt ponzi madness. Where we have finally hit 100% lvrs, 0% interest rates and forty year mortgages. The system has been milked to death decade after decade by all the previous world leaders, and this lot of world leaders have been left with the crumbs, and to deal with the mess created by those who came before them.
All rocket science is it boys and girls ?
Basically we are headed into the biggest depression the world has ever seen. A depression that will make the great deepression look like a stroll through the park.
The gfc you saw in 2008 was nothing but a warm up to the real thing.
As for war Mike, and I have touched on this only a couple of times over the years and do not wish to scare the herd either. But history shows us, that long term world economic decline has always led to world war.
Like the depression compared to the last, the next world war will make the last one look like a walk in the park too.
I would say the chances of ww3 by 2025 are 90%. Could be much sooner. Who knows ? The chinese and russians are stocked to the eyeballs with nuclear weapons , china is postioning wepons like no tommorow, and directed toward the US. China were testing missiles only a week or two back, cant remember exactly ,but thought I read they travelled at ten times the speed of sound. Unbelievable.....
America was once the high and mighty domaination of the world. The economic powerhouse, the miltary equivalent of superman . Truly untouchable in the truest sense was what they WERE. Not anymore.
They are now a bit more like that hotshot in primary school, who has arrived at high school, only to realize they aint so hot anymore.
Where once nobody could threaten them, the threats are now all around, and stronger than ever. I think history is the only thing giving them strength now. Bit like a champion boxer who could never be beat, or so it seemed. Until finally someone steps up to challenge this ageing hasbeen.
When you go bear mike, you go grizzly don't you. You're certainly no Paddington. I think you may over exaggerate, but I'm cashed up so I hope you are right. Nice post too, worth repeating.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
When you go bear mike, you go grizzly don't you. You're certainly no Paddington. I think you may over exaggerate, but I'm cashed up so I hope you are right. Nice post too, worth repeating.
Well I certainly got that call right.
Quote:
Mike29 Apr 2015, 07:51 AM What are opinions on Chinas stock market. It has increased 123% over the past year and up 36% in 2015. This at a time of slowing growth and property market in decline. It seems the only thing feeding this is easy credit and loser laws designed to make it easier for the average person to buy stock.
While we focus on Chinese property and slowing GDP growth is this the bubble that is set to burst and bring down much of China with it. It was the Japanese stock market crashing which lead to Japans fall from predictions of over taking the USA. Is the same about to happen in China?
The real question is can anyone recall a share market collapse of 30% of greater over a short period of time not leading to a recession or financial crisis. I cannot think of one, but maybe some one else can. Restrict it to Major economies examples.
I have been bearish on China for some time, I certainly think long term China will be a great economic boost for Australia but this will play out over the next 30-40 years along with the rest of Asia. Right now though and over the next few years it could get rough. A lot rides on how the authorities respond.
Like the days after Wall Street went belly up, if it was not for the swift and dramatic action of the Federal Reserve and NY Fed with some extremely smart people the US could indeed have entered a depression. At least one lesson was learnt from the last depression, what needs to be done to avoid it after the horse has bolted. To bad they did not act as the horse was getting restless.
If the Chinese leadership makes mistakes it could derail a lot of Chinas progress for the next 5-10 years. The political, social and economic implications for the region are immense.
createdby
4 Jul 2015, 01:00 PM
Quote:
Japan crashed in the 80's and 90's while the rest of the world boomed from 90's to 2008. Same thing will happen with China. The world will go on its relatively merry ways.
Perhaps. Japan does not have Chinas strategic importance. Japan can never be a world super power, China can. Japan was not a communist government and the Chinese as a society are far more likely to protest and revolt. Japanese citizens are far more obedient, loyal plus a democracy which offers its own resilience when faced with crisis.
Quote:
I think there will be no contagion as the Shanghai Exchange is limited to locals. The Yuan is decoupled from other currencies apart from US. There are no derivative plays on the Chinese market.
True but it is the effect that stock market crash has on the rest of the Chinese economy that is the real story. That certainly has global implications.
Quote:
Greece has the potential. But I don't know if China has. If anything, it will only cause a recession in Australia (already started). That's it.
Disagree. Greece can fixed with a few hundred billion Euro, chicken feed in comparison to the losses already felt on the stock exchange in China, let alone the broader effect on the Chinese economy which will play out over the next 6 months. Greece will rattle markets, but it is more the issue of how secure the EU is if one nation leaves in such a fashion as Greece will. The Germans could solve the Greek problem tomorrow by taking a hair cut on the debt and forcing everyone else too. I think it was in 1952 that West Germany had 50% of all its debt wiped clean, low interest rates and repayment terms extended. This lead to the German economic miracle over the following decades. Greece is no export powerhouse, but free from crippling debt it could certainly become a prosperous nation with some reforms. I think this is the likely outcome, creditors will take a hair cut for some more reforms to put Greece on a stable path. It is like a bank lending to some one they know cannot afford the loan, some blame rests with the creditor for lending more then they should have.
Quote:
Politically, they will get smashed if they try to drum up nationalism in South China Sea. They are contained by US allies. They're still weaker than US military.
I agree. But in the short term China has far greater number of Ships, Planes, Missiles much closer to the South China Sea then the US or its Allies. The US is far more powerful then China military, it is no contest really. A lot gets made of Chinese growth in its military which is certainly making large strides. All China is really trying to do is impose a cost on the US to operate and fight close to Chinese shores. China under stands it cannot possibly hope to win in a war against the US and its Allies, it would struggle to over come Japan with out massive losses let alone the combination of the US and Japan. The build-up of Chinese forces though will give the US pause in its actions due to a potential massive cost China could impose on US forces in losses of men and material in any conflict. China could at some point invade Taiwan and due to local superiority in numbers the US may decide the cost to eject Chinese forces from Taiwan is not worth fighting WWWIII. The same for the South China Sea and other areas, it now has the potential to be a global war. It gives both sides pause, is it really worth the effort. Im sure if the US got bogged down in a war with China Putin would be rubbing his hands together asking himself just how much of Eastern Europe could he take before the US and its Allies could muster the strength to stop him, if it all. What happens to the middle east, would ISIS or Iran dominate the region.
Quote:
I think the politburo can hold China together as they can always direct their 1 million strong army on dissenters. There will be internal purges, but I don't see a civil war scenario.
Just like the Soviet Red Army held together the Warsaw Pact and the USSR even though its had a far stronger Military in comparison to China today. 1 million soldiers would be the tip of the ice berg needed to hold together 1300 million angry china men looking for some one to blame. A lot of those soldiers or generals may be have there own goals in mind and decide the CCP has had its day and lead China down the wrong path. I do not see civil war but I can see a scenario where the military decides to take over from the corrupt CCP leaders. The Red Army is loyal to the party no the nation and to save the party the Army may decide to purge the leadership. Where things go from that point is anyone's guess
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.
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