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On China And The End Of The Commodity Super-Cycle; From ZeroHedge
Topic Started: 7 Mar 2012, 11:46 AM (5,089 Views)
zaph
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dave289
14 Mar 2012, 02:21 PM



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This is why frank should be barred from the forum . he has stated something I said, and then deleted evrything else else around it, which clearly states that it would only go up if commodity prices did not collapse as well as the dollar going to high for which I said was a big possibilty . so I have been clearly taken out of context here by frank because this is his only way to get back at me for shitting on him once again yesterday.


do you control the cat weasel account? The cat is slightly ahead on the readability stakes.

If you don't like to read Frank's posts, why don't you put him on ignore?

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If I was ,you I was piss him off for doing so not only becuase he is ruining the forum but also just trying to cause trouble . I have now had to waste time with this moron once again for the sake of everybody else ,so he does not confuse them with his bullshit . instead of respond to the GLD who has spent some time to have a think about things unlike most and has given us his take on things . I will have to respond to this later as I have to go out for a while , but well done Gld and thankyou for your thoughts and input , wish there was more of this without all the other bullshit.


If you can't afford another computer and a wireless router, maybe we can all chip in. They're very cheap these days.

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Just curiuos , I am the only one who thinks frank castle removal would make the forum a better place .


maybe we should get rid of the Jews, homosexuals and gypsies at the same time? there is an ignore button, use it.

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I will show you all the extent of which zaph has gone to just to cause trouble cause his life his so dismal , but I dont have time now.


see above. we may even be able to get a free lap top under the education system.

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You WILL be shown to be the lying born loser that you are later or tommorow zaph , just so you know what you have to look forward to .


i can't wait.

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Zaph you know I answered the question in great detail , as usual .


maybe i had to pop down the shop for milk and missed it?

how's the divorce going?

We're still waiting for the mystical thread where you got everything right?

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NotFooled
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The Bear Whisperer

Frank Castle
14 Mar 2012, 03:57 PM
Nice rant crazy dave
On the plus side, you have gained a stalker. :excited:
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audas
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GLD
14 Mar 2012, 12:35 PM
Dave, there's another dynamic going on behind the scenes.

Take a look at the USD index, there's a link between terms of weakness and strength and the Dow.
Jibberish.
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Admin
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Administrator

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Chinese banquet is nearing the end

Commentary: ‘Botox economics’ threatens China with toxic shock

By Satyajit Das

SYDNEY (MarketWatch) — Like the rest of the world, China’s recovery from the global financial crisis was the result of “Botox economics.” Taking advantage of a centrally controlled, command economy, Beijing boosted output through government spending and directed bank lending to maintain growth.

Unfortunately, China now faces significant problems.

The weakness of its two major trading partners (the U.S. and Europe) means export demand is likely to remain subdued. Domestically, the side-effects of debt-driven investment are now emerging.

China’s ability to sustain high growth levels is questionable. Specifically, its capacity for further stimulus is uncertain. The ability to adjust the economy to the new economic environment poses unprecedented challenges in rebalancing consumption and investment within China. Slowing growth also poses social and political challenges. Chinese Premier Wen Jiabao has repeatedly admitted that the “stabilization and recovery of the Chinese economy are not yet steady, solid and balanced”. Read more: China's not so miraculous recovery.

The conventional view is that China will be able to continue to stimulate demand using its large foreign exchange reserves, large domestic savings and low levels of debt.

China’s $3.2 trillion in foreign exchange reserves are invested in predominately in U.S. dollars, euro and yen, primarily in the form of government bonds and other high-quality securities. These assets have lost value, through increasing default risk (as the issuer’s ratings are downgraded) and falls in the value of the foreign currency against the renminbi.
Risks and realities

Attempts by the Chinese to liquidate reserve assets would result in sharp falls in the value of the securities and a rise in the renminbi against the relevant currencies with large losses. The reserves also force China to buy more dollars, euro and yen securities to defend the value of the existing portfolio, increasing both the size of the problem and risks.

In reality, China ultimately will have to write-off these reserves, recognizing its losses. It can do so of its own volition or have the value of its investment reduced over time through falls in the value of the currency in which the security is denominated.

This equates to a real loss of wealth as China has issued renminbi or government bonds against the value of these investments.

China also has far greater levels of debt than commonly acknowledged, although the bulk is held domestically. The Central government has a low level of debt — around $1 trillion (17% of GDP). In addition, state-owned and state-supported entities have debt totalling $2.6 trillion (42%); local governments about $1.2 trillion (19%); policy banks $800 billion (13%); Ministry of Railways $280 billion (5%), and government-backed asset-management companies set up to hold non-performing bank loans $300 billion (5%). The total debt, around $3.6 trillion, is 59% of GDP.

The debt levels are exacerbated by what Michael Pettis in his book “The Volatility Machine” describes as an inverted debt structure — where borrowing levels increase when the economy has problems. When the economy slows, China’s debt levels, both direct and contingent, will increase rapidly.

China also has limited flexibility in managing its currency. The renminbi has risen 30% since Beijing adopted a policy of managed appreciation and revalued its dollar peg in July 2005.

As growth and exports slow (the trade surplus and foreign exchange reserves are falling), China needs to let the renminbi fall to cushion the adjustment. But developed countries are all seeking to increase their share of limited global growth by lowering the value of the currency. In a U.S. election year, the risk of trade protectionism and the prospect of being referred to the World Trade Organization for currency manipulation limit China’s policy flexibility.
Unhappy landings

The reality is that since 2007/ 2008, a part of China’s growth has been an illusion. Since 2008, China’s headline growth of 8%-10% has been driven by new lending averaging around 30%-40% of GDP. Up to 20%-25% of these loans may prove to be non-performing, amounting to losses of 6%-10% of GDP. If these losses are deducted, Chinese growth is much lower.

The China economic debate is focused on the alternatives of a soft or hard landing. Even China has stated that growth will slow.

The case for a soft landing assumes that the investment and property bubbles are less serious than thought. Beijing has sufficient financial capacity to boost growth by loosening monetary policy and bank lending, while adjusting specific policies, such as lifting restrictions on housing sales to prop up prices.

In that case, China is able to boost domestic consumption, replacing investment as the key driver of its economy. Excess capacity is gradually absorbed as the world economy recovers. Growth comes down gradually, without causing social and political disruptions.

In contrast, the case for a hard landing assumes the rapid and destructive unwinding of asset-price bubbles and problems within the Chinese banking system. A poor external environment and losses on foreign investment exacerbates the problem. Growth collapses, triggering massive social unrest and political tensions.

The end of a cycle of debt- and investment-driven growth is typically disruptive. Japan’s experience, which China has drawn on in shaping its economic model, is salutary. Japan grew on average by 10% in the 1960s, 5% in the 1970s, 4% in the 1980s, and has remained stagnant since, as it adjusts to the deflation of its debt-fueled bubble.

As an old Chinese proverb, probably apocryphal, holds: “There is no feast that does not come to an end.”

Read more: http://www.marketwatch.com/story/chinese-banquet-is-nearing-the-end-2012-03-14
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dave289
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Manufacturing GONE, retail GONE , all other jobs GONE -all gone over seas , phone jobs , banks jobs, IT jobs ,etc ,etc,etc .its game over franky I will be back in september to see just your falling ,enjoy that :bye: . Its all over for zaph to, think he's a bull in a bear outfit ,but jibbers shit all day long on here , while his overlevereged property is being smashed . Have fun learning when it is all too late. :bye:
Edited by dave289, 16 Mar 2012, 10:31 AM.
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hoofarted
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"The end of a cycle of debt- and investment-driven growth is typically disruptive. Japan’s experience, which China has drawn on in shaping its economic model, is salutary. Japan grew on average by 10% in the 1960s, 5% in the 1970s, 4% in the 1980s, and has remained stagnant since, as it adjusts to the deflation of its debt-fueled bubble."

And 20 YEARS has not fixed that problem. If you are over leveraged and debt ridden, prepare to take one for the team... long, slow and deep. Rather you than me.
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davel
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HF nailed the key quote.

Note that Japan was starting in a much better position than China, its therefore reasonable to expect China's path to be more difficult than Japan's was.

Has anyone else noticed or is almost ALL of the data and news coming out of China now tending towards the negative? This is one heck of a change from even a year ago.
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newjez
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I fear that when we have the change in power - certain 'truths' will be made public. They will blame the previous administration and start with a clean slate.

The big worry is that they may take a different political stance. The economic one when it comes down to it is just fluff.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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GLD
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audas
15 Mar 2012, 01:58 PM
Jibberish.
Audas, please let me explain.

Take a look at the Dollar index from 2005 to 2007, then compare it to the Dow. A lot of dollar weakness before the crisis.

In 08 to 09 the USD exploded from 70 points to nearly 90 in the space of 1 year. Central banks sold their currencies and bought treasuries as a 'flight to safety'.

I googled dow vs USD index and found this.

Posted Image

After the crisis is 'over' temporarily we get dollar weakness again with the Dow recovery, then we get a few jitters and another big dollar rally which doesn't quite make the previous high of 89 points.

Over that time we have QE1, QE2, and now the Fed is basically buying a majority of US government bonds (QE3).

The Dow continues to rise, Dollar continues to fall. We didn't see a huge push in to the dollar during the Greek crisis.

The index doesn't look as strong on the weekly, there's a lot of pressure around 80-82 points.

Whether it tips back in to long term down trend from here or keeps rising from here we'll have to wait and see.

If the dollar resumes is decline (ala 05-07) it will be doing so from a higher Dow. The higher Dow, on weaker economic fundamentals is just all of those extra dollars making their way to Wall Street at the expense of the currency.

Also, look at the correlation between the DOW and the AUD.

Posted Image

Pics pulled from:
http://www.dailyfx.com/forex/technical/article/forex_correlations/2011/08/16/dow_jones_us_dollar_index_correlation.html

In the first quarter of 2012, we can see investment in to US equities was actually more attractive, the Dow has moved higher than the AUD, the correlation weakened.

We just have to wait and see whether the correlation sticks going forward. My bet is that it weakens with the move into US equities chasing short term gains, but longer term it remains somewhat supported.
Edited by GLD, 17 Mar 2012, 09:12 AM.
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GLD
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FXstreet.com US Dollar Index, is what i'm looking at the moment.

http://www.fxstreet.com/rates-charts/usdollar-index/?version=1
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