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The credit bubble in Australia has never really popped; The obvious catalyst for the popping of the great Aussie bubble is China
Topic Started: 16 Apr 2012, 05:23 PM (4,449 Views)
b_b
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Elastic
19 Apr 2012, 10:35 AM
b_b
18 Apr 2012, 09:01 PM
That is not how the monetary system operates.

When we run a current account deficit it means locals are giving up existing deposits for something in exchange.

I will use a trade deficit as an example.

Assume an Australia citizen wishes to acquire a Japanese made Honda. Since the Honda is made by Japanese workers, the workers require yen for wages. So the Australian has to acquire yen so as to buy the bike. They do this in the FX market. If Australia does not conduct any other trade for the period we will record a trade deficit / current account deficit = to one Honda.

But when the Australian citizen acquired the Yen in the FX market, who sold it to him, and what did they get in return?

The person who sold them the yen acquired AUD. The AUD ends up in the Australian banking system. In fact it has never left the Banking system.

Now the national accounts will record this as a current account deficit, and Banks will characterise this "re-classified" deposit as foreign owned. But the fact is, the Bank never "funded" the transaction, nor did they fund the current account deficit. It was simply a swap of a local deposit for a foreign good.

Banks are simply innocent bystanders to foreign transactions their customers initiate.
Sorry b_b that doesn't make sense.

So what happens to the yen in this example. Does the the yen just end up back in the Japanese banking system as well so that we get a net doubling of the total money?

Surely, the money disappears from the Australian account gets transferred into the Japanese account at the relevant exchange rate resulting in no net loss/gain of money.

The Yen never leaves Japan.

The AUD never leaves Australia.

The ownership of the existing AUD has changed from an Australian Citizen to a Japanese Citizen (who is now taking AUD FX Risk). The money never "left Australia". The money was not "funded by a bank".

The ownership of the Yen has changed from one Japanese person (who now owns AUD) to the worker who built the Honda. The Yen never left Japan.

So no - there is no double counting.

To summarise....

In Australia
The Australian received a Honda & loses his AUD Deposit
One Japanese person received AUD

In Japan
One Japanese person lost his Yen Deposit but received AUD deposit (see above)
One Japanese person recived Yen for building a Honda.

NO BANK FUNDING OF CURRENT ACCOUNT REQUIRED.

I hope this makes sense.
(S – I) + (T - G) + (M - X) = 0
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Catweasel
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b_b
19 Apr 2012, 12:05 PM

The ownership of the existing AUD has changed from an Australian Citizen to a Japanese Citizen (who is now taking AUD FX Risk). The money never "left Australia". The money was not "funded by a bank".

Catweasel say actually, during a chin stroke, it say that the "Japanese the citizen" take the ownership. In a reality, it the Japanese bank that a take a the ownership. Then pawn off to Japanese retail customer who ultimately accept a all a exchange rate risk.
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b_b
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Catweasel
19 Apr 2012, 01:08 PM
b_b
19 Apr 2012, 12:05 PM

The ownership of the existing AUD has changed from an Australian Citizen to a Japanese Citizen (who is now taking AUD FX Risk). The money never "left Australia". The money was not "funded by a bank".

Catweasel say actually, during a chin stroke, it say that the "Japanese the citizen" take the ownership. In a reality, it the Japanese bank that a take a the ownership. Then pawn off to Japanese retail customer who ultimately accept a all a exchange rate risk.
A Japanese Bank is a corporate citizen of Japan.

My point remains. Austraian Banks do not fund the current account deficit.
(S – I) + (T - G) + (M - X) = 0
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Catweasel
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b_b
19 Apr 2012, 01:11 PM
A Japanese Bank is a corporate citizen of Japan.

My point remains. Austraian Banks do not fund the current account deficit.
Catweasel laugh. A corporate citizen of a Japan operate under entirely different the risk as Japanese mouse.

Also, among a Australia the bank, it much the more capable legally to source funding from offshore compare to a Aussie mouse. It also benefit from system to work it its advantage.
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raveswei
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b_b
18 Apr 2012, 09:23 PM
Conversely, the rising AUD has corresponded with falling house prices in recent times.

Housing Bears who are willing a lower AUD are going to get the shock of their lives.
are you sure?

AUD rally that started in March 2009 and ended in late 2010 clearly corresponds with house price rally that started in mid 2009 and ended in early 2011. House prices are falling since AUD started moving sideways and down, in 2011.

Actually there is very strong correlation between house prices and AUD/USD over the last decade.

Posted Image

In future, please spare us such obvious lies.
http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

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raveswei
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b_b
19 Apr 2012, 12:05 PM
The Yen never leaves Japan.

The AUD never leaves Australia.

The ownership of the existing AUD has changed from an Australian Citizen to a Japanese Citizen (who is now taking AUD FX Risk). The money never "left Australia". The money was not "funded by a bank".

The ownership of the Yen has changed from one Japanese person (who now owns AUD) to the worker who built the Honda. The Yen never left Japan.

So no - there is no double counting.

To summarise....

In Australia
The Australian received a Honda & loses his AUD Deposit
One Japanese person received AUD

In Japan
One Japanese person lost his Yen Deposit but received AUD deposit (see above)
One Japanese person recived Yen for building a Honda.

NO BANK FUNDING OF CURRENT ACCOUNT REQUIRED.

I hope this makes sense.
you clearly do not have an idea how system works.

What you are missing is debt - creation and destruction of the money.

http://popping-bubble.blogspot.com/

Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.

disgraceful little man Frank Castle owes a house to Salvation Army

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newjez
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b_b
18 Apr 2012, 09:23 PM
Happened in 2001 too.

Conversely, the rising AUD has corresponded with falling house prices in recent times.

Housing Bears who are willing a lower AUD are going to get the shock of their lives.
It won't be much of a shock. It is exactly what I am predicting. When the Aud falls, I intend to bring over a large wad of cash and buy several houses, as will every other UK migrant that has made the trip in the last five years. The only thing that will screw me is the timing. I'm stuck in the UK for a year at least, so don't lower those interest rates too fast.
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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Strindberg
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newjez
19 Apr 2012, 04:33 PM
It won't be much of a shock. It is exactly what I am predicting. When the Aud falls, I intend to bring over a large wad of cash and buy several houses, as will every other UK migrant that has made the trip in the last five years. The only thing that will screw me is the timing. I'm stuck in the UK for a year at least, so don't lower those interest rates too fast.
If you read b_b you'll see that it doesn't work like that.

I thought I was bringing my money/cash here when I moved here from the UK in 1999. But I didn't bring anything. What happened was that although I asked my bank in the UK to transfer my money to my bank in Australia, they are not able to do that.
The banks use foreign exchange services rather than transfer money across borders. The foreign exchange service found traders holding AUD (already within the AU banking system) who wished to do a swap for UK pounds in the UK banking system.
The result was that someone else became the new owner of my pounds in the UK and I became the new owner of some already existing AUD in Australia. No funds left the UK and no new funds appeared in Australia. The AUD I acquired already existed in Australia.
It may be that the new owner of AUD, like yourself, has a greater inclination to use those funds for house purchase. But it may be otherwise. Neither trade nor immigrants increase funding.

Immigrants with money tend to have the effect of raising the exchange rate of the currency of their target location.
Edited by Strindberg, 19 Apr 2012, 04:57 PM.
Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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stinkbug
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raveswei
19 Apr 2012, 04:13 PM
are you sure?

AUD rally that started in March 2009 and ended in late 2010 clearly corresponds with house price rally that started in mid 2009 and ended in early 2011. House prices are falling since AUD started moving sideways and down, in 2011.

Actually there is very strong correlation between house prices and AUD/USD over the last decade.

Posted Image

In future, please spare us such obvious lies.
This is really interesting point, Rave.

You mention that there's a correlation, but I'm curious as to the causation. Do you think there's a causal relationship here? Which way?

Cheers.
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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b_b
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raveswei
19 Apr 2012, 04:19 PM
b_b
19 Apr 2012, 12:05 PM
The Yen never leaves Japan.

The AUD never leaves Australia.

The ownership of the existing AUD has changed from an Australian Citizen to a Japanese Citizen (who is now taking AUD FX Risk). The money never "left Australia". The money was not "funded by a bank".

The ownership of the Yen has changed from one Japanese person (who now owns AUD) to the worker who built the Honda. The Yen never left Japan.

So no - there is no double counting.

To summarise....

In Australia
The Australian received a Honda & loses his AUD Deposit
One Japanese person received AUD

In Japan
One Japanese person lost his Yen Deposit but received AUD deposit (see above)
One Japanese person recived Yen for building a Honda.

NO BANK FUNDING OF CURRENT ACCOUNT REQUIRED.

I hope this makes sense.
you clearly do not have an idea how system works.

What you are missing is debt - creation and destruction of the money.


the creation of money comes from the initiation of the loan, or via government spending.

The destruction of money comes from a transaction between debtors and creditor.

This is off topic, and proves you are beyond clueless.
Edited by b_b, 19 Apr 2012, 05:24 PM.
(S – I) + (T - G) + (M - X) = 0
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