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The Australian economy according to David Llewellyn-Smith; Rallying call to his perma-bear audience to get the hit count up?
Topic Started: 30 Sep 2013, 11:10 AM (7,299 Views)
Veritas
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b_b
1 Oct 2013, 12:27 AM
Nope. The number 1 reason they do not want to break up the euro is to protect German savings (and German banks). The fact Germany is a net exporter to the PIGS means the German banking system accumulates deposits and bonds in those same countries. Break up an devaluation would wipe out DEUTSCHE bank and customers.

So the hard working German has supplied cars etc to Italy, Spain etc, and in return he got an Italian and Spanish bonds (via the German banks).

What was it I was saying? Exports are the cost, imports are the benefit.
Huh? German deposits would just be converted into the new DM. Not a bad result I expect for deposit holders.

But I'm still right. Germans would be fucked with a new DM, for a while at least.

Why you think having one of the most successful export led manufacturing industry in developed world is a cost to Germany well, that just makes no sense whatsoever.

Would you prefer if they just sold everything to fellow Germans?

Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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miw
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b_b
1 Oct 2013, 12:27 AM
Nope. The number 1 reason they do not want to break up the euro is to protect German savings (and German banks). The fact Germany is a net exporter to the PIGS means the German banking system accumulates deposits and bonds in those same countries. Break up an devaluation would wipe out DEUTSCHE bank and customers.

So the hard working German has supplied cars etc to Italy, Spain etc, and in return he got an Italian and Spanish bonds (via the German banks).

What was it I was saying? Exports are the cost, imports are the benefit.
Germany is in the Euro because if they had not joined the Euro France would not have allowed them to reunify. The Euro was introduced for political, not economic reasons. Of course the architects of the Euro knew that having a single currency and interest rate would involve fiscal transfers, but they cannily didn't tell people at the time. Germans are gradually understanding this.

Veritas
1 Oct 2013, 12:34 AM
Huh? German deposits would just be converted into the new DM. Not a bad result I expect for deposit holders.

But I'm still right. Germans would be fucked with a new DM, for a while at least.

Why you think having one of the most successful export led manufacturing industry in developed world is a cost to Germany well, that just makes no sense whatsoever.

Would you prefer if they just sold everything to fellow Germans?
The problem for the German banks in the event that Germany left the Euro would be their spanish bonds would continue to be denominated in Euro and become worthless as the Euro devalued against the new DM. In the event that Spain left the Euro, the spanish debt would either be redenominated into the new Peseta and become worthless or stay in Euro and be defaulted on.

The central bank might look after the depositors, but the equity of all German banks would be wiped out almost overnight.

BTW the German manufacturing industry was the most successful in the world long before the Euro. They surpassed Japan as the biggest exporter in the world in about 1990 and were only pretty recently surpassed in turn by China.

Edited by miw, 1 Oct 2013, 01:04 AM.
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Shadow
30 Sep 2013, 11:36 AM
House prices are booming instead of crashing like he predicted
You'll only be better off in the long term if prices continue to grow. The way things are looking now, and knowing the government's determination to do absolutely anything and everything to keep this bubble going, it's a sure bet. But what if due to some black swan event, the bubble pops, and remember, we have a massive real estate bubble here, and prices take a dive? Your equity could well be wiped out in a matter of weeks or months.

As long as you realise that this bubble is artificially propped up and to keep it going, it has to suck up everything else around it like a giant vacuum cleaner (disposable income for other things, manufacturing industry, retail etc. etc.) then it can keep going for many years but the bigger the bubble, the louder the pop when it does eventuate.

I don't know how it will pop in the long run but suspect it will be something that happens overseas - maybe interest rates will have to increase, maybe the collapse of the Euro, maybe there will be another GFC, or maybe something we haven't yet thought of. This bubble is on shaky ground though, the fundamentals don't support it, and it's all built on increasing debt levels.
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Pig Iron
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Bogan scum

peter fraser
30 Sep 2013, 11:27 AM
The major portion of our export income is from our mineral wealth, so I don't disagree with that portion of his statement.
i do. calling it dirt is an attempt to cheapen what is really the science of finding and exploiting mineral wealth. it is not dirt, dirt has no value, he simply wants us all to think it is because he is a bitter pissed off blogger who feels like a fool when he see's how badly he called it.
I am the love child of Tony Abbott and Pauline Hanson
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Veritas
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Pig Iron
1 Oct 2013, 10:27 PM
i do. calling it dirt is an attempt to cheapen what is really the science of finding and exploiting mineral wealth. it is not dirt, dirt has no value, he simply wants us all to think it is because he is a bitter pissed off blogger who feels like a fool when he see's how badly he called it.
Yeah, but its not fucking microprocessors either.

Thats the point.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Pig Iron
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Bogan scum

Veritas
1 Oct 2013, 10:36 PM
Yeah, but its not fucking microprocessors either.

Thats the point.
fluid mechanics, geomechanics and geo statistics are easy are they? not to mention the chemistry invovled.
you just dont have a clue do you.
I am the love child of Tony Abbott and Pauline Hanson
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Sydneyite
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Veritas
1 Oct 2013, 10:36 PM
Yeah, but its not fucking microprocessors either.

Thats the point.
Actually it's funny you mention microprocessors! You know what they made from? Sand! Ie dirt! So pretty unsophisticated stuff really, just like large scale mineral exploration, extraction, and shipping. :dry:
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Kulganis
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Yet, with all the sand we have, we don't have wafer manufacturing.

I see no problem with mining, but we shouldn't be sending the raw material overseas to be made into products that are then sold back to us, we should be manufacturing these final products and making the profits ourselves, we have more than enough smart people to do this.
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry

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stinkbug
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1 Oct 2013, 05:02 PM
You'll only be better off in the long term if prices continue to grow. The way things are looking now, and knowing the government's determination to do absolutely anything and everything to keep this bubble going, it's a sure bet. But what if due to some black swan event, the bubble pops, and remember, we have a massive real estate bubble here, and prices take a dive? Your equity could well be wiped out in a matter of weeks or months.

As long as you realise that this bubble is artificially propped up and to keep it going, it has to suck up everything else around it like a giant vacuum cleaner (disposable income for other things, manufacturing industry, retail etc. etc.) then it can keep going for many years but the bigger the bubble, the louder the pop when it does eventuate.

I don't know how it will pop in the long run but suspect it will be something that happens overseas - maybe interest rates will have to increase, maybe the collapse of the Euro, maybe there will be another GFC, or maybe something we haven't yet thought of. This bubble is on shaky ground though, the fundamentals don't support it, and it's all built on increasing debt levels.
Why do you think property is in a bubble? It doesn't seem to be exhibiting bubble characterics at all.
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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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skamy
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1 Oct 2013, 05:02 PM
You'll only be better off in the long term if prices continue to grow. The way things are looking now, and knowing the government's determination to do absolutely anything and everything to keep this bubble going, it's a sure bet. But what if due to some black swan event, the bubble pops, and remember, we have a massive real estate bubble here, and prices take a dive? Your equity could well be wiped out in a matter of weeks or months.

As long as you realise that this bubble is artificially propped up and to keep it going, it has to suck up everything else around it like a giant vacuum cleaner (disposable income for other things, manufacturing industry, retail etc. etc.) then it can keep going for many years but the bigger the bubble, the louder the pop when it does eventuate.

I don't know how it will pop in the long run but suspect it will be something that happens overseas - maybe interest rates will have to increase, maybe the collapse of the Euro, maybe there will be another GFC, or maybe something we haven't yet thought of. This bubble is on shaky ground though, the fundamentals don't support it, and it's all built on increasing debt levels.
Your whole post is based on a a couple of really silly assumptions. The first is that there is a bubble here, this is just naive nonsense Australian house prices have been stagnant relative to income for many years and we are just now emerging from a quite severe correction. These idiots on the web spruiking bubbles and crashes have a lot to answer for. Secondly, you fail to understand that all increases in wealth end up in property, you can prove that easily by looking around the world at GDP/wealth and house prices, people will always choose to put their money into a better home over a new iphone or fancy pair of shoes. House prices wont drop until people stop competing for the best located homes, and that is a very rare day indeed happening only a few times in most peoples lives.


Kulganis
2 Oct 2013, 10:14 AM
Yet, with all the sand we have, we don't have wafer manufacturing.

I see no problem with mining, but we shouldn't be sending the raw material overseas to be made into products that are then sold back to us, we should be manufacturing these final products and making the profits ourselves, we have more than enough smart people to do this.
No Kulganis, this is the old way of trading and everyone paid more for everything, look to Eastern Europe during the cold war to see the most recent example of this kind of economic policies. China can make things cheaper than us as they have economies of scale we could never have. At this stage in Australia's history we give China iron ore, gold, copper LNG etc and they give us back loads of great things that they make with it much much cheaper than we could make them for ourselves. Sure the Chinese would love to have our mineral wealth and sure we would love to have Chinese cheap manufacturing, but we cannot have it all and it is better for a global society the way it is. Globalisation was once a worthy dream, not just the dirty word it is today, and is still not without significant benefits.

One day Australia will change from being a resources based economy and then we will all have to find new ways of making money, but there is absolutely nothing wrong with the current deal per se. We just need to make sure all Aussies get some of the benefits of our mineral wealth while we have them and ensure minimum environmental damage, IMHO.
Edited by skamy, 2 Oct 2013, 11:04 AM.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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