China

[Mugwump]

Meanwhile, there is something potentially seismic happening ; something far bigger than Tony Abbott, far bigger perhaps even than the US Presidential election or the Euro crisis.

China's credit-driven growth model seems to have finally hit the reef, and the economy is now listing very badly, apparently outside the control of China's rulers. Noone is quite sure where this will all end (and if they tell you they are, move seats on the tram to get away from them), but the chances are that Australia, with its own credit boom fuelled by the lines of Chinese money, is heading into waters that are as dark and dangerous as any it has seen, with few secondary industries to cushion the shock.

Interesting times.

[partypie]

You mean it's possible Twiggy Forrest might have to get a welfare card?

[Dangles]

The shit will probably hit the fan after next year's election. Just in time for Labor to get the blame for it.

[Wokko]

Well we blew the mining boom. Rather than a huge sovereign wealth fund we ended up with a plasma TV in every housing commission flat, then an upgrade to an LCD when Rudd came in.

Australia made it's profligate bed and now has to lie in it.

[Mugwump]

What's interesting is that it is, in many ways, a purely financial phenomenon, similar to the Western 2008 crisis.

The economic foundations of the new Chinese economy are potent ; the modern level of education, productivity growth through urbanisation, interconnectedness with global trade, and the falling costs of raw materials are all real economic muscles. What seems to be occurring is that the export model is falling off a cliff as the indebted economies of the developed world cannot sustain demand, and the capacity of China's own indebted businesses to service debts taken on in the boom is now threatened. So too are the banks which have taken hyperinflated land values as collateral. Japan, anyone ?

If that is correct (and anyone who tells you they know for certain is a fool or a chancer or both), it's not clear that the CCP has real policy options to address this type of financial heart-failure. What does seem likely is that the Australian dollar is heading for earth at a rapid rate.

[John Wren]

isn't this simply a correction and the year on year growth was never going to be sustainable? some commentators have suggested that when things do pack it in it make 2008 look like a walk in the park.

[Culprit]

Our Manufacturing base has gone so the low AUD means nothing as we don't make anything. Your Super will take the biggest whack but it's not real money. The shock will be when all the Chinese that have purchased property in Australia are forced to sell as they need the money. That is when it will go BANG.

[John Wren]

fire sale. now is the best time to have money.

[Culprit]

I'm now worried, Joe Hockey has come out and said all is fine and the crisis has been overstated. This is after announcing he is going to give personal tax cuts without delivering a budget.

[John Wren]

^what a goose. of course it will be ok for him and his cronies.

[Mugwump]