Posts Tagged ‘economy’

Well, a lot is going on in China.

In a short summary the Chinese Government is one of the smartest on earth, but the challenge they have to deal with are also the biggest in the world.

How it will end will be more or less a toss of a coin.

– The failure of the Solar Company (a shadow banking product) it clearly states that the PCC has decided to really start fighting the shadow banking issues. One company will not start a chain reaction – but there are a lot around with products with end of life cycle in April/May.

A beautiful and simple article about shadow banking, a classic Ponzi scheme

Five charts to explain China’s shadow banking system, and how it could make a slowdown even uglier

– The slump in iron ore (and metals in general) is a by-product of new China starting to address overcapacity in steel (attention Australia) and pollution. Again Steel Industry has a lot of shadow lending in it.

So now we just wait the media to start spreading the panic 

Yesterday I saw in The Australian a poll that indicates that John Howard has been considered the best prime Minister of Australia, ever.

On the economic side of view, I tend to disagree.

People might think that he was the best PM because everyone felt rich and happy during his “kingdom”.

In reality he is the one that planted the seeds of this Australian Crisis by opting to give tax breaks and cash rebates with the surplus instead of reinvesting in an Australia post mining boom.

In history every boom has a  bust, so it is not extremely difficult to forecast that a boom cannot go on forever -specially if it is based on something on which you have absolutely no control (China). Instead of employing the massive profits and surplus to create a more like-Germany Australia (in an economic sense), he just bribed his way to the next election win.

But in reality that is not is fault. He simply used the system with extreme intelligence and egoism.

Every Australian PM last just 3 years. 1 year he settles in the political arena with its best team, the second year can do some mild policies and the third year is already in re-election mode.

So practically you have just one year to make tough economic reforms and hoping that the electorate will forget. So if you get a lot of cash and like to be re elected it is just better and easier to bribe the electorate in another win….hoping that the issues will blow up in the face of someone else.

It worked perfectly for John Howard – much less for Australia. Specially if China will have the contraction that it has to have.

It would be better if the electorate start to think …not just follow.

PS. I think myself as independent. Yes I would think myself more Liberal than Labor if there was such things as differences. Currently I call them Libeor (Liberal-Labor). Waiting for the next party “None of the other two” 

The last big Australian manufacturer has gone. In total somewhere between 25,000 and 50,000 jobs will be lost (probably excessive figures as some small manufacturer will be smart enough to tap into the Asian markets, but not by much.

All blame the Australian Dollar…..but in reality that was just the last nail in the coffin. The main manufacturing costs are workforce and utilities and rents.

I arrived in Australia in 2003 and Australia was at least 30% cheaper.

Housing costs from 2003 soared as the real estate market rocketed fuelled by tax discounts (negative gearing) and Asian demand  (it is extremely easy to circumvent, legally, the no-foreign ownership rules). Plus electricity and water bills went up and up.

Wage naturally had to increase – less than the property market – but they had to increase.

On top of this the various government made a lot of free trade agreements with countries have manufacturing cost much lower than us (Thailand and South Korea, for example, that are large car manufacturer).

On top of all this, the manufacturers concentrated on low cost cars (it really does not work building cheap cars in high cost countries…the Germans understand that very well).

So the Australian Dollar was the last nail in the coffin.

Naturally the political class is to blame – not just Tony Abbott. Once upon a time, instead of the cheap solution of offering subsidies they should have looked into what was the problem.

Too late, bye bye Toyota. I wish it was so easy…..what about Australia?