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The China property bubble and an economy hooked on growth.

April 27th, 2011 · Greg Atkinson · 39 Comments

For around a year or so I have gradually become more cautious about the outlook for the Chinese economy despite the assurances from mining company executives, the RBA and Wayne Swan amongst others that all is well. Without doubt the rapid development of the major cities in China has been nothing short of spectacular but surely we must ask ourselves: is this rapid growth sustainable over the long term?

Many people will answer this question with a resounding yes and point out that China has around a billion plus people all keen to have a better life and willing to work hard to move up the income ladder. But the desire of a nation’s population to have a better life does not in itself result in economic growth and riches for all.

I know this sounds simplistically obvious, but of you read a lot of bullish outlooks regarding the Chinese economy they basically fall-back time and time again on the belief that the Chinese middle class will just keep expanding and spending therefore the growth will be there year after year.

We know that GDP growth in China has been very strong now for two decades averaging around 9% per annum since the early 1990’s. We can see from the vast amounts of commodities they import from Australia that there obviously has been a lot of economic activity going on during this period and a quick look at the new office towers in many major Chinese cities provides us with a visual insight into the modernisation of the nation.

But that has all happened in the past.

Most investment products include this warning in their literature or prospectus: Past performance is no guarantee of future results. But when it comes to China many analysts and market commentators seem to think that statement does not apply to the China investment scene and will brush aside any concerns about the Chinese economy as they they don’t exist.

But rather than brush aside those concerns I feel it is best for investors to be aware of them and take them into account when making investment decisions especially for those investing in the Australian stock market.

Remember the ASX All Ordinaries and S&P/ASX 200 are both heavily influenced by commodities related stocks and therefore any slowdown in China would most likely send their shares heading lower thus dragging down the overall Australian stock market.

One of the most prominent investors who is bearish on China is James Chanos who is president and founder of Kynikos Associates, an investment firm in the US that specialises in short selling.

In numerous interviews over the last year Chanos has been stating that his company is taking short positions related to stocks exposed to such areas as the construction and banking in China.

He has pointed out for example that fixed assent investment in China is running at incredibly high levels (i.e around 60% or more of GDP now) and that much of the construction related activity in China seems to be driven by the need to make annual GDP targets rather than based on any market requirement as such.

Certainly I saw a lot during my recent trip to Nanjing that makes me inclined to agree with Chanos more than say with Jim Rogers who is bullish about the Chinese economy.

Late in 2010 Chanos appeared on CNBC and discussed why be believed the Chinese property market was in a bubble and I have posted this interview below. In this interview he raises a lot valid concerns about the Chinese economy which simply don’t get much air in Australia.

James Chanos comments and observations simply reinforce my view that any slowdown in the Chinese economy will result in a major shock to the Australian economy. I think the reliance our economic policy makers have placed on an extended commodities boom is akin to paying poker with the Australian economy.

If the Chinese property sector was unable to be cooled gradually then a rapid decline in prices and construction activity would slash the demand for commodities like iron ore and copper.

This would most likely drag down Australian GDP growth and put further pressure on the Australian housing market. Perhaps the Australian economy could withstand a sharp fall in commodity prices, but I doubt it would hold up well if the residential property market also started to slide backwards.

I guess at this point in time there are two paths to follow. One is to believe in the seemingly unstoppable Chinese economy and ride the commodities boom to riches (or ruin). The other is to seriously think about preparing for a scenario where the Chinese economic miracle comes to an end in the not too distant future.

I am on the second path and am preparing as best I can for a economic slowdown in China.

Finally let me just remind readers than I am not in the business of providing financial or investment advice. The purpose of this blog is simply to toss up some ideas and analysis for discussion purposes. So as always please feel free to leave a comment and shares your views.

Greg Atkinson is the editor of Shareswatch Australia and the Managing Director of Ohori Capital He is originally from Australia but currently resides in Japan. He can be followed on twitter via @GregAtkinson_jp

39 responses so far ↓

  • 1 Paul Baxter // Apr 28, 2011 at 10:10 pm

    The analogy to Japan post ww2 has legs. Why can’t China do what Japan did. Japan also produced cheap rubbish, exported it and built infrastructure and an economy and gradually improved quality to the point where a premium was paid for Japanese quality. This took 30-40 years to complete. Why is it so hard to believe that China will not do the same over a longer period given their size. If a property bubble bursts then at least they have the infrastructure there that can be utilised for the next upward leg.

  • 2 Greg Atkinson // Apr 29, 2011 at 6:33 am

    Hi Paul. I actually don’t see much in common between China and Japan apart from their economies grew rapidly. As Chanos points out in the clip many people are forgetting that in China GDP growth is a target set by the central government and this makes it very much different from Japan or Germany.

    An issue with infrastructure which economists rarely talk about is that it is also a liability. From the day you finish building a new sports complex or railway etc you have to start maintaining it as well and that costs money. If you have built it 20 years too early then it becomes a drain on resources which I guess might be okay, if you can make it pay for itself over the next 20 years.

    But already in China there are vast shopping malls that are already starting to fall in disrepair because they have are simply most empty and the focus has moved onto to the next big project.

    If the property bubble bursts then that would mean millions of Chinese would be without work since the contraction frenzy would slow considerably. I can’t see how this would help the next upward leg at all. If you don’t have a job you are not likely to be using the fast rail network or watching a game at the local sports complex. Remember in China no job basically means no income.

    By the way a reader posted the following link a few days back, I will post it again because the clip about ghost cities in China is well worth watching:

  • 3 Biker // Apr 29, 2011 at 10:13 am

    To hear Chanos talk, you’d think that the US is managing its economy so much better than China at the moment! 😀

    Must go have a look… .

    Were you able to visit many ‘ghost cities’, Greg?

  • 4 Greg Atkinson // Apr 29, 2011 at 8:46 pm

    I was only in China for 5 days and it was a business I did not do a ghost city tour. But I saw plenty of empty office buildings and apartments even in a well established city. There does seem to be some over-building going on.

  • 5 Biker // Apr 30, 2011 at 11:41 am

    Two years ago we were surprised to note a lot of spare commercial property around Perth. It has been quickly taken up and we won’t be surprised to see commercial rents rising as an extreme shortage begins.

    The question in China may not be whether all the new apartments are _needed,_ but rather whether the intended occupants can afford the purchase price, or the rents.

    Again, comparison to the US, where deterioration of infrastructure is the issue, as opposed to creation of brand-new infrastructure and technology, begs the question “Who is managing their economy better… China or the US?”

    My perhaps flippant observation is that only global warfare seems to point US planners in one common direction; whereas China appears to be enmeshed* in extremely long-term planning.
    Even DR (China Bashers Extraordinaire!) recently acknowledged
    method in their madness… .

    * I accept the full connotation of that descriptor!

  • 6 Ross T // May 1, 2011 at 5:39 pm

    The 2 trillion of domestic and overseas debt bubble currently hanging over Aussies make us as bad as china and the US. Our govt is in debt to the tune of 200billion so they are stuffed! As for the Aussie dollar – the RBA is supposed to control its fluctuations, so you wonder why they are sitting on their hands. Especially given that we are an export economy? Easy enough to fix -just print more Aussie dollars? As for the share market how much has been cashed up by low interest loans using the Yen? All the fundamentals look bad, and gold keeps rising so a crash of some sort seems inevitable. Everyone seems to be waiting on a change of govt to fix things again – could explain why Julia is sounding more and more like Johnny Howard!

  • 7 Greg Atkinson // May 2, 2011 at 8:53 am

    Interesting to see that the chairman of Rio Tinto reckons the current high prices for copper and iron ore probably not sustainable according to this article in The Australian today: Rio tips commodity prices to take a dive

    The article also includes this interesting section about what the Macquarie analysts think is happening:

    In the short term, Macquarie analysts say there are no signs iron ore prices, which are about $US180 a tonne, are about to decrease. They say iron ore inventory data for China continues to show ongoing destocking.

    “However, the fact that prices can push up without inventory rising indicates yet again just how tight supply is relative to demand. We believe another round of purchasing activity will be required in the very near future that will provide further upward momentum for prices.”

    Rising prices without rising inventories…well maybe supply is tight or it could mean that the building frenzy in China is slowing and that iron ore prices are already in a bubble.

  • 8 Biker // May 2, 2011 at 3:33 pm

    “…Interesting to see that the chairman of Rio Tinto reckons the current high prices for copper and iron ore are probably not sustainable…”

    Yet the English King of the Doom’n’Gloomers, chief critic of the ‘Aussie Housing Bubble’, claims resource prices will rise…
    that this time it’s different… .

    As he’s been consistently wrong on our housing, since 2005,
    maybe this time he’s right?! 😉

  • 9 Greg Atkinson // May 18, 2011 at 7:27 am

    “TREASURY chief Martin Parkinson has raised the spectre of China’s boom turning to bust – with devastating consequences for Australia – if Beijing persists with manipulating its exchange rate and spreading inflation throughout the world.” (Source: The Australian) See: Boom-to-bust warning on China: Treasury chief Martin Parkinson

    The scary thing is that the people managing our economy see the risks presented by depending too much on the Chinese economy and yet, they don’t think we should do anything to lower this dependance. So as I keep saying, there really is no Plan B. It’s China or bust.

  • 10 Ned S // May 19, 2011 at 12:52 am

    “… there really is no Plan B. It’s China or bust …” – Agree totally. (Although they do also have high hopes for India.)

    And it’s exquistively obvious the RBA is making it up on a month to month basis. (With various parties saying stuff like “the risks remain elevated” re the global stuff.) Plus the fact our 4 major banks have been put on a negative ratings watch really can’t be making anyone feel happier surely?

    By and large I’m simply forced to conclude that Oz policy makers have accepted that we could be in for lots of volatility – Even as a best case scenario? And have decided we are going to go with that until such time it might become obvious that going with it isn’t working???

  • 11 Greg Atkinson // May 19, 2011 at 7:20 am

    The problem with the India back-up plan is that India is also counting on China. Maybe we should come up with a China domino theory because if the Chinese economy hits the skids it will have a knock on affect on the economies in Europe, US, Japan, India and Russia just to name a few.

    Maybe too many people are relying on the goose to keep laying golden eggs?

  • 12 Greg Atkinson // Jun 9, 2011 at 11:14 am

    Looks like the real estate market in China might be on the decline and if so, that would lower the demand for commodities such as coking coal and iron ore from Australia.

    According to an article in the WSJ today entitled: The Great Property Bubble of China May Be Popping

    “…..prices for key industrial metals used in construction have softened. Spot copper prices have lost 5% since early March, and have now fallen to around 69,000 yuan ($10,647) a ton after racking up 34% in gains between June 2010 and March this year. Major steelmakers have been consistently cutting their product prices since February.”

  • 13 Biker // Jun 9, 2011 at 4:48 pm

    DRA’s unashamed copper bubble is popping? Goodness.

    Emailing Wen Jiabao to suggest FHOGs!~ 😀

  • 14 Greg Atkinson // Jun 18, 2011 at 8:19 am

    I don’t think they need to stimulate the housing market in China, they already have millions of vacant apartments.

    It also looks like consumer spending might be on the decline there as well according to this report from Bloomberg: Consumers Fade in China Economy Racked by Inflation With ‘Peak Days’ Gone

  • 15 Biker // Jun 19, 2011 at 10:37 pm

    Biker: “Emailing Wen Jiabao to suggest FHOGs!~ 😀 ”

    Greg: “I don’t think they need to stimulate the housing market in China, they already have millions of vacant apartments.”

    China remains an enigma. I’ve pushed for an extended visit, without success. Not much interest from the missus.

    I agree it’s likely they’ve overbuilt. The rationale is apparently The Hundred Year Plan.

    My perception, right or wrong is:

    US: No plan. Political survival paramount. Infrastructure crumbling in the worst way.

    China: Long term planning. Political dissent and lobbying insignificant. Brand-new infrastructure being implemented.

    That’s an unkind perception. I haven’t mentioned industry or agriculture… but, with some minor exceptions (Ford Motor Co, Apple, etc) China seems to be on the ascendancy, the US in decline. Where China does appear to be grasping the nettle is in renewable energy development. Yes, we know there are significant costs attached, but world demand for solar and EVs may turn out to be their best call (or some other technology may leapfrog both! 😀 )

  • 16 Greg Atkinson // Jun 27, 2011 at 8:05 am

    It looks like even some of the China bulls are starting to worry about the property sector in China now. According to an article in The Australian (via the WSJ)-

    “Just two months ago, China expert Nicholas Lardy dismissed concerns about what he labelled a “so-called property bubble” during a conference at the Peterson Institute for International Economics in Washington.

    Now, he says a housing downturn could produce a “major, major economic correction” in China, a view shared by other mainstream economists.”

    Source: Chinese property risks fuel concerns

    Over at WSJ Asia they report that:

    “Residential prices are heading downward in some major cities, damping some undesired real-estate speculation but raising the prospect that the Chinese economy may slow more rapidly than anticipated with profound consequences for global growth.

    Real estate is a foundation of China’s phenomenal growth record in the past two decades, and its health is crucial to China’s construction, steel and cement sectors. Real estate is also a favored investment of Chinese looking to get better returns than bank deposits pay. Local municipalities and provinces depend on rising prices for land sales as well to fund infrastructure projects.”

    Source: The Great Property Bubble of China May Be Popping

    It’s starting to look like the shine if coming off the Chinese economic miracle.

  • 17 Biker // Jun 27, 2011 at 9:48 am

    “It’s starting to look like the shine if coming off the Chinese economic miracle.”

    Still looks shinier than that US corrosion!~

    Almost 100% of consumer goods our family buys are made in China, including our new 13″ Air, made-to-our-specific-order.
    US technology, manufactured in China.

    Arrives today. I expect it to be another shining example of global cooperation!~ 😀

  • 18 Greg Atkinson // Jun 27, 2011 at 10:44 pm

    Biker the Chinese economy needs the US consumer to start buying again in a big way..and EU consumers as well and that doesn’t look likely for a while.

    In an article posted on Bloomberg today Gary Shilling writes:

    China’s labor force is aging. Its consumers save too much and spend too little. Its political and economic policy tools remain crude. Its state bureaucracy seems likely to curb spending just as exports weaken, and thus risks deflation. As U.S. consumers retrench, and as the global commodity bubble begins to dissipate, these fundamental weaknesses will combine in a way that’s unlikely to end well for China — or for the rest of the world.

    Source: Why China’s Heading for a Hard Landing, Part 1: A. Gary Shilling

    The next four parts should be interesting.

  • 19 Biker // Jun 28, 2011 at 11:26 am

    Listening to Wen Jiabao discussing these issues last night, I had the very distinct impression he sees the imperatives* as building China’s domestic markets and supporting and a$$isting (lost causes like) Greece. The latter statement was a surprise.

    US and European consumers will continue to buy from China as their quality control continues to improve. They’re ‘building a better mouse trap’ and the world will come to them. Yes, there’ll be some hiccups, but my money is on them… because they’re unencumbered by powerful lobby groups. The other essential difference is that where US governments permitted those ma$$ive bonuses to their worst GFC thieves, China would have lined those slimeball traitors up and smartly shot ’em!

    * Interesting word that. The statement, while gently couched in a tone of helpful cooperation, was, nonetheless, imperial…

  • 20 Ned S // Jun 28, 2011 at 12:43 pm

    The point about China’s aging population is certainly a valid one.

    I find Shilling’s statement that “Its consumers save too much and spend too little” a bit perverse though – Maybe some other countries should have encouraged a bit more of that approach and a bit less of the opposite one?

  • 21 Greg Atkinson // Jun 28, 2011 at 2:22 pm

    Biker: “..they’re unencumbered by powerful lobby groups”..are you talking about the Chinese Government? In reality there are plenty of very powerful lobby groups in China, the construction sector being one of the most powerful.

    Ned: Not only is the Chinese population ageing quickly but the diabetes rate in China is now close to that of the U.S. In addition smoking related deaths and becoming a major problem.

    According to a BBC report:

    “Because of a sharp increase in cigarette sales in the last 30 years, around 2,000 people a day are currently dying of smoking in China.

    By 2050, the researchers expect this number could rise to 8,000 a day – some three million people a year.”


  • 22 Biker // Jun 28, 2011 at 3:01 pm

    It’s probably time you watched ‘Inside Job’, again, Greg.

    Three thousand (3000!) lobbyists fighting the regulation of the finance industry. Schools of economics bribed to preach the benefits of deregulation…

    Too easily we forget that it was/is corrupt banks and the insurance industry whose interests were best served by the over-construction of homes in the US.

    For most of the last decade, the US generated _three times_ the number of housing starts per head of population as Australia. In 2006 – 2007, there were 4.5 times the number of housing starts p.h.o.p., as in Australia. The US bubble was steadily building since 2001, but in those two years construction went _crazy_ as supply not only peaked, but went into hyperdrive. By 2007 – 2008, the US started cutting back, but even during 2009 – 2010, an economy with oversupply AND a housing collapse was still more than doubling Australia’s building starts!

    In whose interest was it to write up (repackage, certify A ratings) these low-doc, no-doc, NINJA liar loans? Who took home half-billion dollar bonuses? It sickens me to the core that we walk the same Earth as these low-life scum.

    Good luck to China and its people. China makes totalitarian government look almost beneficial… while the US form of democracy festers and haemorrhages…

  • 23 Greg Atkinson // Jun 28, 2011 at 5:59 pm

    Biker here is an interesting extract from an article about the interest groups in China:

    “Powerful interest groups have paralyzed China’s macro policy, with ominous long-term consequences. Local governments consider high land prices their lifeline. State-owned enterprises don’t want interest rates to rise. Exporters are vehemently against currency appreciation. China’s macro policies have been reduced to psychotherapy, relying on sound bites and small technical moves to scare speculators.”

    Read more:

  • 24 Biker // Jun 28, 2011 at 8:21 pm

    Greg: “…with ominous long-term consequences…”

    You mean you’re more optimistic about the long-term consequences of US multi-trillion debt, Greg?

    If China’s doomed, the US is dead-and-buried… .
    While there’s much to admire about this ageing superpower, it sounded its own deathnell by supporting these immense, corrupt corporations.

    And sadly, a change of leaders appears to have actually accomplished nothing. The US is hell-bent on financial seppuku…

  • 25 Biker // Jun 28, 2011 at 8:31 pm

    But here’s some consolation; Sayce agrees with you, Greg:

    Given HIS track record, perhaps I need to review MY position!~ 😉

  • 26 Ned S // Jun 28, 2011 at 9:45 pm

    “If China’s doomed, the US is dead-and-buried”

    As one nation descends another arises; Whilst a third waits in the wings.
    Such has the way of the world always been. And such shall it always be! (Anon’ymous’ :))

    I think Indian girls are cute Biker? … 😉

  • 27 Biker // Jun 28, 2011 at 10:48 pm

    Yez, I’ve met some very, very cute Indian girls, Ned. 😀

    While studying at UBC, back in the mid-eighties, I also met some extremely cute _Amerindians,_ who were part of a tskel project, aimed at assisting First Nations people to gain doctorates in law, education and other disciplines.

    If these aren’t the most sharing and cooperative of human beings, I’m yet to meet a more collegial race. I was often asked to chair tutorials in the very early hours of the morning, with wine and pizza delivered to the campus. Over 30,000 students at that time, but only Asians (and us Indians!) there, studying, at 3:00 or 4:00 am in the morning… .

  • 28 Greg Atkinson // Jun 29, 2011 at 7:48 am

    Biker, I have never said that China is ‘doomed’ nor have I said I am optimistic about the outlook for the US. What I am pointing out is some of the very serious issues the Chinese economy faces because simply brushing them aside won’t make them go away.

    Since the Australian economy is now so dependant on the Chinese economy I believe it is best for stock market investors not to get carried away with the China boom story and appreciate there are very real downside risks.

  • 29 Biker // Jun 29, 2011 at 10:35 am

    “I have never said that China is ‘doomed’”

    That’s true, Greg. We may often read too much into each others’ links.

    None of us can be sure about anything in China’s future.
    It’s likely that long-term China sees Africa as the supplier of its resource needs; that meanwhile it will continue stockpiling; that it will continue to create infrastructure; that we’ll see a quantum leap in innovation… and a rise in the living standards of Chinese.

    Let’s hope that that positive inference, made by Wen Jiabao, is genuine and lasting… and not simply a rephrasing of that western lie: “I’m from the government. I’m here to help you.” 😉

  • 30 Ned S // Jun 29, 2011 at 2:49 pm

    Gittins sums things up fairly sensibly here I’d say? :

    “But these seemingly prosperous countries – which have gone for many years falsely inflating their prosperity by borrowing from the future – are reaching their day of reckoning.

    Even if they avoid another financial crisis, they are set for a protracted period of austerity and relative penury, with their economies growing only slowly for many years. They have not woken up to this yet, but they will.”

    So if nothing else, Asia which doesn’t have all the welfare expectations that developed nations in the West do I guess?, is set to do better (or “less worse” anyway?) than the West generally going forward. With it still being somewhat debatable just how much Oz will benefit from being a part of Asia. Though we continue to have high hopes obviously.

    And sure, as well as having our own entrenched welfare expectations, we are obviously handicapping ourselves with all sorts of other stupid damn initiatives too.

  • 31 Greg Atkinson // Jun 29, 2011 at 4:02 pm

    Ned isn’t Gittins a supporter of big spending government programmes and Keynesian economics? I sense his views drift with the times?

  • 32 Ned S // Jun 29, 2011 at 4:36 pm

    “Ned isn’t Gittins a supporter of big spending government programmes and Keynesian economics? I sense his views drift with the times?”

    Could well be Greg? (I doubt I’ve ever read much of his stuff?) Just happened to read that article and thought he has one bit of the big picture right at least.

  • 33 Greg Atkinson // Jun 29, 2011 at 5:15 pm

    Well you remember the G-20 grand plan during the GFC…spend, spend, borrow, borrow, spend, spend. Apparently the clever way to get out of a crisis caused by too much debt was to go into debt more..they are a cunning mob that G-20 😉

    The problem with focusing on GDP growth is it doesn’t take into account the big long term picture..i.e. what damage is being done to the economy to keep the numbers looking good.

    But we are on the same path in Australia. We have been blessed with a vast amount of mineral resources but even during a boom we can’t seem to balance the books and get the trains to run on time.

    I even just read that 80% or so of the investment needed in the mining sector needs to come from offshore….one wonders what we have done with all the wealth we should have accumulated over the last few decades? Where did it all go?

  • 34 Ned S // Jun 29, 2011 at 6:41 pm

    “…one wonders what we have done with all the wealth we should have accumulated over the last few decades? Where did it all go?”

    We are told that we are collectively better off than at any time in our history I gather Greg. That may be, but the quite important issue does seem to be that the working and middle classes do appear to be getting squeezed.

    I think Biker is quite correct in laying a huge amount of the blame at the feet of the banks. And in particular some overseas banks. And their central bank that kept their interest rate way too low for way too long. While being able to do it quite specifically because their currency enjoyed global reserve currency status. (Interesting side comment: I see the Russians have recently bought some AUD! Diversify, diversify, diversify being the newly preferred approach maybe? :))

    Doesn’t exonerate Oz though. In hindsight we probably should have been doing way more in relation to infrastucture. But it was just easier and way more politically palatable to use the loot to buy votes by upping welfare all round (including middle class welfare.) With that covering off on the Commonwealth gov.

    But I have ABSOLUTELY NO IDEA what state govs (QLD anyway) wasted their bit of the loot on? (Anna Bligh’s makeup and wardrobe maybe??? (Roll eyes))

  • 35 Biker // Jun 29, 2011 at 7:56 pm

    Greg: “But we are on the same path in Australia.”

    Here we differ markedly. The Bank for International Settlements rates our banks highly. The BIS, you’ll recall, was one of the very few financial entities to forecast the GFC.

    SMH: “…the pre-tax profits of Australia’s big four was the equivalent of 1.14% of their total assets. This is ahead of the _second_ placed US banks on 1.02%… and more than FOUR TIMES* the rate of profitability of British and German banks…”

    Here’s Catch22 for you, Greg: 79% of our mines are owned by overseas investors. Seems like a good case for a mining tax, maybe; at least until we can buy our country back!~

    * MY capitals…

  • 36 Greg Atkinson // Jun 30, 2011 at 9:05 am

    Biker I have been questioning how we manage our mining resources & profits for some time as per my rant back in 2009 for example: LNG billions: is Australia getting a good deal from the Gorgon Project?

    If we don’t invest in the mines ourselves then we can’t complain when someone else does. A tax is not the answer, what we should be doing (and have done) is set up a Sovereign Wealth Fund (SWF) and ploughed money into the sector instead of wasting it on middle class welfare, tax cuts and broadband networks.

    As for our banks, yes the big four look pretty solid but that doesn’t mean our GDP growth is sustainable. Even the US banks are making money again..what does that tell you?

  • 37 Biker // Jun 30, 2011 at 9:44 am

    Greg: “…you remember the G-20 grand plan during the GFC…spend, spend, borrow, borrow, spend, spend. Apparently the clever way to get out of a crisis caused by too much debt was to go into debt more…”

    Yes, and you were addressing responses to the GFC…
    ie., stimulus, Greg.

    My point remains that:

    * The GFC was primarily caused by deregulation of financial
    institutions in the NH. Call it ‘too much debt’ if you like.
    It was actually _bank and insurance fraud._

    * Stimulus _followed_ the inevitable collapse(s) caused by
    that deregulation and _billions_ in bank employee bonuses.

    * With strict lending and borrowing regulations in place, the
    GFC would not have occurred. No _need_ for stimuli!~

    Greg: “If we don’t invest in the mines ourselves then we can’t complain when someone else does.”

    Here, I was responding to your statement:

    “…80% or so of the investment needed in the mining sector needs to come from offshore….one wonders what we have done with all the wealth we should have accumulated over the last few decades? Where did it all go?”

    I’d have thought that one was a bit of a no-brainer, Greg.
    It went overseas!!~ 😉

  • 38 Greg Atkinson // Jun 30, 2011 at 5:50 pm

    By the way here is the link to the first part of a series of interesting articles about why the Chinese economy is going to run into trouble: Why China’s Heading for a Hard Landing, Part 1: A. Gary Shilling

  • 39 Greg Atkinson // Sep 11, 2011 at 8:42 am

    Here is an other clip about the over-building in China followed by a link to an article suggesting that property market in China is effectively in a bubble.


    This Is What A Bubble Looks Like:

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