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Friday, 22 September

03:43

The Elites Are Privately Warning about a Crash "IndyWatch Feed Economics.au"

Many everyday citizens assume powerful global financial elites operate behind closed doors in secret conclaves, like the scene of a Spectre board meeting in the recent James Bond film.

Actually, the opposite is true. Most of what the power elite does is hidden in plain sight in speeches, seminars, webcasts and technical papers. These are readily available from institutional websites and media channels.

Its true that private meetings occur on the sidelines of Davos, the IMF annual meeting, and G-20 summits of the kind just concluded. But the results of even those secret meetings are typically announced or leaked, or can be reasonably inferred based on subsequent policy coordination.

What the elites rely on is not secrecy but lack of proficiency by the media.

The elites communicate in an intentionally boring style with lots of technical jargon, and publish in channels non-experts have never heard of and are unlikely to find. In effect, the elites are communicating with each other in their own language and hoping that no one else notices.

Still, there are some exceptions. Mohamed A. El-Erian is a bona fide member of the global power elite (a former deputy director of the IMF and president of the Harvard Management Co.). Yet he writes in a fairly accessible style on the popular Bloomberg website. When El-Erian talks, we should all listen.

In a recent article, he raises serious doubts about the sustainability of the bull market in stocks because of reduced liquidity resulting from simultaneous policy tightening by the Fed, European Central Bank (ECB) and the Bank of England.

He says stocks rose on a sea of liquidity and they may crash when that liquidity is removed. This is a warning to other elites, but its also a warning to you.

But its not just El-Erian whos sounding the alarm

Youve heard the expression the big money. This is a reference to the largest and most plugged-in investors on Earth. Some are mega-rich individuals, and some are large banks and institutional investors with a dense network of contacts and inside information.

When it comes to big money, sovereign wealth funds are at the top of the food chain. These are funds sponsored by mostly wealthy nations to invest a countrys reserves from trade or natural resources in stocks, bonds, private equity and hedge funds.

As a result, sovereign wealth fund managers have the best information networks of any investors. The chief investment officer of a sovereign wealth fund can pick up the phone and speak to the CEO of any major corporation, private equity fund or hedge fund in the world.

Among sovereign wealth funds, the Government of Singapore Investment Corp. (GIC) is one of the largest, with over $354 bi...

02:43

S&P Downgrades China Sovereign Credit Rating "IndyWatch Feed Economics.au"

If theres one thing we can rely on in the financial world, its a rating agency coming to the party late.

Standard & Poors has now come out and lowered Chinas soveriegn credit rating. It also downgraded the countrys outlook from stable to negative.

It seems slightly bizarre that the other two big rating firms downgraded China four years ago.

Thats a long time in finance.

China has been racking up debt since the global financial crisis. This has worried a lot of people, for a long time. There is a limit to how much credit can pump up the economy.

I happened to be speaking to China expert Tom Miller two nights ago. He says Chinas leaders are perfectly aware that the state-run companies are saturated in debt.

In fact, a few years ago, the Chinese authorities identified the one factor in the Chinese economy that could take on more debt to prop up the economy: The Chinese consumer.

Hence mortgage growth took off as the rules were loosened a bit, and weve seen Chinas real estate market run hot in parts of the country.

How far can that go? Im not sure. Im not particularly bearish on China. Id say any slowdown there is probably expected now, and therefore priced in.

My colleague, Jim Rickards, is not sanguine. He views China as one of the triggers that could tip over the financial system.

In fact, China is one of the biggest triggers the global elites are preparing for. There is another one though.

Read on for Jims take here

Best wishes,

Callum Newman Signature

Callum Newman
Editor, The Daily Reckoning Australia

The post S&P Downgrades China Sovereign Credit Rating appeared first on Daily Reckoning Australia.

01:36

Tricky question of getting better banking "IndyWatch Feed Economics.au"

THE chair of the Australian Competition and Consumer Commission, Rod Sims, has always championed competition as the friend of the consumer. In the past few years he has been especially critical of state-owned utility monopolies and privatisations that lead to monopolies and structures that hurt consumers.

This week, with the interests of consumers at heart, he questioned the four pillars policy that prohibits mergers among the big four banks.

He said it could be argued that the four pillars policy gives the big four an advantage because they are seen as too big to fail and would be bailed out by the taxpayers if there was a crash, so they get higher credit ratings and can borrow at lower interest rates. Against that advantage it might make it harder new banks to enter the market to give consumers a better deal.

Alternatively, Sims suggests, the Government should look at extending the no-merger rule beyond the four big banks to all banks to stop the big four swallowing up smaller banks which can offer consumers a better deal.

Yes, it is a good idea to look at the banking system to see if the rules are still serving consumer needs, but we should be very careful. The stability of the financial system is more important than whether banks are serving consumers. It will not help consumers if the financial system is made less stable.

Australia has been pretty well served by its financial system compared to other countries, as the history of the global financial crisis attests. Sure, we have had our scams and incidents of unethical behaviour, but we dodged the bullet that hit the US and Europe.

A book by Obamas first Treasury Secretary, Timothy Geithner, called Stress Test: Reflections on Financial Crises is quite instructive on how important the financial system is to the well-being of everyone. It also busts some myths on the 2008 crisis and points out some lessons which have still not been learnt in the US, and probably not in Australia either.

Geithner was head of the New York Federal Reserve under Bush and was one of the first to express alarm at the growth of the derivatives market which was one of the main causes of the crash. Finance companies bundled up mortgages into derivatives and sold them. The ratings agencies foolishly gave them AAA ratings, but when the housing bubble burst, the derivatives were near worthless and a chain reaction began.

Geithner wanted a classic Keynesian response: for the Government to push money into the economy, as was done by the Rudd G...

01:08

China bans Bitcoin executives from leaving the country "IndyWatch Feed Economics.au"

http://www.trustnodes.com/2017/09/19/china-bans-bitcoin-executives-leaving-country-miners-preparing-worst

Chinese media is reporting executives of crypto exchanges have been ordered to not leave the country with a very rough translation stating:

A number of informed sources say the executives of special currency trading platforms are not allowed to leave Beijing to cooperate with the investigation. In accordance with regulatory requirements, trading platform shareholders, the actual controller, executives and financial executives need to fully cooperate with the relevant work in the clean-up period in Beijing.

Australias Financial Review (AFR) says the above has been confirmed with them by a source close to one of the biggest exchanges, Huobi, which told them its founder, Li Lin, was required to report to the authorities and cooperate with their work at any time.

The draconian measure is undertaken following a decision by Chinas Communist Party to close down all crypto exchang...

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Thursday, 21 September

22:58

China's influence: growing, not slowing "IndyWatch Feed Economics.au"

China still rising

There is a bit of talk about a slowdown in China, a slowdown in Chinese interest in Australian property, and more broadly even an inference that China's influence on Australia may be waning.

It's true that local lenders have generally stopped financing offshore property investors, and this has changed the immediate dynamics in the Aussie housing market, slowing transactions and settlements, and eventually leading to a slowdown in apartment construction.

This had to happen sooner or later as apartment building was at unprecedented highs, driven by almost exponential investment from China.


Looked at through a different lens, however, the reach and influence of China on Australia may only be just beginning.

Lest anyone needs reminding, China's population is vast, the urbanised population is still growing at a rollicking rate, and it will be for years to come. 


And one thing we know about China is that when something becomes an entrenched trend, due to the sheer weight of numbers it really makes a massive impact.

More fluid movements

Permanent settlers in Australia were previously being recorded at about 20,000 or so per annum from China.

However, within the past few weeks the ABS has disc...

22:55

Crunch! "IndyWatch Feed Economics.au"

The dream run is well and truly over for iron ore stocks!


Ouch.

21:02

2 weeks to go! "IndyWatch Feed Economics.au"

Just a couple of weeks to go until the Money for Life workshop.

For a short time a special offer for blog readers, which you can redeem here.

14:00

This 1-Acre Permaculture Farm in Australia Can Feed 50 Families "IndyWatch Feed Economics.au"

By Amanda Froelich

By 2050, the worlds human population is expected to reach 9.7 billion. Considering 795 million people still go to bed hungry each evening, this is concerning. Fortunately, sustainable solutions exist, and they include vertical gardening and permaculture farming  among others. The latter has been employed on a one-acre farm in Australia and reportedly works so well, enough produce is grown to feed 50 families.

The Limestone Permaculture Farm may be minute in size, but it produces enough produce to feed dozens of families. Started when wife Nici developed an illness, the farm now educates the local community about permaculture and even offers internships.

TreeHugger reports that the Coopers have been farming for close to a decade. At Limestone Permaculture Farm, they grow organic produce, raise sheep goats and chickens, keep bees, and even build with recycled materials. Much of the farm is powered by energy from wood, water, and the sun.

The premise of permaculture is to mimic the social design principles observed in natural ecosystems. Opposite of large-scale mono-cropping (growing one crop at a time), permaculture farming creates symbiosis so a variety of plants may thrive. Some of the permaculture principles implemented by the Coopers include swales, a chicken tractor and even self-seeding edible ground cover.

Credit: Limestone Permaculture Farm

Reportedly, husband Brett discovered permaculture over a decade ago. He told the Newcastle Herald,

...

13:00

Australia Cites Blockchain In 'Digital Economy' Strategy Launch "IndyWatch Feed Economics.au"

Australia is plotting an ambitious new Digital Economy initiative and blockchain is part of the plan, a new paper reveals.

12:04

Bedpans, bitumen, & Bachelor's degrees "IndyWatch Feed Economics.au"

Employment boom

Australia has created an extraordinary ~325,000 jobs over the past year, including a boom over the past six months the like of which arguably hasn't been seen in decades. 


The question is how? And where?

Greater Sydney (+83k), Melbourne (+59k), and now Brisbane (+46k) have each seen a drive in employment growth over the past year. 

Greater Sydney now has a monthly unemployment rate of only 4.46 per cent, and the annual average unemployment rate across the harbour city continues to decline, as it has for 3 years now. 

That's been partly driven by apartment construction and the associated multiplier effect, and a swathe of infrastructure projects. 


Increasingly Hobart is firing up, adding +6k jobs over the year to August 2017, with the median duration of job search continuing to decline. 

...

11:52

China Begins Rounding Up And Detaining Bitcoin Executives "IndyWatch Feed Economics.au"

China has begun rounding up and detaining Bitcoin executives who run exchanges in the country, amid a huge crackdown against cryptocurrencies. 

As the war on Bitcoin continues, Chinese media is reporting that executives who operate Bitcoin exchanges are being told they are not allowed to leave Beijing whilst the government conducts an investigation.

A number of informed sources say the executives of special currency trading platforms are not allowed to leave Beijing to cooperate with the investigation. In accordance with regulatory requirements, trading platform shareholders, the actual controller, executives and financial executives need to fully cooperate with the relevant work in the clean-up period in Beijing.

Trustnodes.com reports: Australias Financial Review (AFR) says the above has been confirmed with them by a source close to one of the biggest exchanges, Huobi, which told them its founder, Li Lin, was required to report to the authorities and cooperate with their work at any time.

The draconian measure is undertaken following a decision by Chinas Communist Party to close down all crypto exchanges, with trading volumes in the country dropping considerably.

Chinese trading volumes now account for only around 5% 10% of bitcoins or ethereums global trading volumes. With price there significantly lower. Leading CoinMarketCap to exclude them from calculations of average prices.


07:38

The Three Arguments Against Gold and Why They Are Nonsense "IndyWatch Feed Economics.au"

Its no secret that I am a big believer in gold.

But today, I want to take a look at the case against gold.

Starting from a low of about $250 per ounce in mid-1999, gold staged a spectacular rally of over 600%, to about $1,900 per ounce, by August 2011.

Unfortunately, that rally looked increasingly unstable towards the end.

Gold was about $1,400 per ounce as late as January 2011.

Almost $500 per ounce of the overall rally occurred in just the last seven months before the peak.

That kind of hyperbolic growth is almost always unsustainable.

Sure enough, gold fell sharply from that peak to below $1,100 per ounce by July 2015. It still shows a gain of about 350% over 15 years.

But gold has lost nearly 40% over the past five years. Those who invested during the 2011 rally are underwater, and many have given up on gold in disgust.

For long-time observers of gold markets, sentiment has been the worst theyve ever seen.

Yet its in times of extreme bearish sentiment that outstanding investments can be found if you know how and where to look.

So far this year, theres already been a change in the winds for gold.

A change that, in many ways, I predicted in my most recent book: The New Case for Gold.

But today, I want to show you three main arguments mainstream economists make against gold.

And why theyre dead wrong.

The first one you may have heard many times

Argument #1: Not enough gold to support the financial system

Experts say theres not enough gold to support a global financial system.

Gold cant support the entire worlds paper money, its assets and liabilities, its expanded balance sheets of all the banks, and the financial institutions of the world.

They say theres not enough gold to support that money supply; that the money supplies are too large.

That argument is complete nonsense.

Its true that theres a limited quantity of gold. But more importantly, theres always enough gold to support the financial system.

But its also important to set its price correctly.

It is true that at todays price of about $1,300 an ounce, if you had to scale down the money supply to equal the physical gold times 1,300, that would be a great reduction of the money supply.

That would indeed lead to deflation.

But to avoid that, all we have to do is increase the gold pri...

07:34

J Coin: A New Shot Fired in the War on the Dollar "IndyWatch Feed Economics.au"

Uh-oh. Jamie Dimon and the crypto haters better pay attention. Japan is making them look behind.

The banks there are getting together to launch something called the J Coin.

Its a digital currency, and its designed to mimic the national one the yen.

The banks there are working overtime to protect their market share from the encroachment coming from Apple Pay and the Chinese behemoth Alipay.

These banks know if they dont carve out a niche in this new market, theyll get left behind.

J Coin would offer commission-free remittances, instant transfers, and cheaper overseas movement, for starters.

I told readers of Small Cap Alpha recently that we have to follow whats happening in the crypto market even if you dont want to risk a penny on it.

This is because cryptos have so much potential to erode existing revenue streams for established companies.

For example, if you happen to own shares in the Australian Securities Exchange [ASX:ASX], you should check out a guy called Professor Mike Aitken.

Hes developed a new asset trading system called digi.cash, which he says would bring instant settlement and practically zero cost to trading.

That could be a problem for the ASX, considering it earns around $300 million a year from clearing and settling the cash equity and derivative markets, according to The Australian Financial Review.

5,000 years of history keeps rolling

The monetary system hasnt sat still for 5,000 years, so theres no reason to think it cant shift again away from what we have now. Im pretty sure were heading into a new phase now digital, or crypto.

Physical cash is becoming irrelevant, whether we like it or not. But it does pose various problems. For example, how long before governments and the elites look to lock us all in a closed loop where there are no private transactions?

Theres latent potential now for official currencies to go completely digital and all of them will be tracked. Everybody wants your data, and to know what you do.

Governments are likely to bring their legal tender laws to bear on cryptos in the same way they force us to use the official currencies of today.

I have no doubt the market can provide a secure, private cryptocurrency. But governments would make it illegal for corporations and companies you deal with to accept it. The usual coercive stuff.

If you want to pay your electricity bill, youll have to use the crypto the government wants you to use. Something like th...

07:26

Greg Clark visits Australia and finds high rates of status persistence "IndyWatch Feed Economics.au"

The co-authors on this paper (pdf) are Andrew Leigh and Mike Pottenger, here is the abstract:

The paper estimates long run social mobility in Australia 18702017 tracking the status of rare surnames. The status information includes occupations from electoral rolls 19031980, and records of degrees awarded by Melbourne and Sydney universities 18522017. Status persistence was strong throughout, with an intergenerational correlation of 0.70.8, and no change over time. Notwithstanding egalitarian norms, high immigration and a well-targeted social safety net, Australian long-run social mobility rates are low. Despite evidence on conventional measures that Australia has higher rates of social mobility than the UK or USA (Mendolia and Siminski, 2016), status persistence for surnames is as high as that in England or the USA. Mobility rates are also just as low if we look just at mobility within descendants of UK immigrants, so ethnic effects explain none of the immobility.

Social mobility is indeed difficult to pull off.  Hat tip goes to Ben Southwood.

The post Greg Clark visits Australia and finds high rates of status persistence appeared first on Marginal REVOLUTION.

06:14

When intra-governmental relations turned sour the US-Fed Accord Part 2 "IndyWatch Feed Economics.au"

In Part 1 of this mini-series When relations within government were sensible the US-Fed Accord Part 1 I examined the pre-1951 agreement between the US Treasury department and the US Federal Reserve Bank, which saw the bank effectively fund the US Treasury. The nature of that relationship, which began when the central bank was formed in 1913, changed in 1935 when the legislators voluntarily chose to change the capacity of the currency issuer to buy unlimited amounts of US Treasury debt directly to one of only being able to purchase the debt in the secondary markets once issued. But the effect was the same. The central bank could control the yields at any segment of the bond maturity curve at its will. The shift in 1935 was the result of conservative forces that were intent on derailing the governments capacity to use the consolidated central bank/treasury to efficiently advance well-being. They wanted political constraints placed on the Treasury, such that it would have to issue debt to the non-government sector before it could spend, which they knew was an arrangement (similar to formal debt ceilings) that could be used to pressure the government towards austerity. By the time the Korean War ensued, these conservative forces were winning the political debate and big changes were to come, which would limit the fiscal capacity of the US government to this very day. The result has been an inefficient fiscal process prone to capture by conservatives and certainly not one that a progressive would consider to be sensible. I analyse that shift post-1942 in this blog, which is Part 2 in the series. In Part 3, we pull the story together and reveal what was really going on.

Tensions mount 1942-1951

The first graph shows the yield behaviour of long-term government bonds from the end of WW2 to the late 1950s. The vertical line (Treasury-Fed Accord) marks a discrete shift in policy, which we will discuss in this Part and the final Part of this mini-series.

Clearly, the pegged arrangement was effective (it was abandoned, as we will learn, in 1951).

The US Federal Reserve Bank was not necessar...

06:05

Energy Auditing to the Australian Standard "IndyWatch Feed Economics.au"

Accurate and consistent energy auditing is critical to the uptake and quality of energy efficiency projects as it is often used as the basis for business case justification, project design and as a baseline to measure post-upgrade savings. Presented in partnership with the NSW Office of Environment & Heritage, the EEC's Energy Auditing to the Australian Standard training program gives energy audit practitioners the skills and knowledge to deliver energy audits that meet with Australian Standard 3598:2014

06:00

Australian Dollar and Bitcoin "IndyWatch Feed Economics.au"

1.00 AUD = 0.0002 BTC
0.0010 BTC = 4.60 AUD
Converter

00:50

Can Putin Stand Up To Washington? "IndyWatch Feed Economics.au"

Can Putin Stand Up To Washington?

Drake University Emeritus Professor of Economics Ismael Hossein-zadeh explains that the reason Russian President Vladimir Putin so often blinks when Washington confronts him is that the ruling oligarchs in the US and Russia are members of the same financial elite. The more than one hundred Russian billionaires are financially integrated into the West and are able to elevate their interests above Russian national interests.

If this is correct, then Russias only alternative if Russia is to remain a sovereign country and escape being another Washington puppet state like the UK, all of Europe, Canada, Australia, and Japan is to nationalize without compensation the holdings of the Russian billionaires. Most of them stole their fortunes in the turbulent days of Soviet collapse and privatization. The Russian people should steal them back.

https://ismaelhossein-zadeh.com/putin-blinks/

The post Can Putin Stand Up To Washington? appeared first on PaulCraigRoberts.org.

Wednesday, 20 September

21:46

Trump Blocks His First Chinese Acquisition of an American Company "IndyWatch Feed Economics.au"

What's behind the recent national security-driven decision to block a Chinese acquisition of a U.S. firm?

17:05

Australia's Securities Watchdog Might Run Its Own Blockchain Nodes "IndyWatch Feed Economics.au"

Australia's securities markets regulator is weighing the use of blockchain as part of broader data strategy.

14:51

Australia Ends Double Taxation of Bitcoin, Cryptocurrencies "IndyWatch Feed Economics.au"

Bitcoin and other cryptos are no longer double taxed in Australia

10:44

Putting the blame where it belongs "IndyWatch Feed Economics.au"

Queensland Premier Anna Palaszczuk has followed Bill Shorten in blaming privatisation for the woes of the electricity network. Shes basically right, although theres much more wrong with the National Electricity Market than that.

Equally importantly, in terms of getting a good outcome, shes on a political winner in the fight with the Turnbull government and particularly the Abbott faction pulling Turnbulls strings.

No one fully understands whats going wrong with energy policy, but Australians love renewable energy and hate privatisation. Both of these judgements are validated by experience. Renewable energy has overdelivered on its promises while privatisation has (at best) undelivered and more commonly made matters worse. So, the idea that the LNP can win the debate on energy policy by bashing renewables and attacking public ownership as socialism seems pretty implausible.

10:26

Debt Rattle September 20 2017 "IndyWatch Feed Economics.au"

Edward Hopper Automat 1927   Australia: A Delusional, Stuffed, Basket Case, Bubble, Third World Economy (MB) With QT On The Way, This Market Is Headed For A Brick Wall (Boockvar) Where Deutsche Bank Thinks The Next Financial Crises Could Happen (CNBC) Just 4% Own Over 95% Of Bitcoin (HowMuch) MPs

The post Debt Rattle September 20 2017 appeared first on The Automatic Earth.

08:13

The Golden Solution to the Worlds Biggest Debt Crisis "IndyWatch Feed Economics.au"

Yesterday, we told you about a special report Nick Hubble has prepared on why gold is the perfect investment for any Australian right now.

Its called The AUSSIE Case for Gold. And you can get a sneak peek here.

Nick is the Editor of Jim Rickards Strategic Intelligence advisory here in Australia.

And while it seems people all over the planet have their heads firmly stuck in the bitcoin frenzyJim and Nick have been quietly investigating the REAL threat to the world economy.

Australia is a key part of it.

You can think of this report as the missing chapter of Jims bestseller, The New Case for Gold.

So, were releasing a special, 2017 limited print run package. Why? To help navigate your wealth through what Jim calls the next monetary reset.

This is something that could finally bring down the global eight-year-old bull market.

What could be the trigger?

As Jim explains below, one factor people still seem to ignore is ever-rising US national debt, which, as of today, is over US$20.1 trillion

The blame for this comes from the cost of major wars, the 2008 financial crisis, and a bevy of irresponsible government spending.

But, as much as we like to criticise government for being completely irresponsible with our money, the past is in the past.

What matters now is how we get out of this mess.

Thats why I want to share with you Jim Rickards latest take on the situation.

Read on below for the current state of the debt crisis, but, more importantly, a clever first step on how we can get out of it

The Golden Solution

Jim Rickards

Right now, the United States is officially $20 trillion in debt. Over half of that $20 trillion was added over the past decade.

And it looks like annual deficits will be at the trillion-dollar level sooner rather than later when projected spending is factored in.

Basically, the United States is going broke.

I dont sa...

07:00

Vacancies falter "IndyWatch Feed Economics.au"

Resources recovery

August 2017 was a softer month for job vacancies on the Department of Employment's index.

The trend is now +6.4 per cent higher than a year earlier, and +23.8 per cent below the October 2013. low. 


Despite the weaker month, Queensland and Western Australia still experienced double digit growth from a year earlier, with a decent lift in Victoria. 


The annual figure was down in Tasmania, but that's as likely related to a surge in employment uptake based on other indicators.

The wrap

It's good to see that vacancies in Western Australia are now well off the lows of 2016, at about 12 per cent higher.

But nationally, this was a softer result. 

Perhaps this is an early indicator that the economy is set to underwhelm in 2018.

Westpac's Bill Evans, always worth following closely, sees no rate hikes in 2018 on this basis. 

...

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