January 11, 2012

Tremors from Australia's crash will reach our shores

Posted in International Economy · 200 comments ·
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This week, the column is going to focus on the one country that has been receiving thousands of young Irish people for the past three or four years, giving them a chance when there were none at home. The question I pose this week is: what will happen to Irish emigration to Australia when the Australian housing market goes bang?

For those of you with family in Oz, you will be aware that there has been the mother and father of a housing boom all over the country. You will also be aware that reports of its demise have been frequent and persistent. Up to now, nothing has happened and the boom has more or less continued.

Just over two years ago, I spent a few weeks working in Australia and found myself on Bondi Beach on Australia Day. Bondi Beach, and particularly Bondi Junction, were full of young Irish workers. The stories were typical: young professionals, who had been working in Ireland and had been laid off in the boom, were starting over in Australia. They worked in the waterfront bars and cafes of Bondi, getting back on their feet in the hope of rebuilding careers Down Under.

Even back then, there was talk of the possibility of a wobble in the housing market. But the few who were worried were more than outnumbered by what Aussies call “spruikers”. A spruiker is a snake-oil salesman who ramps up the prices by talking up the market. We know all about these lads. The spruikers generally work for the real estate or the finance industry and are still on the TV all day talking about ‘great opportunities’. As was the case in Ireland, these were the “supply and demand” merchants, who claimed that the ridiculous increase in house prices was simply a reflection of demand which was related to population growth.

But as we in Ireland know, the demand for houses is not a result of the growth in population but the growth in, and availability of, credit. The key driver for house prices is debt. No debt means there’s no house- price inflation — plain and simple. If the banks are financing every Tom, Dick and Harry there will be an unsustainable boom. When prices start to fall, the credit dries up and the market collapses.

This is the lesson of the past five years worldwide. The best leading indicator of this will be the currency. The currency, if a country has one, is the canary in the coal mine because when the economy shows signs of overheating, the financial markets will pre-empt the fall in asset prices by selling the currency first because it is a liquid asset and can be traded — unlike houses, which we know here in Ireland are illiquid assets. The Aussie dollar, like sterling before it, has fallen ahead of the housing market.

Australia’s housing market looks like it will be the last great housing boom to go bang in a great, rolling, global-housing boom/bust cycle which started to crack in the US in 2006/7, Ireland and Dubai in 2007 and the UK in 2008. Up to now, Australia’s boom has managed to keep going, but it is beginning to falter.

The reason the Aussie market has managed to keep going is down to China. Australians sometimes refer to their own economy as “China’s quarry”. I have seen this for myself, having spent time filming a documentary in Port Hedland in the Pilbara mining region of Western Australia, where enormous diggers gouge out the iron ore. We followed that same ore to the Chinese port of Ningbo where it is smelted into steel for China’s booming export industry. (www.addictedtomoney.com.au)

The Chinese money, which bought the ore in the first place, swells the coffers of Australian banks, and these banks lend this recycled Chinese money to Australians to buy houses. As long as the Chinese buy up the ore — or other minerals — the money supply of Australia will expand, making credit available to Aussies. The more credit there is flowing around, the more the good times roll. Morgan Stanley, the investment bank, revealed that Australians are now as indebted as Americans and in the past four years, mortgage borrowing has run far ahead of all other types of borrowing.

But what if the credit stops? What if China doesn’t want to export — or more accurately can’t export at full tilt?

This slowdown is already happening in China. In October alone, Chinese industrial exports were down 17pc on the year and the omens for the Chinese economy, with the world slowing down this year, are not good. The Chinese authorities will try to manage this decline by pumping money into the system. For example, bank lending in China rose 15.6pc in November, however, the falling export demand for Chinese goods will impact on the amount of Chinese money going to Australia. This will put the squeeze on credit, and in so doing, the fall in house prices seen in the past three months will continue.

We know from our experience here in Ireland that housing markets do not correct in an organised fashion. There is never a soft landing. It is likely that once house prices begin to fall, which they have done in the last few months, they will drop like a stone.

What does this have to do with us? It affects us because it affects the job prospects of our emigrants who have gone to Australia. It will affect not just those directly involved in construction because, as we know, when the tax revenues from construction dry up, so too do government jobs as there is less money for nurses, doctors and teachers. Last year, according to Australian government statistics, there was a 68.8pc increase in primary visa applications from Ireland for business (long- stay) visas. The majority of them were to New South Wales, followed by Queensland and Victoria. Over in Western Australia, visas granted to Irish citizens increased by 149pc last year. Many of these jobs were in the mining industry.

When the property market slumps in Australia — which is likely to be this year — the job opportunities will go too. This cycle of money and jobs from Western Australia to China and back to Australia, which drives up the amount of credit, and thus the increase in house prices, has enormous ramifications for people in this country.

The opportunities in Australia entice people over. Initially, they can work in bars and cafes because demand is buoyant in Australia because of the wealth effect of rising house prices. The higher the house prices, the more credit is extended and the more cash there is in circulation. But when this merry-go-round stops, it shudders and then, as sure as night follows day, it goes into reverse. And tremors will be felt in Galway and Donegal, as they are in Sydney and Melbourne.


  1. Adam Byrne

    Never like Bondi Junction, it was a dump. Good article though David.

  2. At least the aus$ is a federal currency with one central bank

    • Realist

      That does not really help too much as they expanded the credit too much due to the fractional reserve banking system and central bank.
      In simple words they did not save first to borrow, but rather spent money coming from the thin air, like in Ireland, like in Germany, like in Greece, like in USA and like in probably 99% of countries around the world.
      Once we recognize that the root problem of this booms and busts is credit expansion due to the fractional reserve banking system and central banks supporting them it will be better for us.
      Tackle it and the malinvestments driven from the central place will stop.
      It will be no bank to drive credit expansions without prior saving, nor central bank or government to bail out banks.

    • eddieroq

      David..the AUD has never been as high as it is now (almost 0.8euro)…your point about the AUD faltering is nonsense…i do agree that the property prices will drop but it will not be an uncontrollable like you say…Australia is a diverse commodity economy with mineral as well as energy commodities that the world demands now more than ever (Oil, Gas, Coal, Uranium), also housing development and planning permission is slow so the likelyhood of an oversupply scenario is unlikely…to be honest i think you are sensationalizing what will be a ‘correction’ and not a crash

  3. Juanjo R

    Whats the solution then to property boom and bust?

    The difficulty is that eye-watering profits can be made by absolutely anybody and very quickly but when it goes wrong as it in Ireland, you are left with long-term problems of unusable buildings, lack of infrastructure in the places that really need it, lack of transport, no market incentive and huge debts.

    Remember unlike speculation in stocks and shares or any private goods for that matter ( or private property ) speculation on bricks and mortar ( real property ) has a whole dimension as real property when developed has rights and development laws and all kinds of inmplications attached to it. When a property is established in deed it takes a long time usually and a big change in money before it can be extingushed.

    Maybe to manage development much more closely? Ration it so to speak? essentially view development in general as a type of economic resource to managed in a sustainable way? Like trees or fishing stocks…not as a free for all get rich quick scheme.

    • Juanjo R

      sorry about the typos!

    • 33square

      for there to be a profit, there must be a loss (be that financial or otherwise), it’s a law like the conservation of energy: value cannot be created or destroyed, only changed from one form to another. gathering more of this value than a person might ever need is the problem. the solution is a changed mindset by choice (unlikely) or a changed mindset by life or death necessity (more and more likely by the day)

      • Juanjo R

        That is not true 33square.

        The laws of physics which are scientific are not the same as any supposed laws the pseudo-science or human a area of economics.

        Value is a notion of man and values are abstract – energy is not. Energy is a reality.

  4. An extremely sane article that sees causalities in the right way.
    Pity our EU masters are purblind to the obvious.

  5. Deco

    Pearl of wisdom from the article.
    Absolute pearl.

    [
    A spruiker is a snake-oil salesman who ramps up the prices by talking up the market. We know all about these lads. The spruikers generally work for the real estate or the finance industry and are still on the TV all day talking about ‘great opportunities’.
    ]

    A yes. We in Ireland, know exactly was this references, in the Irish experience. We had Sumo Harney telling us in 2001, “we can NOT talk ourselves into a recession” as we learned how to binge even further on credit. We had The Drumcondra Ditherer with his speech about “cribb en and mow anen and sit en on da fence, is a lost opper tune ity, I don’t know why dose peeple don’t committtt suicide…”.

    We had Dan McLaughlin, Austin Hughes, the head of myhome.ie, countless bankers, thousands of auctioneers, and a few media personalities all singing from the same over inflated hymm sheet. Because property was a Calvinistic religion there for a while. “I have borrowed and invested, therefore I must be a member of the Elect. Look at me. I am a believer in the property cult.”

    A Spuiker. I presume it is a variant of “a spiker” – as in somebody trying to spike prices.

    Maybe we can copy that into the Hiberno-English.

    We even have a Spuik in the centre of Dublin – a monument to all the price spiking that went on in the Binge era.

    Shall we continue to call it the Binge Syringe, or rename it as the Monument to the unknown Spuiker ???

    • Deco

      Or even Monument to the Unknown Fallen Spuiker ?

      We can have Bertie and chums laying a wreath every year, and then a reading of a list of the developers who were sent VietNAMA and who have yet to escape….the dignitaries can all stand around in umbrellas from AIB, BoI, Anglo Banglo, Permo, INBS, etc…

      • Realist

        We need a one big pyramid to make the icing on our property boom :)
        Who should go in there not sure, but we can guess.

      • Juanjo R

        There is have a monument already- or at least a type of – its the shell of the anglo-Irish Bank new HQ building in the IFSC that hasn’t been finished.

    • Dorothy Jones

      Well Deco…nothing has changed.
      -NAMA in its wisdom now decides to finance apartments in at the Grange in Stillorgan.
      -Limerick Regeneration spends €116m and not one house has been built. It’s a huge amount of money in relation to the small amount of demolition which has been carried out to date.
      Two further examples of ridiculous misappropriation of taxpayers’ monies in the face of cutbacks in areas such as disability.
      The Government may be dim but for Heaven’s sake, are the Troika completely thick as well? A high infant’s grasp of maths would be sufficient to see that this is a completely nonsensical state of affairs.

      • 33square

        “The Government may be dim but for Heaven’s sake, are the Troika completely thick as well?”

        Dorothy: you are making the mistake of believing that both of these parties don’t intend to fail!

        • 33square

          what you need to fathom is the desired result of their “failure”…

        • 33square

          imagine if a massive change had to be made that no government could get away with making without being overthrown. how would government(s) go about making that change?

          can you say “false flag”. 911 was above all else, a signal.

        • 33square

          the Drumcondra ditherer wasn’t really dithering, he just wasn’t playing for the home team, depending on your point of view :D

      • uchrisn

        dorothy, basically over half the voters are property owners and have a vested interest in increasing the price of their property. This is the key to the Irish crisis, ‘the herd’.
        1. They let the banks and developers get away with anything as long as their house prices were going up.
        2. They bailed out the banks bought up all the properties in the country using the countries money to keep up their house prices.
        3. They would like nothing more now than to knock down every empty unit in the country to get their houses prices back up.
        We live in a democracy. A democracy should not be 2 wolves and 1 sheep deciding whats for dinner, Ireland has been like that and it best sums up the Irish crisis.

        • Colin

          You are correct uchrisn. Speaking as a sheep, with wolves eyeing me up for years, I had to leave Ireland to find new pastures to feed on.

          I always noticed many of my peers complained about high house prices in the late 90s. Then, they go out and buy one in the early 00s, in the foolish view that they are always going to rise in value. Then they try to convince everyone who hasn’t bought a house that they are missing out on making easy money, they become evangelical about it. It is like crossing over to the dark side.

  6. Deco

    Australia is full of many extremely indebted individuals and families. Amazing how success does this. Or maybe it is the banking system ???

    Anyway Australia is highly leveraged, and is heading for a serious showdown with debt deflation.

    The only thing that can rescue Australia is if the regime in Beijjing decides to do more stimulus packages.

    When the US does stimulus packages, it stimulates China.

    When China does stimulus packages, it stimulates Australia.

    • Realist

      The only place to print money from nothing is banking system and central banks.
      This is where the problem is starting in a boom time. When bust come it is too late to do anything. the best solution is to leave everything to crash, companies to go bankrupt, relax laws so labour and resources can shift to industries in need to people.
      Malinvenstmens projects need to ceese to exist and should be abandoned and not prolonged with additional trillions of money.

      China is in in itself over indebted, they are around 60% of GDP (sorry for using this stupid aggregated and nonsensical economic parameter) in debt as they have their own ghost cities with 2 million of empty apartments and their own NAMA’s, actually tens of NAMA’s where they shift debt from one to another.
      I am sure Ireland will invent NAMA2 and NAMA3 following the Chinese example :)

  7. lomcan

    What’s the name of Anglo’s twin brother in Australia ? Anyone know?

    • mactuile

      Commonwealth Bank (CBA), though none could possibly be as bad as Anglo.

      David – your point about the currency. To me it looks like the Australian dollar has never been as strong, but cracks are appearing in the housing market. Do you think the AUD is yet to experience a fall?

      I knew from office chat, media and general property psychology there was a bubble brewing here even before I looked at the inflated numbers. It it all depressingly similar to Ireland. Although it is hard to see the 70%+ price drops here that I imagine will end up being normal in Ireland.

    • To start Anglo Irish Bank was incorporated by a Limerick Accountant and managed by him initially in Limerick before it expanded to Dublin.Maybe we should ask where is Limerick in Australia? That might give us a lead !

  8. gizzy

    It may be different countries but the Banks are being advised by the big four all over the world. The problem with the big four is that their experts are not experts but MBAs in nice suits masquerading as experts. In my experience I found they did not know their arse from their elbow. In Banking however the Boards take the word of the advisors as gospel and pay them millions for it. All these guys do is chase the market be it shares or property until it falls advising on new IT spends, new marketing plans beefed up sales teams. Then after it falls they advise on beefing up risk management, management info systems H.R. depts etc. Of couse they have experts in all those areas and in most cases packaged solutions.I was at a Borad meeting where as a young advisor spoke twelve board members all nodded their heads. The guy was talking such nonsense my teeth were itchy listening to him.I worked in Banking pre 04 for twenty years. What is going on now is criminal. You can build a new Bank now cheaply with low IT and infrastructure costs of less than 100m. A billion capital would allow you lend 7 billion into the real economy if you can access the same funding the existing players are having wasted on them. The only problem is the guys making the decisions fall into two camps, those who have a vested interest and those who think you need to take over toxic loan assets to take over the payments system. That is why when asked about nationalisation of the Banks all the politicians spout on about ATMs. What the in the name of God, Allah or any other deity have loan books got to do with ATMs.I have forgotten more about Banking than these guys know but when I tried to get back in recently was told at 47 that I was too long out of it. As if being in there from 04 to 08 would have being a good thing. Bottom line they want to control it more than they want to fix it.

  9. Murdoch Media

    He is Australian how will he fare when Australia goes into recession? And our own O’Relilly Media exposure in OZ ? Any takes ?

  10. Deco

    Would love to know what the Aussie versions of Anglo (aggressive developer oriented bank) and Permo (aggressive home supermortgage bank) are called. Permo did some really stupid moves in the leafy suburbs of Dublin with mega-mortgages. It took two years longer to realise, but they also flopped 99% in value. And it was sort of easier to predict than Anglo’s short sharp collapse where the ordinary punter had no knowledge of what Anglo were doing….

    Purely as a short opportunity. A reverse Seanie Quinn move on CFDs.

    I hope that Australia does not have an Aussie version of Sean Quinn.

    It all depends on China’s construction boom.

    • imithe

      The closest I can think of is Macquarie Bank AU:MQG. They had a culture of high risk/high rewards but were badly stung by US Subprime crisis.

      The ‘Big 4′ banks in Aus are generally more conservative and benefitted after the Government Bank guarantee here – when smaller institutions were swallowed up. My general perception is that they took this as a warning sign and have been increasing their deposit base in the last few years.

      In the news this week, the big 4 are warning of cost cutting in 2012 caused by a drop in lending over the last year.

  11. imithe

    Very interesting to read an article by David about the Australian Economy. Hard to argue that there is an impending fall in house prices but a crash sounds a bit extreme.

    An amusing thing here in Sydney over the last few years has been Property Opinion articles in smh.com.au where Spruikers espouse Sydney’s property hotspots. This is followed by a blog battle between the bulls and the bears arguing their case for a continuation or a crash.

    By the way, there are a large number of mainly younger people praying for the big crash in the hope that they will afford a home near the main city centres. However, in the past the main declines have occurred in the outer suburbs where supply is plentiful. The authorities have tight regulation on new development close to CBDs here.

    One comment of David’s I disagree with is “The Aussie dollar, like sterling before it, has fallen ahead of the housing market”. In fact the AUD has generally been trading above parity against the USD for the last year, hitting highs of $1.10; currently $1.03.

    Would like to hear Tull McAdoo’s take on this.

  12. Willie C

    Australia’s Morgan Kelly – Prof. Steve Keen wrote the following yesterday…
    http://www.crikey.com.au/2012/01/11/is-australias-housing-bubble-finally-close-to-bursting/

    Looks like David is a follower!

  13. gavcol

    Great article.. I am over here at the moment and its uncanny how many simlarities there are with Ireland before things went bang. However, the AUD is stronger than its ever been recently (AUD now buying .8 EUR). I dont get your point that the currency is falling?

  14. Keego11

    long time reader first time poster etc. My wife and I moved to Australin in mid ’07. We moved for a change of scene more than anything else (prior to financial meltdown) so never really felt the brunt of problems lots of our friends are dealing with – apart from negative equity and falling rents on our Dublin pad.

    in 08/09 Australia and the new Rudd labour govt responded to the GFC by a massive stimulus package, basically handing out cash, having only been in the country a couple of months we unexpectedly recieveed a healthy gift (despite being relatively high earners) – remind anyone of SSIA’s! This is credited with having kept Australia out of recession. Interestingly I recall the exchange rate with the US ringing at 1:1 in May ’08 and dropping to something like .69c in October which defintely helped mining exports and further shielded down under.

    With regards to property here there are major differences but also similarities to Ireland circa 07/08. If there is a bubble here its definitely a speculation bubble not helped by a system of negative gearing where owners of multiple “investment” properties can right off loses thus paying little income tax and huge overseas investment coming out of China and SE Asia, particularly in new apartments (doesn’t seem to be the same over supply of suburban houses).

    Traditional local manufacturing is dying. Unions are stirring up trouble every week, see Qantas and Bluescope steel.

    The mining boom is not replacing lost jobs and artificially changing the makeup of the areas they work in ie rental properties in outback Australia close to mines are seeing similar yeilds to Sydney’s Eastern Suburbs! .

    Forclosures are on the rise particularly in low income areas and there is definitely a squeeze on household incomes with more and more being spent on rent and mortgage repayments.

    There is mandatory superannuation for every employee in Australia with a min of 9% of gross going into your pension – sensible. The Spruikers have floated a wonderful idea that people can dip in to this fund for mortgagee’s in order to stimulate the market – madness!

    Lots of Australians I speak to seem to think that there are 4 commodities the world needs regardless of economic circumstances – Oil, Gas, Coal and Iron, the last 3 Australia has the last 2 in abundance. However IMO Oil and Gas is the only real commodities to rely on, and China is actively developing alternative supliers in Africa and Central Asia (Mongolia) to supply Coal & Iron.

    I don’t think there is an Anglo or INBS equivalent here but the banks are heavily reliant on the continuing mining boom. If China & India contracts due to a property bust ( i’m hearing lots about black loans in China at huge interest rates) Australia and its banks will be in massive trouble, high costs, negative equity, low productivity etc. Yes Australia has its own reserve and currency but the banks will look after #1, they will foreclose and they will raise interest rates as they see fit. The other thing that seems to have been forgotten by the younger generation here is that interest rates at the moment are historically low, their parents will tell you horror stories of 15+ rates in the 80′s and 90′s

    Sorry for rambling a bit but just felt the need to add my thoughts to this!

    • lespantalonsfancie

      Keego11,

      “The mining boom is not replacing lost jobs and artificially changing the makeup of the areas they work in ie rental properties in outback Australia close to mines are seeing similar yeilds to Sydney’s Eastern Suburbs! .”

      I think people not au fait with Sydney will not quite understand just how posh the “Eastern Suburbs” are that you speak of. I hear the “Boat Licence” ownership per capita is the highest in the country !:)

      lespanalonsfancie

  15. redriversix

    25 January 2012…..

    1.25 billion euro Anglo Irish Bond fall’s due for payment to UNSECURED Bondholder’s.

    That’s €1,250,000,000.00 due on 25/1/2012.

    America borrows $3,600,000,000 a day to standstill.

    That’s $3.6 Billion dollars a day,every day

    No where in the World is immune from financial crisis or “contagion” or poor mismanagement,but at least Australia has excellent natural resources,so if they kop on quick enough they have some tangible industry to help support themselves.I don,t know what their debt ratio is like,maybe they can learn from the mistakes of other’s.?

    CANCEL YOUR DEBTS

    Best

    RR6

    • There’s a widely perpetuated myth that we wanted to pay the unsecured bondholders. That our dept of finance thought it was sensible. This was not the case. It’s widely known on trading desks that Ireland got shafted and this was forced upon us by the European Central Bank as they were afraid of a Lehman Bros style scenario if our banks creditors weren’t made whole. We introduced the guarantee scheme and we got a spanking as a result. I’m no fan of the FF party but the FGers are simply following the same plan, with a bit more gung ho. Germany and France are lending us money with the caveat that some of it most go to pay off these bondholders. It’s disgusting but that’s what happens when you give away your economic sovereignty.

  16. redriversix

    Reuters has confirmed that American “Homeland security”has been monitoring Social media sites for the last 18 months including ;

    Facebook
    twitter
    myspace

    To name but a few,they are also believed to be watching blogs such as the “Huffington post”…………your okay, “David” your not on the list !

    Iranian president in Cuba for talks with Cuban leader……

    Best
    RR6

  17. stiofanc02

    Well lets hope that a few more of those in the scratcher till noon get there in time for the bust.

    It will do them the world of good, as I look at those who left and came back were far superior to those who didnt make a move in the 80′s

    If they could get a taste of some success before the Aussie crash and have to pay their own ESB bills for a few months it will help them with some basic life skills that will be much needed here when they come back.

    No doubt an Aussie crash is coming, how much longer before the shit hits the fan is the question?

  18. redriversix

    Russian Naval Task force , headed by the Aircraft Carrier “Admiral Kuzrenstov”has left the Syrian port of Tatus after a three day visit.Their “visit was to replenish food and water supplies.

    Russia has maintained a Soviet era Naval Base there for years and hopes to upgrade it 2012.It is their only Naval Base in the Mediterranean.

    The U.S.S Carl Vinson AIRCRAFT CARRIER along with HMS Daring are sailing to link up with the U.S Task force in the Gulf which already has the Carrier group JOHN.C.STENIS there.

    To have two carrier groups operating together is quite unheard of in “peace-time”…………..must be some great war-games or maybe we have not been in “peace-time for a long time.

    Of course,I know military action or reports have no effect on financials around the world [sic] so I should not blog this here,Bit it beats typing the same old shit about “our”crisis which their is no answer to and people generally are apathetic towards.#

    Quite astonishing really…

    Financial strike now

    Best RR6

    • Juanjo R

      rr6,

      Military power projection, employed by countries such as US the UK is closely linked to economic policy so its not completely inappropriate on occasion.

      However its not got much to do with housing bubbles in Australia though!

      I think US carrier groups have been deployed in that area ( eastern med/gulf ) in that strength for 40 years at least. ( To clarify thats just one super-carrier ). The deployment isn’t that unusual, I think.

      The strike range of these groups is huge – up to radii of thousands of miles. They don’t need to be close to a target to strike at it with whatever type of weapon they choose.

      Speaking of power projection there was announced shift in direction towards Asia Pacific by Obama recently.

      http://www.bbc.co.uk/news/world-asia-15715446

      This is very significant if you corelate this with economic developments there – the rise of China and India ( and Russia in the background )and their current attempts to get around using the debt-backed dollar. Also these countries are upgrading their militaries significantly – for instance China and Russia/India jointly are seperately developing their own advanced stealth fighters to complete with the best American ones right now. China is also trying to build large aircraft carriers.

      For India and China this is advance to the forefront of military technology is unprecendented, as is thier rise in economic standing.

      So hence the US re-adjustment.

  19. bonbon

    For a complete overview of Australian financials this page has it all including derivatives, the housing bubble.

    http://cecaust.com.au/main.asp?sub=articles&id=background_financial_crash.html

    As @imithe posted above Macquarie is the candidate :

    http://cecaust.com.au/main.asp?sub=articles&id=2010_05_28_draculas-bank.html

  20. Realist

    Not long time ago CEO of Australia’s fifth largest bank, ING Direct, says “There is an urgent need to provide more affordable options and borrowers should be able to choose whether they want to repay the capital or not.” The people of Australia “are needlessly being denied the chance to buy a property while prices spiral out of their reach”.
    Koch goes one better, with ING Direct’s new Interest Only Perpetual Mortgage, borrowers can tote their loans from property to property, “accumulating equity from rising property prices as they go.” After all, real estate always goes up in price and ING wants to be your “mortgage partner for life.”
    “Then, as they near retirement,” says Koch, “they could sell their property for a big enough profit to pay off the original loan and buy a smaller place outright, leaving them mortgage-free. Or they could keep the mortgage going and repay the original capital from their estate, after death.”

    A check of the ING website reveals that Mr. Koch started with the company back in 1999 as Head of Technology and CIO. The brief bio makes no mention of Koch having any lending experience. Which may be why he claims, “There is no economic reason for banks to insist on regular capital repayment. It just makes the loan more expensive for the borrower.”

    “It has worked fantastically in Europe as a way for people to get home ownership and build wealth throughout their lives. It just requires a change in mindset about how you live with debt,” says Koch.

    We know how this story ends :)

    • Morning,

      Thanks for all the comments and various opinions on Aus and where it might be going. The key to this article is to alert people to the fact that mortgage lending in Australia is out of control and it seems reminiscent of, rather than a carbon copy of, this place a few years back.

      All the best,

      David

      • Realist

        Morning David,
        Thanks for your articles that drive us to think for a bit every day.

        They are all starting in the same place, banking system printing money from thin air, giving it to the population, expanding the credit as you said, while proping the building industry (and other industries) with thin air money again.
        Money is not based on previous savings, but rather fractional reserve banking ability to print money supported by central bank.
        That brings the inflation and booms of huge dimensions that can only end in busts as sooner or later it will be no more resources left (as they are not saved by the society prior).

        I cannot see how is that different than in any other country.

      • Deco

        +1.

        People you have been warned.

        Do not send the toil of your labours into the oblivion that is a binge economy real estate market !!! Don’t drink the money you earn either.

        Save it carefully, because life is long and you have a long life of committments in front of you.

      • John Norton

        David, good morning GMT+11

        Greetings from Sydney. Insightful article and very true of the state of affairs here in Sydney for one. Isn’t it funny that my boss, director of a boutique architectural design practice here in an expensive Sydney suburb laughs at me when I talk about property here being overvalued and that it is heading for a correction! Where I wonder if he will have work for my by year’s end, he’s banking on a flood of enquiries for new work in this first quarter, which incidentally is yet to happen.

        Just one point; the language of your column when read by nervous Irish eyes here in Australia is considerably raw, tragically all too familiar and potentially very painful, again. You casually ask the question…’what will happen to all of us Irish out here when the economy goes pop?’’ in a tone that suggests you are more than certain that what most of us fled from is on the way here to haunt us. I do agree with you though and do believe the housing market and economy in general is in need of substantial correction. And I’m sure its coming. But if you were to write the article again would you use similar language and tone that suggests Australia is in major trouble? And that it’s due to strike this year?

        Long time follower,
        John

  21. bonbon

    The solution is an urgent call for a New National Bank,
    the dream of the courageous founder of Australia’s original Commonwealth Bank, King O’Malley.

    And here is a list of signatories :

    http://cecaust.com.au/main.asp?sub=info/mobes/natmobe&id=the_australian_ad.htm

    • Realist

      How is that going to be different than current banking ?

    • bonbon

      And just to remind British Gold Standard ideologues, national banking follows Alexander Hamilton’s First National Bank concept introduced in the Federalist Papers, explicitly to counter the corruption of British banking, still even more relevant today.

      • Realist

        The only proper way is 100% reserve banking based on real money and not money printed from thin air.

      • bonbon

        Printing money from thin air is what’s going on, even if the money M1,M2,M3 is derivative notes of nominal value.
        Since if the $14 quadrillion is monetized, ie. hyperinflated, a giga-Weimar is inevitable, bankers are terrified, but follow this path as if programmed.

        The counter-reaction to base money on a gold-reserve creates what Hamilton called “dead-stock” leading to corruption a credit system is needed.

        But first Glass-Steagall all the non-commercial paper.

        The key then is to look at the difference between Hamilton’s idea and hte British one. Today most “addicted to money” have not the slightest concept of this. It is a massive blind-spot. And there must be the area to look.

        • Realist

          Bonbon,
          Not sure I understand your position at all.
          Are you for 100% reserve or fractional reserve banking ?
          Are you for central bank or not ?
          Are you for gold or any kind of hard currency or not ?

          From mentioning Hamilton it looks you like more government and more centralizing power, is not it ?

        • bonbon

          National physical economy v. imperial finance represented by concentrated “independent” central bank monetarism.
          Right now finance is concentrated in 5 or 6 TBTF dinosaurs (Citi being just one) which all nations are blackmailed to support to the point of suicide. Break that centralized power with Glass-Steagall, and use the US constitutional Credit clause to move ahead.

          That’s Hamilton.

          • Realist

            So, you are still for central banks or not ?
            For more government or not ?

          • bonbon

            The British Central Banking system is now totally bankrupt. National Banking of Hamilton is the way forward now, after hiving off the synthetic derivative mountain with Glass-Steagall.

          • Realist

            I wish I know more about it but the main question is for you to explain in simple wording this:

            How will such national bank prevent the same crisis if it existed in Ireland ?

            You can also add other things that needed to exist.

          • bonbon

            First de Soto and the Austrian School – I post below on this. Second national banking as Hamilton specified.
            But essentially Glass-Steagall before any of this.

  22. bonbon

    Eire has gotten itself again into the worst of all possible worlds – de facto (if not officially) a Commonwealth member and to top the misery, a poster Euro-lander. Add in new “transportation” to Australia.

    Australia has been dealing with the Commonwealth banking system for years- the National Bank Petition dates from 2002. That banking system has reclaimed the USA (de-facto if not officially) as evidenced by Bernanke’s FED rescue of the Euro. Australia does not have the explicit Euro problem, but is entwined in exactly the same financial system, as evidenced by identical bubbles.

    Ireland should take example of its diaspora there fighting for a new banking system, and Glass-Steagall.

    • Realist

      I do not think that is enough really to prevent boom-bust cycles until you stop printing money from thin air.

      • bonbon

        True money does not grow on trees. But printing is only one aspect – buying and selling money as a “commodity”, blocked by the Bretton-Woods from 1945-1971 is another.
        Monetizing gold or monetizing Credit issued by a national commitment to progress is the question Hamilton took to Congress.
        After all how to set the price on gold?

        Boom-bust cycles seems to be a mantra here as if inevitable with no cause. From physics, when 2 systems are locked in “conflict” one expects noise. We are at the point now where this noise will kill us all, the planet cannot tolerate the older system any more.

        • Realist

          Boom-bust cycles are coming from credit expansion caused by fractional reserve banking system backed by central bank who is backed by government.
          If you have 1 billion of real money and you print out 10 or 20 billion out of it (e.g. Anglo or AIB), is not that what is causing boom cycle, leading later to bust ?

          Physical laws do not apply to human action that I know. If they do we will not be learning from each other and be writing it in here.
          Particles and humans are not driven by the same laws.

        • Realist

          You can read free book called “Money, Bank Credit, and Economic Cycles” by Huerta de Soto.
          It costs you no money and it is an excellent book.
          It explains at the end how to move to the proper system.

        • bonbon

          Boom-bust comes from the long vicious conflict between an imperial moneterism v. progress of the human species. It is not an intrinsic natural effect but an imposed plague.

          Basically monetarism operates in a particle world with flat geometry, Human progress in a Riemannian geometry.
          This is why free-trade, levelling the playing field are simply incompetent economics.

          The reference to particles misses waves, but that’s for another discussion.

        • bonbon

          Wiki :
          Huerta de Soto is also an adjunct scholar of the Ludwig von Mises Institute, a member of Mont Pelerin Society’s Board of Directors, of the Board of Trustees and the Scientific Council of the Foundation IMDEA Social Sciencies, and of the Quarterly Journal of Austrian Economics’ editorial board and director of the publication “Procesos de mercado: Revista Europea de Economía Política”.

          The London School of Economics really owns the Austrian School. The Chicago Boys who put and loved the dictator of Chile, Pinochet, represents the Austrian School.
          If you want we can debate this, but simply put, the EU is implementing the Austrian School right now.

          • Realist

            It does not mater who owns who, but does something make sense or not.
            How can one school of thought own the other school of thought ?
            How come EU follows austrian economics ?
            What is going on around the world is total opposite what austrian school is teaching.
            They are for 100% reserve banking without central banks, with slim or no governments and their influence.

            I just cannot grasp your reasoning at all. What school or schools you follow or acknowledge ?

          • Deco

            Austrian Economics advocates zero effort being expended trying to bail out failed capitalist enterprises.

            That part of Austrian Economics has been conveniently discarded by Merkozy.

          • bonbon

            I post directly on Hayek below. It must be an important theme as it turns up all over the place.

  23. Mea Culpa

    Old Age Pensioners

    May I be allowed to intervene an off topic issue on this site but a real issue otherwise .The following has been submitted to local radio / newspaper :

    I am a Independent Qualified Accountant and Taxation Adviser since 1977, practicing in Limerick and during that time I have brought to the public domain the following :

    - Reporting to the National Crime Forum in the Limerick Civic Offices in 1998 my ten year predictions on the Irish Bank Crisis that has since come to past : and

    - Reporting on the discrimination against small Irish Farmers by The Revenue on the year of marriage and taking the matter to the Appeal Courts and winning the case that became a national media at that time .

    After 8am on Christmas Day , St. Stephens Day and the day after I walked by O’ Callaghan Strand in Limerick and on each of those early mornings I saw the selfless efforts of brave civic minded men and women dredging the river Shannon in search of a body while a helicopter hovered overhead.

    Subsequent to those days I learned how The Revenue sent ‘indignant missives’ disguised as letters to 150,000 pensioners attempting to criminalise them in their dying years for something they did not do .I have decided again to report to the Media only this time it is about a greater injustice to all our senior citizens .

    It is important initially to understand that all pensioners were tax compliant to 31st December 2011, and it is not their problem whether they did or did not pay enough tax to that date .There is no dispute about that . Essentially , the Dept of Finance were empowered with all the information at their disposal to regulate the P.A.Y.E collection process of all taxes at source which is what they should have done but had not done so in relation to all monies paid by the Department of Social Welfare .All the said sources of monies on which the Revenue claim that the taxes are owed were known by the Dept of Finance or at least should have been known by them had they acted to make it their business to do so and which is what they are paid to do so by the taxpayers.
    The purpose I am writing this report now is to show my anger at the Minister for Finance , Mr . Michael NOONAN and why he allowed this happen and also why he had chosen to do so during a Holy Time of the Christian Calendar year and why had he not acted properly to inform The Electorate on Budget Day his intentions then when he had the knowledge from Revenue .There was a time and a place to communicate properly and honourably to the senior citizens of Ireland and The Minister FAILED to do so . Instead he acquiesced and politicised the event to his own self serving purpose and turned away from his overpaid duties and decided to cause to criminalise and give further hardship to the weak and infirm .

    Everyone have / had parents and grandparents and civic respect should be an honoured tradition and this should not change .The Minister thinks otherwise .

    I am reminded how every year, in the weeks before Christmas , how families are slaughtered by The State either directly by The Sheriff or through their organs of the Courts and during the law term St Michaelmas or St Michael of the ark angels ,and how many families receive Bankruptcy notices, many of which are issued by Irish Banks .These actions by the Minister marks the year of the end of what was Christmas and this has now been taken away from all of us .

    This Minister has already caused enough suffering to senior citizens by enforcing their children and grandchildren to emigrate and indentured them without a vote and a voice in foreign lands while they search for work .On the date of the Budget the Minister had further knowledge that he has chosen not to disclose and intends to implement to destroy the remaining fragile fabric of social order remaining in our society .The Minister elects to maximise his opportunity and only allow his knowledge of an earlier information on the public domain after thirty years when you and I will be long gone to another world that can only be better than this one he controls.

    It is important for all senior citizens to ask, ‘are the actions by the Minister not within his remit under the Finance Acts and The Constitution’, and ‘are they Equitable and not causing undue Hardship to those concerned’ .These are some of the Tenets that govern his actions to be proper and honourable as Minister .

    I am calling on The Senior Citizens Parliament to call for this Minister to RESIGN immediately and enforce his resignation without delay .This is your LAST VOTE .

    Signed : John ALLEN , Accountant
    Further Taxing Issues

    Further Tax Path

    Tax Compliance by OAP to 31st December , 2011 .

    Law of Equity

    Constitutional Law

    No More Christmas

    Destruction of Estates of Deceased

    Power of Attachments

    Freezing Bank Accounts

    Bank withdrawal regulations

    Temporary Bank Closures

    Easy Targets

    Guilty until proven not guilty

    Court Orders to sequester assets

    New unproven EU stricter laws of enforcements

    Non availability of experienced Revenue & Social Welfare Personnel after
    29th February ,2012

    Writing a philosophical book in 2006 reflecting on a Time 10,000 years ago that has now become our present and our future in Ireland . It is called ‘ Da Wu Yu Code ‘ ie the code of before time and after time

    Rescuing Gardai from their Boat under Sarsfield Bridge 44 years ago .( media cuttings available )

    Taxing compliant taxpayers due to negligence by Revenue and writing off tax liabilities by non compliant tax entities/ payers .

    • bonbon

      I think it is time for tougher action – use the Nürnberg Code. Making lists of targeted chronically ill and old to save money for the “effort” was the document that indicted the T-4 individuals.

      We have a clear precedent from 75, not 10000 years ago.

      The signatures were damning evidence, so collect them now.

      The effort to save this doomed system will kill us all if not stopped. First they will go after the weak, then they will come for the rest even if they emigrate to Australia.

      The signatories of such orders tend to grow mustaches, Obama did after his Obamacare death panels!

      P.S. T-4 refers to the health ministry at Tiergarten 4 where Dr. Brandt etc., signed the infamous document backdated to 1938. We now see T4 actions again.

    • Lord Jimbo

      Interesting post John.

      “Subsequent to those days I learned how The Revenue sent ‘indignant missives’ disguised as letters to 150,000 pensioners attempting to criminalise them in their dying years for something they did not do.”

      Pensioners sound like the A-Team, and the way they have responded to the medical card fiasco, and now this Revenue fiasco should be an example to those youngsters who only ever protest about university fees and not the state of the nation, which shows you how limited the student body is in Ireland, in France they wouldn’t have left the streets.

      The letter fiasco once again pushes back on the curtain on the activities of State agencies, and it does not inspire confidence, the State is scoring too many own goals, defeating itself time and again.

  24. Philip

    It is the global meltdown in action. The situation in Australia is stimulated by the short-term growth of China & India. BRICs have benefitted from the monopoly money pumped in by temporary economic masking effects of the Euro and the US wealth derived from the overleveraging of property. People ran to property/ bricks and mortar to hedge for their old age as they started to see their manufacturing jobs heading east which was otroginally financed by banks which had too much money to start with originally.

    It is all circular or more correctly…spiral because as we keep teeting back and forth, the real wealth is being misallocated more and more and more and put into skyscrapers and other othe rtrophy assets that do f all except mar the skyline.

    • Colin

      Speaking as someone currently working on a skyscraper, I disagree with you. Skyscrapers do not demand to be seen as trophies either, its all in the eye of the beholder. They are convenient to work in, they are safe structurally, they offer natural daylight to those who work in them, and they encourage the use of public transport in central locations.

      We should be more worried about bungalows blighting our countryside and their septic tanks polluting our streams and rivers.

      • bonbon

        What about the empty monstrosities in Dubai, the quays, Frankfurt, silly.com valley in Virginia – all built to house non-existent firms?

        Now China has the problem too.

        Banks are sitting on debt related to this. Maybe they are listed as assets?

        • Colin

          You could also look at Hong Kong and Singapore and see plenty of high rise and well run economies.

          The whole Dubai thing is unsustainable, a city in the desert. High rise there was purely vanity, I’ll give you that.

          I didn’t know there were skyscrapers built in Dublin, that unfinished Anglo HQ is not high rise. But think of it, if there was high rise in Central Dublin, you could then and only then justify investment in metro and luas, with much lesser reliance on cars, which would be very good for our economy.

          • bonbon

            High rises with productive firms in them, not more banks would be good. It would imply a population of Ireland perhaps at 20 million, more than double the pre-”famine”. That would require many Gigawatts of power that turbines and solar just cannot do.

          • Colin

            bonbon, the opportunity has passed, there will be no high rise development in Central Dublin. But if there had been, instead of suburban sprawl out as far as Kells, Portarlington and Mullingar, then people’s properties may not have fallen so much in value, and schools, workplaces, hospitals, shops would be nearby, along with every other facility, and you would not need to own a car as a good public transport system would be required and provided.

            So, no, we’re not gonna find another 16 million people to force us to go high rise. There will be no development in Ireland for a very long time.

            We should have gone high rise a long time ago, but that’s another fcuk up our leaders and experts take credit for.

          • bonbon

            Look beyond the obvious facts, dream of something that never was and ask why not, as JFK said here in this brilliant speech before the Dail in 1963, fully packed with ideas

            http://www.jfklibrary.org/Asset-Viewer/Archives/JFKWHA-202-001.aspx

            It’s 25 minutes and as relevant right now as ever!

      • mediator

        Hi Colin

        Are you aware that before the famine, there were many more “houses” or at least cabins in the Irish landscape. On my fathers homeplace of 35 acres there are remains of four different houses.
        Have you ever read John Seymour or anything on self sufficiency or real sustainability as opposed to the Greens self flagellating and anti human version?
        Skyscrapers are fine as long as oil and other cheap energy are available. They may not be in the long version unless we come up with a viable alternative to oil.

        • Colin

          Yes, I’m aware there was more people living in misery around famine times. Given a choice between a modern high rise apartment and a poverty stricken delapidated cabin not fit for cattle, I know what I’d prefer mediator.

        • CitizenWhy

          Already feasible are energy sufficient farm-apartment high rises. That is, each high rise could produce most or all of its own electricity and grow food on a series of terraces in the building. There would be spaces for children to play indoors and outdoors and a space for events, theater, films, etc. plus a gym, of course. I would imagine some of these “village” buildings being built in the near future. I would certainly prefer living in one to living in an isolated house. These buildings will eventually be affordable for lower middle class people. At first they would work for the affluent, but eventually all. Obviously they would preserve a great deal of open space, including areas for forests.

          • bonbon

            Unfortunately the Greenies want to use this open space for their solar farms. I think it would be silly to move agriculture into high rises while the solar bubble keeps banks happy.

  25. uchrisn

    Generally in the US,UK Ireland, Aus etc, more than half of voters own a property. As such they have no incentive to vote for people who are going to cool down house prices. Instead theyll vote for people who’ll pump them up. Of course this leads to boom and bust.
    Pretty much the reason why governments dont control money prinitng is because history has shown that governments and their short term targets are not responsible enough. With housing in the anglophone countries we are seeing another type of ‘money printing’ helping the older wealtier majority of voters and impeding the younger poorer minority.

    • bonbon

      So the FED and EZB are responsible then? The sacred independence of the ECB in Lisbon, creates a holy aura of responsibility around the gangs actions.

      The FED just pumped $500 billion into the Euro rescue after $13 trillion into TARP etc.

      This is Hayekian in the extreme!

  26. Colin

    Excellent article David, this is you at your best, understanding the data and drawing conclusions which can be communicated to the economically illiterate. I know you will be proved right later this year on your call on Australia.

    So, how will it affect us? I think young people will still travel there, escaping miserable Ireland. The bigger problem is trying to face up to those who are forced to return to Ireland from Oz due to expirations of working holiday visas.

  27. bonbon

    I think the best way to show the problem with the Austrian School of Hayek, Mises, Mount Pelerin, Schumpeter, Sombart, de Sota, is economist Julian Simon’s April 13, 1992, obituary of Friedrich Hayek, who had died on March 23 of that year, appearing under the title, “The Path of Hayek, Scientist of Freedom, Has Come to an End.” Simon wrote:

    “Hayek’s great work all flows from the fundamental vision of classical economics and political science, which Hayek terms ‘spontaneous order.’ This evolutionary principle (originally enunciated in 1705 by Bernard de Mandeville) ascribes the development of society and economy to what Adam Ferguson–colleague of David Hume and Adam Smith–called the ‘invisible hand.’ Hayek flexibly and pragmatically adapted this principle to various conditions of modern everyday life.…”

    Now what is Mandeville’s message ? In 1705, Mandeville published a cynical satire, called The Grumbling Hive–republished in 1714 as The Fable of the Bees, or Private Vice, Public Virtue.

    Mandeville maintained that Thomas Hobbes’s war of all against all, is that which forces man–a “creature of instinct”–into a social order, and this yields Mandeville’s essential thesis: that what we call evil in the world, both the moral and the natural, is the great principle which makes us into social beings, the solid basis for life, and the basis for all the industry and occupations of man, without exception; here it is that we have to search for all art and science. As soon as evil should cease to exist, society would have to decay, if not go under completely.

    Thus, the “moral” thrust of The Fable of the Bees, according to Mandeville, is that “There must be pride, luxury, and deceit for a people to flourish.”

    Many here complain about the deceit, irrational pursuit of policy, and still cling to Hayek.

    Very odd economics indeed!

    • bonbon

      Thus “spontaneous order” is unknowable, cannot be consciously acted on, or policy.

      Glass-Steagall is a direct creative intervention, breaking all Hayek/Mandeville/Smith’s dogma. Perhaps that is why Wall Street/London lobbied so desperately to repeal it in 2000 – we could not after all have any growth,progress, or flourish, if the pure corruption of stealing deposits, leveraging for derivative bubbles, now could we?

      • Realist

        You must be living on Mars as you totally misrepresented what Austrian economics is.

        Did you read any book from Austrian economics ?
        If yes, which one ?

    • Realist

      Bonbon,
      What are you talking about ?
      Did you read any book from Austrian economics ?

  28. redriversix

    No Country will avoid financial crisis.because every finance house is directly or indirectly linked to each Country.Rompuy said today that Ireland was ding well and moving forward to a positive economy.well,that’s grand than……….

    excellent post by JohnAllen…….

    wish you all well

    RR6

  29. What Goes Up...

    Here’s a link from 2 years ago showing some “flexible” Westpac financing loans:

    http://www.thepropertypin.com/viewtopic.php?p=328260#p328260

    They’ve rejigged some pages – but it’s all still there:

    http://www.westpac.com.au/personal-banking/home-loans/

    They’ve been “creative” with their financing for a while now to allow people stretch themselves to make the house prices being asked.

    Where have we seen that before… and why?

    • bonbon

      Well, it’s Isaac’s action-at-a-distance – Ferguson’s “invisible hand” reaching halfway around the world.

      Of course since much beloved Austrian School Economist Hayek says this is “spontaneous order” it is fundamentally unknowable as to why.

  30. Philip

    Just noticing that there’s a general uptick in the markets. WOrry about Euro seems to have dropped slightly. Bond auction for Spain seems ok. All is calm. Equities look low. People may start looking here for better return.

    What gives? Have we missed something? Or is it a dead cat bounce?

  31. bonbon

    Why is Obama’s Treasury Secretary (Minister for Finance) pushing the war agenda?

    Hayekains would have us believe this is “spontaneous”.
    After what has finance to do with war?

    China Tells Geithner To Drop Dead, While Japan’s Finance Minister Tries To Commit Hara-Kiri for His Nation.

    Jan. 12–Japan’s Finance Minister Jun Azumi, at a press conference with Timmy Geithner, who visited China and Japan to strong-arm them into boycotting, or at least curtailing, their oil imports from Iran, said: “We want to take concrete steps to reduce our share [of oil from Iran] in an orderly way as soon as possible. The world cannot tolerate nuclear development.”
    However, Japanese Chief Cabinet Secretary (an extremely important position in Japan) Osamu Fujimura said the government hasn’t made a final decision on cutting Iranian imports, and that Azumi’s pledge is “just one of several opinions.”(!) The governing Japan Democratic Party is already splitting over domestic economic policies, and this may further the process. About 10% of Japan’s oil comes from Iran.
    NHK Television quoted Geithner as saying in an interview that the U.S. will send officials to Japan next week to discuss how the Japanese government will implement its plans. “We share a sense of urgency,” he told NHK.
    In China, however, Geithner got no such pledge. Foreign Ministry spokesman Liu Weimin told reporters at a regular briefing on Wednesday, after Geithner’s departure: “To place one country’s domestic law above international law and press others to obey is not reasonable…. China is a major developing country, and it has reasonable demands for energy. We have repeatedly stated that China, like many other countries, has normal, open, and transparent energy cooperation with Iran, and it is unrelated to the Iran nuclear issue.” Liu said that China’s energy cooperation with Iran does not violate the UN Security Council resolutions, and should not be affected by U.S. demands.

  32. healthy sceptic

    With respect I would suggest that the article on Aussie housing does not cover some important issues.
    Obviously if economic conditions deteriorate significantly then house prices along with other asset classes will fall,but to put the situation in perspective …..
    There is undeniably a shortage of housing in Australia and that’s not from the spruickers but from official statistics.
    The banks are not financing ‘every tom ,dick and harry ‘,the big 4 having been capping mortgage loans at 70 to 75% of valuations. They have been caught in the past and don’t want that to happen again!
    During the depths of the GFC in 2008/2009 there were 8 AA or better rated banks in the world,4 of which were the Aussie majors.
    The strength of the Aussie dollar over the last few years has been driven by 2 factors;
    1.The resources boom ,and
    2. The relatively higher interest rates in Oz
    The A$ ‘weakness” over the last 6 months has been due to global economic uncertainty caused by the Euro crisis and a ‘slowdown ‘in the Chinese economy where even if Beijing loosens economic policy growth is forecast to be only(?) 8%!
    The A$’s movements in the future are likely to reflect the above 2 factors.
    It’s important to note that while we are enjoying a resources boom not all sectors of the Oz economy are doing so well because the high value of the dollar is making it very tough for other exporters and whatever manufacturing we have left and retailers are also doing it tough because of low consumer confidence as a result of global uncertainty.
    The housing boom in Oz has not been financed by “chinese money”from the sale of resources ,that money has gone in taxes ,dividends to shareholders in the resource companies and reinvestment in their productive capacity.
    (Of the resources that China imports from Oz 80% is consumed in China and 20 % goes in its exports)
    The housing boom has largely been financed by the 4 major banks who are very dependent on raising a large part of their loan funds from overseas ,particularly Europe ,and in the current environment there is doubt about them being able to raise all the funds they require.
    The property market in Oz has already cooled somewhat due to the central bank tightening monetary policy in late 2009 early 2010 because of concerns about unsustainable rises in property values.
    Yes Australians do have a high level of debt but as one of your other readers commented in Australia we have what is described as negative gearing which provides tax breaks to investors who purchase rental properties which play an important role in the housing shortage.
    It will be interesting to see how the property market plays out in Australia over the course of 2012 ,but barring economic catastrophe I am one who thinks that Australia will not see a huge bust as occurred elsewhere .

  33. Alan42

    Maybe this is the Aussie Anglo http://en.wikipedia.org/wiki/State_Bank_of_South_Australia

    I was in Oz at the time and witnessed a actual bank run with people lining up outside of the banks .

    Or maybe this is Aussie Anglo
    http://en.wikipedia.org/wiki/HIH_Insurance

    Australia has crashed before , the !recession the the early 90′s was nasty and was a real asset price crash . Skyscrapers left half built , the State of Victoria was bankrupt .

    It caused things like thishttp://en.wikipedia.org/wiki/Four_pillars_policy

    Australia also learned from the Aisian crisis . It has been there before and if crashes again they will deal with it .

    What they won’t do is elect a couple of alcoholics , some red faced goons and goombeans to fist of all guarentee every last cent of bank debt , Create a monester like NAMA that is run by bankers and the dreaded taxman to put a floor under one of the greatest asset bubbles in history ( when the dust settles Irelands property boom will go in histroy along with the South Sea bubble )

    It will not need to go to the IMF cap in hand for a bailout . It will also not have to impose crushing austerity on its already near dead economy in order to pay off unsecured bondholders .

    It is also not part of some nutty currency union that involves one nation exporting their asses off and saving every cent while the southern states sit around drinking coffee and hiding from the taxman .

    I think that irish people would like Oz to crash Irish style , just to make themselves feel better . What ireland has done and what it is continuing to do is really not normal in economic sense or even a moral sense .

    I know which crash I would rather be in .

  34. Pnoone

    I and a growing number of Irish Citizens are looking for support for a petition entitled Irish Citizens: Support the call for Voting Rights for the Irish Living Abroad.

    The unjustifiable lack of voting rights for ex-pats is an issue we are bringing due attention to. The current system even goes so far as to exclude those who would return home to vote. There may be 3 referendums in Ireland in 2012, one on Europe’s plans for fiscal union. As an ex-pat with every ambition to return to Ireland when I can I want my vote to be counted. France has recently established global parliamentary constituencies; most developed nations have a system for ex-pat voting. There is little reason why Ireland should not follow suit.

    The petition has been created to bring some weight to this issue and it is intended to be submitted to the Irish Government on 01 July 2012 (75th anniversary of the peoples enactment of the Constitution of Ireland) to address this unacceptable exclusion of Ireland’s citizens.

    To view the petition and add your name if you wish see:
    http://www.change.org/petitions/irish-citizens-support-the-call-for-voting-rights-for-the-irish-living-abroad

    This petition is not associated with any political party.

    Please ask your family and friends to sign up as well and spread the word.

    Sincerely

    Pádraig
    (London)

    • Good luck with this Pádraig!
      I have signed and believe that what you are requesting is a basic fundamental right.

      That you and 100,000′s are denied this right bears no justification whatsoever and would be granted by any Government who claimed to understand the term Citizenship!

      (Unfortunately “The Teachers” fear this so much!)

  35. CitizenWhy

    From the article: “But as we in Ireland know, the demand for houses is not a result of the growth in population but the growth in, and availability of, credit.” There you have it.

    At one time, in the USA, a property developer had to put up 25% of his own capital before being able to borrow from a bank. Trouble ever since dropping this practice.

  36. bonbon

    Things are not at all rosy

    http://www.smh.com.au/national/financial-institution-risk-list-kept-secret-20111226-1pahf.html#ixzz1iS0i5Pit

    This revelation that Australia’s bank regulator, the Australian Prudential Regulation Authority (APRA), had refused a Sydney Morning Herald FOI (Freedom of Information) request to release its “risk registers” of Australia’s leading financial institutions.

    The 27th December Sydney Morning Herald reported that APRA’s general counsel, Warren Scott, advised against the release on the grounds that releasing the information “may affect the stability of Australia’s economy”.

    For more on the bankrupt state of Australias’s banks :
    http://cecaust.com.au/main.asp?sub=releases&id=2012_01_11_Regulators_bankrupt_banks.html

    • bonbon

      This sounds awfully like the Irish Banking regulators out to lunch. Australia has some also like DMcW who strongly suspect major problems being papered over.

  37. CitizenWhy

    Condo prices in Manhattan are partly driven by foreigners wanting a place there.

    At some point Chinese and other Asians may well want to buy another home in Australia. This is a potentially huge market for Australian houses.

  38. bonbon

    Imagine in Australia in 2005, after warning the country about the derivative bubble that became Lehman, the ASIC threatened to charge the CEC’s directors for giving financial advice without a licence!

    That is even worse than Eire – Lenihan “only” libeled DMcW.

    Wow, are the banksters nervous!

  39. Lord Jimbo

    Interesting article. Australia and China are two big pieces left on the board which do require closer analysis.

    Good point: “But as we in Ireland know, the demand for houses is not a result of the growth in population but the growth in, and availability of, credit.” – this is something I have to remember because all I kept hearing from people ‘in the game’ was about our young, educated and growing population, as if it was the main determinant, it is anything but, it is all about what the banks are prepared to lend.

    But I don’t think Australia’s pending property crash will the last, rumours about China’s boom have been circulating for quite a while, that could be the mother of all economic implosions and may further destabilise a region which is already very nervous about the situation in North Korea.

    Joining the political and economic dots globally is important and I welcome articles like this, the macro picture can tell us a great deal about the direction the world is heading and how Ireland can best place itself.

    I would be interested in knowing where one can get up to date economic data, if there are recommendations from posters on sites they look at, just trying to broaden my own knowledge.

    David, I know you spent some time in Russia, given the changes politically there, and Russia’s dependance on gas and oil, I would be interested on your thoughts on that country as well as the potential impact on Eastern and Central Europe, which is in our backyard when one thinks of Australia and China. Thanks.

  40. Deco

    Citizenwhy. You have probably seen dozens off “hollowing out the manufacturing base” documentaries. This is slightly different – it was created as part in an internal GOP bunfight. The second clip is the full 28 minute film. I bet there are thousands of high profile Mr. Nice in public types who are just as nasty….

    http://andrewsullivan.thedailybeast.com/2012/01/the-most-important-question-in-this-election.html

    • Deco

      Citizenwhy. The subject of the clip is a complete fraud. Another fraud ready to spread misery.

      I want to know how these tramps get away with it for years, and the media never bothers to inform the people. Instead the US gets minutae about Charlie Sheen on drugs, and Lindsay Lohan on parole. The media focuses on drivel. Pure bread and circuses nonsense. In one recent GOP debate they asked the candidates what they do on a Saturday night. And the climbed over each other to say they watch football or basketball. One said he reads books, and you could almost sense the derision of the others at the thought of it.

      Of course, if the media only wants frauds on the ballot paper. “Support our advertising sponsors”.

      • CitizenWhy

        Thanks for the clip. I will post it to my Occupy+others oriented Facebook page.

        The media is corporate owned. There is solidarity among the 1%. In addition, US news outlets, to stay alive, have moved to being a form of entertainment. Local news stations/channels have been shrunk to thin staffs and rely on formulas. Fewer and fewer Americans read a paper. The internet and progressive blogs report all this but they have a niche audience.

        Part of the problem is that the US middle class started shrinking after Bill Clinton got the Republican-sponsored NAFTA passed. It was accelerated under Reagan and the Bushes. And Obama is doing next to nothing – but a little – to stem it.

        The USA took 30 years in a policy of trickle down impoverishment to get where it is. It seems that Europe (EuroZone) now wants to do the same thing in a crash policy of 2-3 years.

        P.S. There is an Irish born and raised author, educated at a US uni on a track scholarship, who focuses his novels on the working people in the Midwest who have suffered from the hollowing out of good jobs. The novels accurately depict many of the crudenesses of American culture. Name: Michael Collins (no relation to …).

        • CitizenWhy

          You may a;ready be following this progressive US blog. If not, here’s the address. You can get emails of the blog free.

        • Deco

          Citizenwhy – if you look back further into US history, you will see a tradition of respect for those who toil and sweat and contempt for the aristocratic notions of privelege that existed in Europe at the same time. It is an essential part of the US culture. From what I can see the Media in the US, and “our corporate sponsors” seem to regard it as a responsibiity to destroy this.

          Effectively, we are talking about the Walmartization, of US culture – so that culture itself is either pulverized into submission, or amended and rebranded to become dehumanized and corporatized.

          I consume, therefore I am seems to be the mantra given. As Kunstler commented something to the effect, ‘we have a dominant religion in the US. That dominant religion is shopping’.

          Don’t worry about the misery, the deceit, the lies, the bankruptcy, the war wounded, or intellectual decline. Get a new SUV, and watch your sports team on TV. Support our advertising sponsors. Everybody is a target for junk that makes Wall Street richer, and everybody else worse off.

          The 1% with the mega-money versus the 99% who are stuck with the consequences of all that miserymaking.

          • CitizenWhy

            Well, yes, in the deep US past a respect for labor, but if you look at a trend started in the 50′s it’s another picture entirely. a Norwegian Christian minister (initiator of the Congressional Prayer Breakfast) began quietly preaching to the elite that God has ordained the American rich to rule the world (the new Israel, every powerful American a King David, etc) and that workers are just parasites on the enterprise and investments of the wealthy. At the same time a prominent US businessman began telling his colleagues that it was time to fight back and repeal the Roosevelt revolution, his main voice the US Chamber of Commerce, which now aggressively promotes the exportation of US jobs, thus rendering US unions powerless. Also at the same time at U Chicago a Jewish refugee Professor (Strauss), frightened by the experience of Hitler, began teaching that the threat of totalitarianism came from the workers and lower orders of society and that the rich and powerful should rule them firmly, including using them as cannon fodder without compunction (Rumsfeld was a pupil/disciple). Much of the American business and political elite (not all) have bought into this elitist right to rule.

            This doctrine of the “divine right of the businessman and his political allies”is enshrined in a secretive Christian DC group without a name but most often called The Family. Many members of Congress are members or seek “spiritual” counsel form this group. At the same time Opus Dei has been successful in converting many influentials to a right wing Catholicism.

            The right has also created a very effective infrastructure of “think tanks” and other organizations aimed at promoting right wing definitions of American values, right wing policies and economics, and penetration of Congressional staffs with interns (paid) indictrinated in right wing thinking.

            The 1% have been very busy forging 1 1% solidarity around these doctrines.

            The activities of these groups have been well documented here and there. But the story is ignored by the mainstream press which is either rhetorically and vaguely liberal (and opposed to the very idea that such groups could exist) or rabidly right wing.

            At the same time, as in Ulster, the “yeomanry” of small owners has increasingly become right wing and fully supportive of rule by the 1%.

            And then there’s the police state within what’s left of the US liberal democracy (rule of law based on rights) – the police state apparatus starting with the Patriot Act and leading to The NDAA law recently passed, plus the drive to control, police, segment and censure the web. Most of the US population will be allowed to live quietly under the liberal democracy but the police state apparatus is there to use any time against any troublemakers once they are labelled terrorists. As you know the US, learning from Britain, has conducted a police state operation outside the US. Now it is quietly being brought home. And the right wing, officially dedicated to “liberty,” is its strongest fan because they know who it will be used against.

            Finally, the US doctrine of “meritocracy” suggests that everyone gets what they deserve in US society. Liberals, out of pity, want to provide the necessities for the “losers,” and help the redeemable children of the “losers” to rise above their station, mainly through education. The right wing want the “losers” and their “excessive” children to go unrewarded and unhelped.

            The Tories are winning in America. The Whigs are befuddled. The left is opiated on theory. That’s the extreme picture.

            But many organizations are working relentlessly for reform and are making headway here and there. And some on the left have begun to build a new society in practical ways.

            P.S. My brother, now retired, was once a very high exec in a major multinational. He was pro-worker and very effective in turning low or no profit operations into profit centers. He earned his MBA in a school among professors who taught that corporations had moral and practical obligations to all its stakeholders, including workers and communities. He refused cooperation with the CIA (in heading an international division) and did not meet a mysterious death like his fellow executives who cooperated. He also saw, at a certain point, that all fresh MBA hires held rigidly to the doctrine that a corporation has an obligation only to its shareholders and “top executive talent” and the sacred “fiduciary trust” of a corporation dictates that it “maximize profit,” especially by minimizing labor costs and increasing productivity (fewer workers, more output, lower wages) through technology. And that’s America today.

          • Deco

            Citizenwhy, it is extremely important to watch what the rich are doing in your society. It is clear that they are highly organized, and have a consistent set agenda with which to direct the media.

            I have read an American author/blogger James Quinn, who takes the view that the Culture Wars in the US since Vietnam are designed to distract the people from the misbehaviour of the state, and from the fact that business interests own it.

            We in Ireland have witnessed a similar development since the 1980s, that could be described as the PD agenda, or the IBEC agenda. This is where a small, very obnoxious, do a deal with anybody political outfit tends to have an extremely toxic influence on state policy. Their objective is to have a set of eyes and a set of ears at the top tier of government at all times. In the years 1998 to 2010 the had massive influence on state policy. Rogue left wing elements might have attacked them in public debates, but no group ever gave them a thorough critique in the Irish media, or anywhere in the Irish academia. They were too close to business.

            The only individual who declared them for what they really were, was Shane Ross – who called the PDs, IBEC’s baby brother or IBEC’s political wing. He knew what was going on. With FF it always deals for the boys. But the PDs where far more lethal because the PDs had an ideology that was crafted on the need to maintain a pretence concerning the deceit being foisted on the ordinary people.

          • CitizenWhy

            Deco, the US right has always had on its agenda the destruction of European Social Democracy (through debt, the instrument of a “soft coup”). US interests are right now busy buying up European assets.

            The US right is quite confident they can rule as they please if they take care of slightly more than 50% of the population (the meritocracy winners and the privileged as well as haters from all classes). They are confident this formula will work in Europe as well.

            Looks like the “soft coup” approach is working well in Ireland.

          • bonbon

            @CitizenWhy : Do you mean Prof Leo Strauss?

          • bonbon

            @Deco : what worried me about the PD’s was the explicit G.K. Chesterton Distributist economics, which in a modern industrial society is simply out of place. Unfortunately this economics has seeped into other ostensibly different political-economic groups. For example Cameron’s so-called Progressive Conservatives are pure Distributist. As usual many in Eire strive in these directions, not realizing the swindle…

        • Deco

          For some strange reason both the US and the EU seem to be mimicking the route taken by the Roman Empire to eventual sickness and decline. Endless wars on some frontier. Depreciation of the coin of the realm. Culture wars. Realms of restrictions on the people, and no restrictions on the elite who behaved like as if they were in a soap opera. Wholescale deciet. And massive bureacratic systems in place to police and control the people.

          • bonbon

            US and EU are part of the Fourth Roman Empire, the Brutish one. That makes Obama Nero, and his pychopathy has been publicly discussed by the leading narcissism psychologist today.
            As long as Nero resides in D.C. we are on the verge of WWIII. Romans with thermonuclear weapons!

          • CitizenWhy

            BonBon .. I do not get why you call Cameron’s policies pyre Distributionist. Distributionism has to do with widely distributing the means of production rather than concentrating them in the hands of the state or a few capitalists and capitalistic corporations. The purest expression of Distrbutionism has been in the successful worker-owned cooperative enterprises in Mondragon, Spain. Cameron is hardly in favor anything like them for the UK. Distribution is about ownership of the means of production, not localization of state services.

            Even Wikipedia gets the essentials of Distributionism right:

            “According to distributism, the ownership of the means of production should be spread as widely as possible among the general populace, rather than being centralized under the control of the state (state socialism) or a few large businesses or wealthy private individuals (laissez-faire capitalism). … Essentially, distributism distinguishes itself by its distribution of property (not to be confused with redistribution of wealth).”

            Distributiuonists resemble anarcho-syndicalits but do not call for the end to the state/government or for the complete elimination of privately owned means of production. In fact the state will continue to have an important role. An example: In a country with large oil reserves (or other commodities), the state would determine its best use for the common good. A worker-owned coop would not own the oil and grew rich while others do not profit from it. Instead, the state can retain a substantial part of the oil earnings while subcontracting various parts of the means of oil production to both privately owned enterprises and worker-owned coops.

            In the USA the formation of worker-owned coops is steadily growing, attracting, among the diversity of its supporters, some practical minded anarchists who focus on the means of production rather than on the state. Those involved see the formation of worker-owned cooperatives as a way to create autonomous, non-hierarchical spaces by withdrawing some ownership of the means of production (including land and soil and seeds) from global capitalists. In short they are working to build a new society within the shell of the old.

            You may want to look at the web site of the US Federation of Worker Owned Cooperatives.

            It is true that Catholic conservatives in the US are attempting to redefine the value of Subsidiarity, essential to Distributionism,in such a way as to justify stopping the federal government from providing such essentials as Social Security, aid to the poor and tax breaks to the middle class (they are seen as fine for the rich, though) in favor of “local charities.” Total nonsense and a perversion of the meaning of subsidiarity. No doubt Cameron is aware of this rightist interpretation and likes it. This interpretation is defective mainly because it totally ignores the need to vastly widen/ distribute ownership of the means of production and the constraints that must be placed on global capitalism. This misinterpretation is also nonsense because its so-called solution (private, voluntary charity) is so far beyond the practically possible that it will greatly increase poverty and misery.

            For some reason you have accepted, and you promote, a far right misinterpretation of Distributionism.

          • bonbon

            Philip Blond of the Fabian Demos think-tank, and now New Republic, wrote the manifestos for Cameron and Blair. That is relatively easy to find. Blond’s thesis is a feudal distributionism resurrected for the modern age. Just look at his publications. Its simply G.K. Chesterton warmed over. Amazing the Tories and Labour and various others such as the PD’s pushing GK Chesterton in the 21st century. It’s no wonder we have economic collapses!

          • bonbon

            Correction (pity no edit button) ResPublica not New Republic. Anyway I posted full info on Phillip Blond in another theme here. The danger of the terror caused by the financial collapse corralling us into a feudal regressive “glorious past”.

  41. joe sod

    excellent article, i have also been watching this, striking similarities to ireland, was there in 2002 and 2007, in 2002 wages were low aussie dollar was low with one euro almost buying 2 aussie dollars and that was when euro was also weak, in short it was cheap everyone was driving around in old 1980s cars, there was no mining boom, tourism was its biggest industry then. In 2007 things had changed somewhat the cars were newer and they had developed penchant for expensive german cars (imported all the way from germany) with even number plates done in the german style, just like ireland in the boom but without the german style plates.
    from what Ive been reading lately australia has become very expensive for just about everything. The unions there are very strong with minimum wage at 17 dollars. They have a weak high spending labour government with a new light weight prime minister that unions can easily push around, (like fianna fail and brian cowen)

  42. Accurate piece on the excesses of Oz, and interesting comments. I wrote about our property bubble–bigger than most–in “Unlocking the Riches of Oz” just before the US bubble burst in 2007. As our national debt’s not too bad we think we’re insulated, believing our incredible household debt is simply a zero sum game with some of us simply others. Oh yeah, fractional reserve banking and overseas bank borrowing works that way?

    Although our ‘big four’ banks, the Commonwealth the NAB, Westpac and the ANZ are all terminally exposed to impossible mortgages, I’d expect the investment bank, Macquarie Bank, to be the canary in our mine.

  43. Er, that should be “some of us simply owing others”.

  44. molly66

    Imagine if there was nowhere to go for all the Irish who had to emigrate and they had to stay here,now there a question the dole queue would be long ,in some way all those who emigrated have done the government a huge favour and maybe the puppet government would have no where to hide and instead of doing little or nothing about the jobs crisis they would have to do something.
    I am sick and tired of watching pat kenny, Vincent brown ,Joe Duffy people like sinn Fein ,the left alliance , people before profit banging there heads of a stone wall trying to get through to this sham of a government.I watched Vincent brown the other night and how Richard boyd did not jump up and pull the member of the government across the table out of other frustration I don’t know.

  45. Deco

    Kenny supports Cameron’s stance on the Merkozy Deal. He has little choice as we are dependent on the UK for trade, and besides the Irish community in Britain would be infuriated if we did not consider their interests.

    And apart from anything else, Kenny needs a strategy for dealing with Irish people arriving back from Australia with no jobs to come home to…..

    http://www.independent.ie/national-news/taoiseach-enda-kenny-backs-david-camerons-no-to-sarkozy-tax-2988168.html

  46. Malcolm McClure

    I think David is mistaken in his conclusion that the Australian property market is likely to slump this year.

    Firstly Rented property is affordable and renting of course is the preferred option for the flood of immigrants. I know of a recent Donegal emigrant carpenter who has rented a home in Perth for A$400 per week out of his take-home of A$1800 pw. The housing boom is not fuelled by the must get on the ladder syndrome but by respectable landlords who want to rent out homes to get a steady income. Warning: Mess up his place and you’ll be ‘out on your ear’ immediately.

    Secondly Australia is a large wealthy continent, not a small, largely agricultural island. It has its own currency, with which it can alleviate any stress by applying the usual measures. It has thriving export markets for its raw materials and agricultural produce in Asia.

    Thirdly Even though China’s exports may falter in a global downturn, their domestic demand still requires importing vast quantities of raw materials. So Australia and China will remain natural partners for the foreseeable future.

    I put forward this alternative conclusion because many young Irish people are in the process of deciding whether going to Australia will lead to a better life, or will just be a rerun of what has been experienced here.

    I am optimistic about the future of Australia for reasons I outline in the following piece and would encourage anyone with a trade or profession who is determined to make a go of it to make a recce trip and bring the family when you have rented a place to live.

    • molly66

      I would urge any body that can go down under or to Canada to go and don’t look back because why should citizens stay here with no job or no chance of making a good living ,wish I was young enough to leave .

    • Colin

      These mythical Donegal chippies are turning up everywhere making a killing, why didn’t I recently hear of one in London clearing £2,000 a week too, and him an engineer who couldn’t get work, who then went on the tools and is making a killing somewhere in the tunnels of London.

      Malcolm, perhaps you could publish this guy’s contact details, so unemployed Irish chippies at home could get in touch with him and get a start out there?

      By the way, those wages you quote, if they are true, are BUBBLE wages, regardless if the Donegal Chippy is working night and day, 7 days a week.

    • Juanjo R

      Ahh – so this time its different Malcolm?

      Points in sequence

      1) Landlord speculation was what drove property prices here, and with the aim of flipping property not rental income from 2004/5 onwards absolute latest. Respectable or not your Aussies landlord will probably need to be paying a mortgage so his income is dependent on rent minus mortgage payments.
      Do you know what they are?

      Aside from that its clear the chippie is participating in a price bubble driven by construction – rent, houses prices and wages…

      2) Australia is a sparsely populated continent and its limited population has limited total needs.When these are reached no matter how high there will be a softening of the market. Its been a long time since Ireland was dependent on argiculture.

      3) China has a credit/property bubble going on internally so your assumption of endless growth there.

  47. Malcolm McClure

    A topic that keeps being raised in David’s blog reflects that many people are worried about the future abundance of global mineral and oil resources.

    I was present at an excellent lecture on this subject last month in the Geological Society, London. It was given by Andrew Mackenzie, a director of BHP Billiton, the largest Australian mining company. He is extremely optimistic about global supplies of all necessary minerals and gave a fact-filled justification of his optimistic conclusion.

    This talk is now online at:
    http://www2.geolsoc.org.uk/presentations/111214Mackenzie/rnh.html

    I recommend that everyone considering emigrating to Australia should watch this excellent presentation. Talk starts at 5 minute point. Skip the introduction.

  48. redriversix

    S&P downgrades France and Austria.Greek debt talks collapse bringing closer the threat of a major default.

    U.S “fines” major Chinese oil broker for failing to adhere to Iranian Oil embargo.

    Two U.S Army infantry Battalions [ 15,000 soldiers ] and a Combat Helicopter unit transferred from Iraq to Kuwait

    Iranian and Turkish “diplomacy”talk’s failed this evening.

    TWO Aircraft carrier groups now confirmed in the Gulf.The U.S.S CARL VINSON AND the U.S.S JOHN C STENNIS although the john c stennis was reported yesterday to be on its way back to California…………….

    Along with HMS Daring,the newest Destroyer in the Royal Navy with a array of specialized equipment on board, and a number of french frigates.

    “all glory is fleeting”

    Have a nice day

    RR6

    • bonbon

      Remember Obama’s speech in Darwin a few weeks ago?

      China: Obama on Insane Drive for Global War

      Jan. 12 –Dai Xu, a PLA Air Force Colonel now at Beijing University’s China Center for Strategic Studies, issued a scathing attack on the Obama Administration’s past, present, and future wars, warning that this is about to spark global war, with Russia and China included. The U.S. is at war on three fronts, he says: “It has further squeezed Russia’s space through NATO expansion. The `return to Asia’ has stirred up huge waves of tension around China. In the Islamic world, the US has brought down Iraq, Libya, Sudan, and Yemen. Now it is pressuring Syria and Iran, as well as Pakistan.” He says this is beyond “Cold War,” and notes that “a US war with Iran is likely to happen this year…. The current sanctions the West has forced upon Iran can actually be seen as a declaration of war. The preparation for this war has been going on for years in the form of espionage, Internet attacks, assassinations, and all sorts of manipulations the US has played on the country’s psyche.”
      Dai Xu says that Russia is also preparing for war in the face of U.S. and Israeli preparations. China is another target: “Another hidden agenda the US has is to cut off China’s access to the Indian Ocean so as to stop the trading activities China has with the Islamic world.” North Korea and Myanmar are possible targets, because they are “strategically important to China.”
      He adds: “Pakistan may also be drawn into trouble by the US as the US has much to gain if Pakistan is mired in social unrest,” especially since Pakistan “is the only Islamic country that has nuclear weapons.”
      He concludes: “As one can see, due to the strategic manipulations of the US, 2012 will not be a year of world peace. It’s possible that the world can’t walk out of the shadow of war in the following years.”

      • Colin

        You’ll find that Obama supported the removal of ‘secular’ Mubarak and is supporting the ‘Muslim Brotherhood’s’ efforts of taking over in Egypt. How the hell is that ‘at war’ with the ‘Islamic World’? If anything, it Obama is pro Islam, bowing to the Saudi King, Releasing Gitmo terrorists that turn up fighting US Soldiers in Afghanistan etc……

        • bonbon

          Obama illegally arrogated war-powers from congress – impeachable under the Constitution. Actively encouraging his staff to watch the murder of Osama and ordering the murder of prisoner Gadaffi are the kind of things that upset China, Russia, and some Americans believe it or not!

        • bonbon

          Preventative War is a crime under the Nürnberg Code. And the Muslim Brotherhood are a British asset, well known to all involved. Yes Obama is a British asset.
          and how much of the “spring” is really local and not imperial games?

        • Colin

          Time to put the crack pipe down bonbon.

          • bonbon

            We are seeing a new variant of the Orange Revolution og Georgian infamy being applied against Syria right now, hailed as local by all the financial media.

            Russia and China see this without orange-tinted glasses.

    • bonbon

      THREE AIRCRAFT CARRIERS IN THE ARABIAN SEA?
      Earlier this week, the USS Carl Vinson and its battle group joined the USS John C. Stennis, making two US aircraft carriers in the Arabian Sea. News reports indicate that a third carrier, the USS Abraham Lincoln is on its way to replace the Stennis which is then expected to return home to San Diego. Depending on when the Stennis departs the Arabian Sea, there could be three US aircraft carriers in the area just as the thermonuclear war danger is ramping up.

      • redriversix

        USS JOHN C STENNIS has bee ordered NOT to return home , but to remain in the Gulf.

        Best

        RR6

        • Juanjo R

          Not sure if thats correct exactly rr6 but there is a third carrier in the area already marine one, a harrier carrier upto 20 harriers, a large amount of helicopters and 2000 troops for an amphibious assault.

        • Juanjo R

          Not sure if thats correct exactly rr6 but there is a third carrier in the area already a marine one, a harrier carrier upto 20 harriers, a large amount of helicopters and 2000 troops for an amphibious assault.

          • redriversix

            Morning Juanjo

            The Third Carrier is the Abe Lincoln,each carrier group moves with several support vessels,Each carrier group group has a “marine amphibious” capability as you described so their are three marine amphibious task forces with three Carriers.Marines have not earned there own Aircraft Carrier yet ! but they do have smaller Helicopter ships which carry Apaches,slicks,casavac’s and
            Chinooks.

            12,000 US marines in Malta ready for jump off to Libya as it descends in to Civil War.Nato has taken control of all oil platforms in Libya to assist transitional Government in repelling the several groups of fighters who are trying to take control…….. allegedly

            The U.S is reported to be “desperately” trying to stop Israel from Attacking Iran

            For perspective Iran,I believe is four times the size of France.

            Best
            RR6

          • Juanjo R

            rr6

            I won’t argue on the overall picture – theres a nasty amount of sabre rattling going on!

            I’m not a hundred per cent in agreement on your details there, but its not far off from what I know of and debating minor details don’t change the big picture.

            Iran is big with an 80 million population. They already suffered from use of chemical weapons in the Iran-Iraq war, which was ignored by the west deliberately because they were against Iran and had supplied components weapons to Iraq. From wikipedia;

            “On 21 March 1986, the United Nations Security Council made a declaration stating that “members are profoundly concerned by the unanimous conclusion of the specialists that chemical weapons on many occasions have been used by Iraqi forces against Iranian troops and the members of the Council strongly condemn this continued use of chemical weapons in clear violation of the Geneva Protocol of 1925 which prohibits the use in war of chemical weapons.” The United States was the only member who voted against the issuance of this statement.[170] A mission to the region in 1988 found evidence of the use of chemical weapons, and was condemned in Security Council Resolution 612.”

            http://en.wikipedia.org/wiki/Iran%E2%80%93Iraq_War#cite_note-169

            What ever happens from here on, the Iranians will be cast as the only villians in the piece, I’m sure…

    • bonbon

      Ranking Retired Defense Official: 200 Million Casualities in Iran War
      January 12, 2012 – 8:10AM
      W. Scott Thompson, former Assistant to The Secretary of Defense during the Reagan Administration, and a leading intelligence official and Asia expert, wrote on Wednesday about the looming Iran catastrophe.

      “The biggest danger hovering over Mother Earth right now is the apparent determination of Bibi Netanyahu to be the last Israeli prime minister. Having known him a bit for 36 years, I’d still say he was the worst possible choice anywhere to lead a country.

      “Current estimates of ‘worst case’ scenarios, which look to me like obvious scenarios if he lets loose on Iran, show two hundred million casualties from direct hits to spreading radiation. If we can just get through 2012 without his personal apotheosis, I can conclude that we are moving into a far more hopeful world.”

      Among other high-level, insider connections, Thompson is an Oxford graduate, a member of the Council of Foreign relations and International Institute of Strategic Studies, and has been a personal friend and advisor to the heads of several Asian countries.

      • CitizenWhy

        War on Iran is insanity for the “pre-emptors.” That doe snot mean they will back off.

        Obama’s agreement to conduct joint military operations with aIsrael may be aimed at getting Israel to calm down and back off.

        Iran’s acquisition of nuclear weapons is inevitable, There is a strong elements in the US elite that accepts this and wants DC to develop a containment policy that deals with this reality rather than trying to prevent a nuclear Iran. Part of the containment strategy is to encourage Russia to be friendly with Iran as a way to modify the government’s fondness for war talk.

        Then public face on issues presented by the US goivt is seldom the back room face of the real strategy. Same for Russia and mots governments.

        The winning argument in the US to line up Congressional support for the war with Iraq was not about weapons of mass destruction. It was a geo-political picture that suggested France-Russia (with France the junior) had a plan to replace Saddam and give Russia control over Iraqi oil, thus putting it in a position to deny, when it pleases, oil sales to China, India and Japan to move them away from the US orbit. A crock of a picture but many fell for it. This picture, however, was never presented to the American public.

        • bonbon

          Iraq was based on a lie by Blair. Chilcot and all that.

          It is not about Iran or Syria, but a direct effort to target Russia and China. This is British policy right now and Obama is their man. Bibi is Blair’s man.

          So this time Americans must understand as long as Obama has his finger on the red button, we all face WWIII.

          He must be impeached for blatant insanity – Article 25/4 now!

  49. redriversix

    Russia and Iran agreed today to STOP using the U.S Dollar for there trades with each other and to use the ruble and the rial from today 13/1/12…………

    Fun and Games !

    RR6

    • CitizenWhy

      Russia wouuld love that. It buys oil in rials and sells to Europe in dollars. Shrewd. I am sure the Iranians have something shrewd up their sleeves too. Perhaps selling to China in Yuan and then joining the rest of the world in pressuring the Chinese to upvalue the Yuan. Of course this move just may be a way to aggravate the “world’s only remaining superpower,” the last gasp boast of an empire in decline. Decline takes centuries, however.

      The Russian move I like is asking the UN to censure the US for human rights violations. There’s actually much substance to that charge.

    • Juanjo R

      Theres a lot more agreements in that neck of the woods between China/India/Iran and Russia involving using gold or their own currencies for trade particularly in gas/oil. Even Japan has been in on it.

      These countries wish to move away from the dollar as a settlement currency. The US wants that to stop before the hegemony of the dollar as the world reserve currency is stopped.

      • bonbon

        That was the BRIC idea pushed by Kudrin, who was fired by Medvedev before cameras 2 months ago. The London School of Economics bveloved Kudrin got in the face which is why the Brit media hate Putin.

        Anyway BRIC is basically Keynes “Bancor” which he failed to push at the Bretton Woods, it is a basket case anyway.
        Unfortunately the Euro is also Bancor inspired – look at the result!

        Russia still has difficulties dealing with these pure monetaristic swindles though…

      • CitizenWhy

        Not much talk of this now that foreigners are pouring their money into US Treasury Bonds.

    • CitizenWhy

      Perhaps this is a way for Iran first to “sell” Russia oil in rials or rubles; then Russia sells the oil in dollars and splits with Iran. This arrangement would also make it possible for European and other countries to sign on to the US boycott of Iran while still buying and selling to Iran through Russia. In the end Russia and Iran get their dollars. The US boasts its boycott is strongly supported. Everyone carries on as usual, ignoring the boycott by using the Russian back door. Ho-hum.

      • redriversix

        Congratulations,Citizenwhy

        That is exactly the scenario I believe will play out,which may lead the U.S to taking “action” to prevent Russia from controlling so much Oil as a “sub-contractor”for the middle east.

        Best
        RR6

  50. Morning All,

    The Eurozone debacle continues to unravel. I will come back to that in tomorrow’s article but just a word on Aus. The point of the article was to warn that the lending data – provided by the Aussie National Bank – look very worrying.

    At a time of rolling crises, its is a danerous trend.

    All the best – off now to the Pheonix Park to watch the Cabinteely under 10s soccer team!

    David

    • Adam Byrne

      Good luck to your son in his match David. I played against Cabinteely myself many times as a kid – very good club.

      Regards,

      Adam.

      • Stuffed 5.1 by a proper outfit The Iveagh Trust!

        • Adam Byrne

          Nevermind! Stick at it, they are so young. Many victories ahead I’m sure!

        • Colin

          Xavi Hernandez said recently that when he played under 10s, his team would lose most of their matches, usually against bigger stronger less skillful boys. But Xavi’s coach told them to keep believing in their better way of playing football, and in time they’d get their rewards. The world’s best players are smaller players as kids, Maradona, Xavi, Messi, Iniesta, Fabregas, Scholes, Rooney, Giggs, Best, Giles, Keane (Roy).

          Tell your son keep the faith, feep the ball, and enjoy his football. Plenty of Life lessons to be learned from playing the game as a kid.

      • I broke my leg playing against Cabinteely when I was 13 :(
        Though I’m still playing at 37 :)

    • bonbon

      Sinking…
      It was the biggest, the fastest, the most opulent, the most modern. It was so unsinkable that far fewer lifeboats were stowed aboard than were needed. The Belfast built ship HMS Titanic? No– the British designed, sinking, HMS Euro System. To belabor the Titanic analogy further, the Federation of European Employers bragged on their website that the initial conversion to the Euro in 2002 was “…the largest civilian project in the history of the world.”

      • Malcolm McClure

        bonbon: Clever. But why spoil your argument by labelling the Euro “British designed”? You never consciously miss an opportunity to pour opprobrium on the Brits, even when it is totally irrelevant.

        • bonbon

          To spoil the fun is not the idea. The Euro is a British project, and London is up to its necks in the crisis. As Thatcher said its good enough for the continent, but the UK would not join.
          Monetary union ala the Bancor of Keynes can never work…

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