Tuesday, April 29, 2014

BEGUN, THE CHINESE ECONOMIC COLLAPSE HAS: here's what you need to know

I'm off to the dentist today, just for a cleaning. I've gone twice already in the past few months for reconstruction of a shattered tooth.

This is the first time I've gone to a dentist in over 20 years. Aside from the shattered tooth, they only found 2 small cavities, and I have very little plaque. So it seems going to a dentist every year is a stupid waste of time.

Anyway, Billy Bishop seems to have restarted the Sinocism blog, so I'm now getting some decent China news again, and just in time, so it seems:

FT Alphaville - when ETFs make things more volatile. We goldbuggers already saw ETF-driven superhypermegavolatility in the junior mining world over the past two years, so this isn't news to us. BTW, the last Izzy Kamizzy post on this topic had a good comment from someone who noted the arrogant hedgies who trade ETFs really don't have any clue as to the liquidity of the underlying, nor do they really care.

Anyway, point being that ETF-driven volatility is now recognized as a thing. Maybe now the market can figure out how to arb that away. Then again, they haven't with gold, have they?

Reuters - in wealthy Chinese city, debt guarantees spark default contagion. Is this it? Is this the beginning of the end for China? Is this the massive repudation of debt, as a dishonest system comes apart at the seams - in China?

Peterson (heh heh, "Peter") Institute - how vulnerable are Chinese banks to a real estate slowdown? Ooh, now this is an interesting article! Remember the argument that Chinese banks aren't vulnerable to a real estate crisis because everyone over there puts down cash?

Ah-ha, says Nicholas Borst, not so fast! He notes a housing downturn will reduce demand in the industries that supply construction materials: and those companies are already drowning in debt and operating on razor-thin margins. Here, let me give you 2 paragraphs from this article, as long as you promise to go over and read the rest:
What are the historical precedents for this? Much like China today, Japan underwent a large real estate boom in the 1980s. Also similar to China, the boom was mostly domestically financed and household leverage was relatively low due to high down payments (self-financing averaged around 40 percent). Japan, like China, had a bank-dominated financial system in which land was an important piece of collateral. When land prices collapsed by 50 percent, the debt capacity of firms using real estate as collateral declined significantly. This led to a reduction in investment by these firms, damaging the entire Japanese economy.

With corporate debt levels in excess of 150 percent of GDP, this same negative spiral in investment due to a real estate price correction is a danger for China. This is especially true for local government financing platforms, which are especially dependent on land as collateral. A shock to land price values would diminish their ability to finance new infrastructure projects, which have been an important driver of economic growth.
Now that's interesting, because the Japan parallel is a suggestion that China could soon suffer through a decade or two or low-to-no growth. And that is what you need to drive American reshoring of manufacturing and a commodity price collapse. And those two things are what could really drive a ten-year secular US economic boom.

Hopefully it's all just academic, and we don't see any more signs of an incipient China collapse, eh?

Mining.com - gold price drops after Chinese imports crater 38%. Gee, I guess they don't need any more gold in China now, eh? Oh, and uh:
Last week a report by the World Gold Council said Chinese firms could have locked up as much as 1,000 tonnes of gold – the equivalent of annual imports – in short-term financing deals, also a sign that end-user demand for jewelry, coins and bars may not be as strong as thought.
Uh-oh! Well, hopefully Indian demand can support the gold price for a while....

Economic Times - rural gold demand may not pick up during Akshaya Tritiya. Uh-oh! Get this:
Vishnu Mukati, a soybean farmer from Ujjain in Madhya Pradesh, is not keen to buy any gold jewellery this Akshaya Tritiya, which falls on May 2. Vishnu, whose family depends only on agriculture, is keeping his cash intact so as to tide over any crisis that may arise due to weak rainfall. "I can buy some gold now. But I am not sure whether I will be able to liquidate it when I need it the most. Moreover, gold price may crash at that time," he said.

Like Vishnu, Suraj Singh, a paddy farmer from Bihar, is also taking a cautious step this Akshyay Tritiya. "I will not buy gold this year. If monsoon is less it will affect my crop. I want to wait and watch for the time being," Singh said.

The rising concern of farmers over weak monsoon is likely to take away the sheen from rural gold demand this year. "Weak monsoon forecast coupled with elections will push down rural demand by at least 20%," said Amit Sampat, director, Pushpak Bullions. Rural India contributes nearly 60% of India's gold consumption. India's gold demand in 2013 came down to 974.8 tonnes following wide scale curbs imposed by the government to tame hunger for the precious metal.

Hey Cookie! How's all that high-falutin' climate "science" of yours look now?

Mining.com - iron ore price drops to 6-week low. Uh-oh!

McClatchy DC - White House deeply troubled by mass death sentence in Egypt. Um... why? Care to explain yourself, Fartbongo?
The Obama administration, which recently signaled it is prepared to reinstate a billion dollar aid package for Egypt, said in a statement on Monday that the verdicts defy the most basic standards of international justice.

“The Egyptian government has the responsibility to ensure that every citizen is afforded due process, including the right to a fair trial in which evidence is clearly presented, and access to an attorney,” the statement said.

“While judicial independence is a vital part of democracy, this verdict cannot be reconciled with Egypt’s obligations under international human rights law.
Um... that's funny, because America has no problem with using drone strikes to execute their radical Islamist enemies without due process, access to an attorney, fair trials or even the most basic standards of international justice. Why does the Egyptian government have to hold itself to a higher standard when dealing with their own radical Islamist enemies?

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