Quick Shots -19/Apr/2014

What I Lie Awake Thinking

I was thinking in my half-waking sleep dream mode this morning that the world’s free market could be understood very clearly as this giant chaotic mass of fear and greed. The bears and bulls are exactly that, animal spirits of fear for the market and greed for the market. It then occurred to me that Karl Marx could see the logical ramification of this capitalist system as a giant train wreck and that somehow human beings with our superior rational intellect would want to add rationality in to the mix.

Of course the communist experiment of the Twentieth Century ended up being mostly fear: fear of Stalin, fear of Mao; fear of counter-revolutionaries; fear of freedom and the corrupting influence of capitalism and so on. But you look at something like the post-Soviet economy of Russia and it is clear that the logical outcome of capitalism is the kind of oligarchic Kleptocracy and all that inequality that comes with such structures. China has similarly headed straight to the income inequality and disparity between the oligarchs and the ever-suffering peasants.

The most worrying aspect of free market capitalism isn’t even this disparity in income or the mis-valuing of labour or the reification of money or the degradation of government and public finnances or the emergence of these oligarchs. It’s that the more we commit to it, the more extreme our reliance becomes, upon a system that is essentially held up by our collective fear and greed. Think about the fact that we are 72hours away from starvation and riots. All that fear and greed has taken us to the ledge and here we are thinking this is the best deal going on how to distribute goods and services.

I’m not about to go become a communist but you’ll pardon me if some mornings I think to myself there must be a much better way than what we’ve got.

Is QE Really Working?

This is what makes me ponder each and every day. It seems that the most successful thing Quantitative Easing has done is shore up the prices of equities and risk assets. The second most successful thing it has done is gone out of the first world into emerging markets in the carry trade – which is another way of saying it didn’t really go to the places in the economy for which it was intended. This is disturbing because the ramification of this is that the economies that most propped up asset prices did so by shipping inflation out to the emerging markets.

I don’t know about you, but I imagine this is having an effect on commodity prices because frankly, you can’t print that much money and not have inflation showing up somewhere.  It sure hasn’t been appearing in America or Australia or the UK, but lately the price of food staples have gone up steadily. The last time this happened it prompted the Arab Spring so we may be headed for even more instability around the globe.

Just to make things a little tricky, Bernanke’s successor Yellen has announced the taper will progress at a constant rate and this is sending investment money back to America, but you have to wonder if the emerging markets are going to be able to handle the drop in liquidity and the rise in commodity prices for food staples.

Then there is the little issue of moral hazards associated with the bail outs. It seems the people who benefited the most from QE and TARP and all the socialised losses governments have taken on around the world as debt (and bad debt at that), were not the people on ‘main street’ as they are called but the top echelon of the wealthy. Not the 1%, but in fact the top 0.1% have made the most wealth out of this exercise. If you lost your house and job in the GFC, I think you’d be entitled to feel quite duped by all of this stuff. The data coming out of the USA saying there’s a recovery going on seems to betray the fact that a lot o the jobs created since the GFC are lower in value than the jobs lost. If the Fed and the US Government worked so hard for this outcome, then surely there’s a problem in reflexively thinking that the bail outs were a success. Thus,  seven years on from when the GFC started to happen, we should be asking just who is benefiting from all this Quantitative Easing?

Ukraine, The Ugly

It’s one of those situations that won’t go away. Russia has essentially taken the opportunity of the instability to annex Crimea back into Russia. While there has been much tub thumping condemnation of Russia by the first world, it seems the other nations in the BRICS have tacitly moved behind Russia. NATO i making noises about moving troops in to Ukraine while the interim government in Kiev has declared the Russia-sympathisers as terrorists. You can see that this is not going to go in any direction of pretty.

Putin and his government have been saying this week that Ukraine is on the brink of a civil war. They may well be heading in that direction right now. All the while I’m a little curious as to what exactly the Obama Administration thinks it is going to accomplish in Ukraine. There is a growing bit of incredulity every time the White House announces it’s going to send a ship through the Bosphorus into the Black Sea. This lone vessel encountered (or rather, got buzzed by) a Russian jet that came within 1000yeards.

It’s enough to make you wonder if Obama and Putin want to repreise the Cuban missile crisis. Unlike Kennedy ad Khrushchev who had to work through elaborate diplomatic channels. Obama and Putin have been on the phone 6 times with very little to show for it. Putin being an ex-KGB man makes it immensely difficult to read, let alone game for advantage, while Obama has a record of drawing lines in the sand and letting people walk all over them.  If all of this ends up as a hot war in Ukraine with NATO troops on the ground, I think that would be the day things have gone incredibly wrong.

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‘Anchorman 2′

I’m Completely Stupid And So Are You

Broad comedy has one saving grace – it never has to get too profound so one thing it will never get mistaken for is Critical Theory. We are never going to mistake a film starring Will Ferrell with ‘A Thousand Plateaus’. This is a good thing because it shows our understanding of genre protects us from exposing ourselves to ideas and notions we would rather not have. Thus comedy draws the most knee-jerk critics when in fact the comic vision sustains the sharpest critique of our milieu.

That being said there are comedies and there are comedies. Some are more cutting than others while broad comedy has an anodyne quality that makes it seem like it is neither poison or medicine. ‘Anchorman’ was such a film and became such a hit that many years later, it spawned this sequel.

What’s Good About It

The bits that make you squirm in your seat with laughter. This one is probably funnier than the first but in bursts. The awfulness of Ron Burgandy can be pretty intoxicating. The inappropriate lines come flying one after the other. The study of Ron is better when he is on top and commanding more than when he is down and out. When he is down and out, the humour is just too maudlin. When Ron thinks he’s in a commanding position, the inappropriateness grows bolder and sillier.

What’s Bad About It

The bits that make you cringe in your seat with laughter. Political correctness gets a right bollocking, but it’s actually hard to say things have come a long way in 30years. It’s not the film’s fault, but the gap is uncomfortable.

What’s Interesting About It

This is the weird thing. The film is a celebration of network news and around-the-clock news coverage while it posits a problematic that say the demand for 24hour news creates the need for increasingly spurious stories. So, on the one hand you have the glorious 24 hour news channel feeding news to the world non-stop as it comes off the feed, but not everything that comes down the feed is of equal importance. Then there is the problem that Television is more given to sensational topics than thoughtful pieces. It’s the nature of the beast as long as it must chase ratings for revenue.

The film is actually quite didactic about this problem. While Ron’s desire to get ratings essentially drives down the average intellectual content to the lowest common denominator, it is also true that he drives the stories to their most sensational apex. All the stylistic quirks we know of contemporary news programs are explained away through Ron Burgandy’s idiotic need to be sensational all the time. You’d almost think the film was a savage satire instead of a simple, broad comedy. But then it quickly abandons this project in favour of a plot-line where Ron loses his sight and therefore his job. With Ron’s eyesight goes any pretension at explaining what made news programming so awful.

The Perils Of Stardom

In the intervening years between the first film and this film, Steve Carrell’s star has risen considerably. This has meant his character Brick Tamland has got the B-plot over Paul Rudd, Christina Applegate and David Koechner. The problem is that Brick was such a minor character the first time through, and such a moron that the plot really doesn’t go anywhere smart or interesting. instead, Carrell gets to play what can only be described as ‘dueling idiots’ with Kristen Wiig.

Yes he gets second billing behind Will Ferrell, but brick is such an idiotic character they have tremendous difficulty extracting anything meaningful out of the B-plot.

I am guessing this sequel is going to do nothing to rescue Chrstina Applegate’s star. She’s really not doing a good job in this film. I never thought I’d say this but, she’s actually bad in this movie, when it’s exactly the kind of film that should be her bread and butter.

Harrison Ford’s cameo is beyond perplexing. He was sort of re-doing his Morning Glory role of Mike Pomeroy, but it was a strange choice.

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‘Captain Phillips’

‘Somali Pirate’ Is A Losing Script

People like this film a lot. You just need to see the Rotten Tomatoes ratings for this film and you realise quite a number of people like this film like it’s some breakthrough film. It’s also one of those movies where once again it’s “A True Story Loosely Based On Fact” so everything you see is a little suspect.

You can run all kinds of simulations and role-plays, I tend to think Somali Pirate is just one of those starting hands that’s got very limited upside. Beating upon them in a Hollywood movie seems more cruel than fair game.

What’s Good About It

Lots of Hollywood-special tense moments. The character build for the Somali pirates is short-handed but good. They don’t waste too much time explaining Richard Phillips. He’s a ship captain, he goes to sea, misses his family when he’s out to sea; all this gets told in under 5minutes screentime and really, that’s all we want to know or need to know before the action begins.

What’s Bad About It

I think Paul Greengrass and his wobbly telephoto look is a terrible choice in this film. For a film that’s already set at sea, the wobbly cam only ads to the sea-sickness-making horror of drifting horizons. I felt ill 20minutes in and it got worse and worse. Worse still, the action sequences were so chopped up they were practically indecipherable as action. You see a flurry of motion but you don’t know what the hell is going on. It’s like his other work, but … worse.

What’s Interesting About It

Somali pirates on the big screen actually is a big draw card. You know me. I’m sick of Russians mafia in Black four wheel drives with machine guns and bad accents.But then one of the first bits of action in the Somali side is a convoy of Nissan 4wheel drives arriving with men touting AK-47s, demanding the fishermen go out and do more piracy. The more things change in Hollywood you realise the more it’s just the wardrobe department working its budget.

Still, it’s interesting to see Somalis on the Hollywood big screen. Of course, this being a Hollywood movie, they really don’t get a good airing, but at least you get a picture of Hollywood trying to do something more representative of the world in which we live.

The race politics is pretty transparent. The film only lets you sympathise with the Somali pirate leader only to a certain extent and there is his right hand man who spends most of the movie angry and hostile, who basically reduces the group to a caricature as damning as the four Muslims in ‘Four Lions’.  You’re watchingit knowing full well that they’re not going to make it, and then the Navy SEALs turn up an of course this being a Hollywood movie, those guys are invincible, so you don’t get the ending telegraphed to so much as given a big billboard on Sunset Boulevard with smiling Navy SEALs brandishing their sniper rifles. Okay, so that bit is not all that interesting.

The denouement is short, and you’re mercifully spared the family reunion scene.

Does Anybody Remember…

… the last democratically elected Somali government head? No? Didn’t think so, because I can’t either.I was freshly minted a graduate out of AFTRS when the first signs of collapse in Somalia took place, and it was Bill Clinton’s first military action as POTUS where he sent troops overseas. I – blithely in my youthful stupidity – tried to hook on with a camera and get out to Somalia for a look so i could make some interesting docos. Fortunately for me, I utterly failed to find any backers here in Australia or over in Japan. I say fortunate because the way Mogadishu turned out, turned into ‘Blackhawk Down’. Somehow I don’t think I would’ve survived that chaotic mess.

In my own defence, I had read “Into a Black Sun’ by Takeshi Kaikoh which filled me with the delusion that I should poke my head into a hot zone with a camera. Somalia, like the Balkan wars that followed, made a point of shooting at camera people and journalists. It’s hard to put this down to any particular reason, but basically the 1990s showed just how bad your cause could look to the world through media, and so it became worthwhile for people in civil wars to silence the press and documentarists by shooting at them.

All that said, I was desperately, then tepidly, then vaguely interested in Somalia for the rest of the decade, probably right up until 9/11 changed everything. The reason I bring all of this up is because I have to confess I haven’t seen any signs of Somalia returning to a functioning state, and the one intervention from the outside resulted in a mess. It’s not that surprising piracy has surfaced as a means for survival with the coastal population. What’s probably more shocking is that there is  whole generation of Somalis who grew up under this chaos and warlord-ism, who know nothing of functioning democracy or even a proper state or that matter. You wonder how they’re ever going to find their way back.

Not Post-Apocalypse, But Post Civilisation

What freaked out Tony Blair in his day as a PM was when he asked how long food supplies could hold out in the UK if all shipping were stopped. The answer he got was 72hours, and then riots would break out. Our modern civilisation is complicated and intertwined with the world, it would only take 72hours for the edifice to find itself in grave danger. Somalia as it exists today appears to be what is left after the state crumbles, and so shipments cease to arrive to a nation. The Hobbsean nasty brutish and short is what is mostly left there from what we can gather.

The general point being, there but for the grace of something larger go us. It’s totally hubris on our part to think that we won’t fall to such chaos. If you read about the English Civil War for instance, you come to realise that the people of England did not anticipate the war breaking out in the way that it did let alone the depredations that came about as a result of the civil war.

In that sense, Somalia is leading the way in some kind of weird experiment of civilisation collapse. Like a canary in the coal mine, if you will, Somalia illuminates the way in which a modern nation state can unravel into this strange warlord-ism. What’s frightening is that maybe that kind of existence awaits us somewhere in the future when our governments lose credibility and things simply fall apart. That’s the truly frightening vision. In that event, we’ll all be Tom Hanks’ Captain Phillips, except not as well paid for our ordeals.

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Adrift

Hard To Identify With Anything

I’m keeping it simple today. I was reading some magazines from Japan in the last few days and surfing blogs in Japan. And I have to tell you I just don’t identify with the tenor or spectrum of politics over there at all. I don’t know if I ever did, but I used to have a handle on it. Now it feels like the children are running the kindergarten, and there are a lot of emotionally immature people in charge of institutions both public and private. And it’s really quite alienating.

Be that as it may, I feel really alienated by Australia as well. I know I’ve tried to just live with it and get on with it, but this Abbott Government has to be the most alienating government in Australia I’ve ever experienced. I thought the John Howard years were pretty awful, shameful, pathetic and on the whole hard to bear, but 7months in, this Abbott Government just creeps me out. And with that comes my deep alienation from the idiot mainstream that thought voting for this was better than voting for Kevin Rudd’s ALP.

So here’s the thing. I’ve tried to be a grown up and talk about things that matter in between writing about movies and music and whatnot, but I just can’t get my head around how bad politics has become around the world. Even the USA has turned into a place I can hardly relate to, and so even pop culture has become a spent refuge. I can’t hide there any more. I’ve tried the bread-and-circus routine, but I don’t want to spend the rest of my life in the bread-and-circus tumble-drier of cultural flotsam.

But today, is the day I’m saying I don’t know what to tell you that is both meaningful to me and meaningful to you. It’s insane. I don’t know how I’ve ended up here. I don’t know how the world has ended up here. It’s seven years from the GFC, employment growth is returning but we keep exporting jobs to Asia, the government keeps lying to us about inflation; real wages are not going up, they’re stagnant or going down, but the government wants us to believe our productivity is falling so we should all take pay cuts; but they’ll go into debt hard even while they vilify debt; they’ll print money and make it easier for the rich to do business but they’ve locked a generation out of housing in many parts of the world; there is no future, there is no revolution, we’re sort of at the precipce where we go from ‘Brave New World’ into Orwell’s ’1984′ (I kinda wish it was Van Halen’s ’1984′ – at least that would rock).

It really is a terrible world, and these politicians really do suck hard. I’m surprised we’re not occupying places and throwing up barricades. I’m not advocating it, I’m just surprised we’re not there.

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‘The Fifth Estate’

Julian Assange, Future Imperfect

So much ink has been spilt and pixels rendered to the name of Julian Assange. I must say that in most part, I’ve felt like a supporter more than somebody calling for his head; but he is a disturbing man in many respects, and he seems to have dreadful personal manners. He might even have Aspergers or Borderline Personality Disordered because in spite of his high-falutin’ stated position and ideals he seems to create dramas in his wake that most normal, ordinary, mere-mortal-citizens would likely avoid. In many ways he’s a gatecrasher who has arrived loudly but with a very strange party trick.

There have already been two movies made on the subject of Julian Assange. The other film covered the strangeness of his upbringing and circumstances. This one takes a hatchet to the self-mythologising and the self-agrandisement we’ve seen from him. At his best, Julian Assange provides us with an interesting standard around which the outsiders can rally against power. At his worst he seems to be an egomaniac with very little care for the lives he might be destroying. It’s not surprising that the man has ended up fictionalised and immortalised on film so quickly.

What’s Good About It

The film makes a very good way towards unpacking the abstract concepts it must discuss in order to address the concerns of Julian Assange, and unpack the intricacies of the argument so that even a lay person can come at the story. The film goes to great lengths to contextualise the events so the cause and effect of these rather abstract choices do get played out for the audience.

The cast is quite impressive. It boasts Benedict Cumberbatch doing his best Australian accent while David Bruhl plays a nervously charged Daniel Domscheit-Berg. The smaller roles have David Thewlis, Anthony Mackie, Laura Linney and Stanley Tucci rounding out the cast and while David Thewlis plays a real person the others play fictional members of the US government to great effect. It could’ve been very cheesy; but the fact that you don’t feel it’s cheesy is a great bonus in a film like this where you have to wade through all the risks of telling “A True Story Loosely Based On Fact”.

What’s Bad About It

I’m not a big fan of the shaky camera thing. The subject matter of the film is subtle enough without the distractions of a jerky camera hoping to add style to a rather grim looking film. Parts of the script are really forced and if they didn’t have such good actors, I don’t know if it would’ve worked. I don’t normally sit there trying to picture the way it would’ve been written, but for some reason this film kept throwing screenplay pages into my mind as I was watching. Not a good sign if you ask me.

I’m also unsure about the metaphorical office landscape as a device. It  seems very contrived and never gets out of it being this adjunct visual device that commentates on the action. The abstraction inherent in the activity undertaken by Assange with Wikileaks denies easy visualisation. In fact there are two gags in the film about how Julian Assange and graphic design don’t mix.

You sort of get the feeling that somebody wanted to get a free moralising boot in to a part of Assange’s story without knowing where to put it. I’m definitely not convinced the film hits any mark near where Julian Assange lives and dreams. And that being the case, the film is largely in danger of being a fantastical imagination of the life of Julian Assange that has very little reference to the true problematic that drives the man. The man, whatever his strengths and faults, is complicated and convoluted. The film tries to show that picture but actually misses which parts of this man’s complications are interesting.

What’s Interesting About It

Perhaps the most venal aspects of the film are the most gossip-tinged and interesting. We have no idea who Domscheit-Berg (“dumb-shit berk” sprang to mind) might ave been prior to Wikileaks. What kind of techno-geek wants a revolution based on transparency and truth so much that he lets a sexy girl walk out on him? It’s a strange terrain. This Domscheit-Berg gets so involved with the Assange vision, he inadvertently cracks open what the film calls the Fifth Estate. Oddly enough, the real life Assange is quite contemptuous of other entities in this Fifth Estate.

Assange’s put down in this film is great. “All these kids are excited reading ‘Neuromancer’ and playing ‘Call of Cthulhu’,” he says so dismissively. It’s true, I’m exactly one of those he would accuse of being complacent about the world; for indeed, I did read “Neuromancer’ with much excitement way back when and also played ‘Call of Cthulhu’ with my mates. And no, I didn’t change the world one iota – it still sucks.

Assange of course famously denounced Bloggers for being only interested in impressing their friends and are not really doing what we are supposed to do, which is read the wires he’s leaking at Wikileaks and getting angry and agitating. All of this is true too.

All the same, I’m inclined to give the man moral support even if he would think I was not helping one bit. I’m just not willing to head down to the barricades with my Guy Fawkes mask on, on his say so. Excuse me sir, but I do think for myself.

Hypocrisy On A (short) Stick

The most poignant observation the film does make is that only a man so obsessed with his own secrets as Julian Assange could bring the world to the brink through exposed secrets. Indeed, this quality of having two sides to the same problematic in his head leads us to wonder out loud just how much self-control this man possesses. One is – okay, I am – inclined to think that part of Julian Assange’s problem is that he’s so used to not having the rules of society not apply to him in society, he keeps living in a thought bubble where he thinks laws and regulations don’t apply to him. He’s easy on himself – which is why he ends up in very strange circumstances involving sex and Sweden and secrets and strange denials.

The film goes a great way to intimate that the sexual encounter he had in Sweden is somehow laden with this kind of permissiveness that he applies to himself. I’m not certain it’s so conclusive, but there are days where I do think maybe it’s all a beat up and Julian Assange really ought to face the music in Sweden. Then I think of Edward Snowden and think that maybe the Ecuadorean embassy is exactly where he needs to hide. Its absurd. It takes an incredibly absurd person to find himself in such circumstances. And none of this Swedish Sex Crime bit really made it into the film.

An Aside On His Bad Manners

Look, I’ve never met the bloke. I know hackers in Australia that came across Mendax in their time back in the late 1980s and early 1990s. Yes, he was a ‘name’ in the hacking community. It’s interesting how one of the things he ‘inspires’ in people is this complaint about his manners. While Geoffrey Robertson was handling his extradition case in the UK, Assange stayed with the Robertsons. Mrs Robertson, Kathy Lette was later on air saying that Julian Assange might be somebody doing something incredibly important, but he was also the person with the worst manners of anybody she had met. And this is coming from Miss Puberty Blues, the Proto-Bogan surfer chick. Of all the things she could have said about the guy, this was it.

Having watched several videos of him giving talks about what journalists are doing wrong, I do get the impression that maybe he’s a pretty far gone Asperger’s case on the loose. I’m not convinced he’s NPD as the film portrays him.  Still, is this even all that interesting next to the actual damage he has inflicted on Governments through advocacy for truth and transparency? Somehow I think the film chooses to miss the point so that it doesn’t have to address the deeper, bigger, more vexing philosophical issue to do with truth and transparency. It opts to tell how two men in partnership fall out.

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I’ve Been Blogging For 10 years Now

…And I’m Sure As Hell Neither Rich Nor Famous For It

Well, 10years is a long time. It’s been across 3 blogs.

I’m thinking maybe I should consolidate everything into 1 big blog and slap it full of google ads. Let me know hat you think.

MLB Opened 2014 In Sydney

I got asked for an opinion about the MLB staging their season opener at the Sydney Cricket Ground last weekend by Pleiades. I do have a bit to say about it but it’s all tangential to what happened. What happened was that the LA Dodgers rolled into town with what we now know to be the highest payroll in baseball and beat Team Australia 4-2 in an exhibition warmup, then the Arizona Diamondbacks twice to open their season 2-0. Also in the fray was the game Team Australia won 5-0 against the D-Backs.

Some impressions of the Dodgers… Jeez they’re a bunch of freeswingers. Apart from Adrian Gonzales and Scott Van Slyke, nobody really seemed to work the count at all. And they still won. So I guess that’s talent. They did leave it to the very end when they were losing 0-2 to Team Australia before they broke open for a 4 run top of the 8th. They kept hacking at the first pitch and were  being 1-hit by that time. Of course they went on to essentially beat the D-backs swinging that way so who’s to say they’re wrong? Maybe talent doesn’t need strategem?

Team Australia acquitted themselves well. This was surprising. The 5-0 win over the D-Backs was really surprising. Until of course the D-Backs proceeded to get rolled by the Dodgers in the first two official games. This prompted great commentary from the ESPN commentators saying that more scouts will come to Australia looking for talent. John Smotlz in particular seemed incredibly keen on the idea.

The arrival of MLB, even for a glimpse should represent a threat to the cricket fraternity. If the awareness of baseball goes up, the kind o talent that goes into cricket might opt to go to baseball. The money and opportunities are certainly weighted that way. This isn’t a discussion about which sport is better. Baseball has more money than cricket right now. When you combine other markets where it is played apart form North America,  it’s clear there’s a lot of money out there.

Here’s a comparison. Once-in-a-generation wicket keeper and batsman Adam Gilchrist probably earned about AUD$10million-15million in his career, an that’s being generous. Roughly overlapping his carer was once-in-a-generation hitting catcher Mike Piazza whose lifetime earnings would be closer to US$100million. They most likely have never heard of each other, which reflects how far apart the worlds have been. Adam Gilchrist had what cricket commentators might call a ‘tidy’ career. Mike Piazza had a resplendent one. Yes, “there’s money in them thar hills”, as they say.

Of course it’s s not all about the money. Lots of Australian kids have a knee-jerk reaction of hating on” Yank sports” so it might take a while.  A very long while even; but eventually the money and interest from America is going to make its presence felt. So yeah, money does talk and bullshit does walk. It’s making me think that the whole Kerry Packer World Series cricket thing was an attempt to stave off baseball from eating his favourite game of cricket. it probably worked in the 1970s. I doubt the numbers are there today and going forward.

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China’s Looking Scary

Bubble? What Bubble?

It’s been a strange year in the world of market-watching. There are as usual, quite a number of ructions that make you wonder about the health of markets or in fact there is any sanity prevailing in markets. Crimea has grabbed headlines and so Australian stocks have followed the lead of the world, up and down, with the news cycle surrounding Ukraine and its coup. Ukraine of course is a basket case waiting to blow up, but it’s not like it’s even in the top 30 economies of the world. Even if there was a full economic meltdown in the guise of a default, there wouldn’t really be too much of a problem short of a shooting war breaking out.

China on the other hand is the world’s second largest economy, warts and all. And there are a lot of warts and other nasty lesions that mark the Chinese economy, one of which is the size of the debt it has created since the GFC. If you tally it up, it is larger than the combined debt of the USA, the Euro zone and Japan combined. The criticism has been that much of this debt has been pumped into general construction companies that have built ghost cities of luxury apartments while other parts have gone into a shadow banking system that has blown this easy credit on god-only-knows-what. Of course, this being China, the debts were collateralised with commodities such as copper, rubber, nickel, iron ore silver and of course gold. Which is all well and good if the commodities are going up, but they have instead been falling in value for some months now. This, has logically led to loans being called in, bank runs on minor banks and a general drying up of liquidity.

As a I mentioned last week, the Chinese market has experienced a number of defaults this month – something unheard of prior to this leadership group coming to power – and all of a sudden things are turning a little hairy over there.

In that light I’d like to share a few links so you can have think about what this might mean. The first link is here:

After Hong Kong, the UK takes the lead by far. (As a note, banks in several countries, particularly in emerging markets like Russia or Latin America, aren’t listed, because they don’t report to the Bank for International Settlements):


Total-loans-to-Chinese-companies-US-billions_chartbuilder
Some UK banks’ long historical ties with China—HSBC and Standard Chartered, in particular, have roots in Hong Kong—mean they have been lending there for decades, though in recent years, loans to Chinese companies and banks have also grown steadily. Neither will be a good thing if analysts’ worst fears about China come to pass.

Right. Of course Australia is on that list with US$28.7billion which is about AUD$ 30bn right now.

Keep that in mind as we have a quick look at what the AFR is saying about Australian banks, courtesy of Pleiades who gave me the heads up as I was telling him about whats reported as going on in China.

A study by funds management giant AMP Capital presented to the ­superannuation funds at an industry conference this week, showed that a typical fund has more than 12 per cent of total assets invested in the banks, but banks accounted for a quarter of their investment risk.

Industry averages suggest a fund’s value shouldn’t move by more than 8 per cent in a given year. However, more than a quarter of that volatility risk in Australian funds is driven by the banking sector, demonstrating just how sensitive our retirement savings are in the continued health of the big lenders.

“The system is quite exposed to these four banks. From an equity point of view, the weight in financials in ­Australia is at a peak,” AMP Capital’s head of credit markets Jeff Brunton told an audience at the CMSF conference in Queensland this week.

At 30 per cent, Australian’s index exposure to the banks is the highest its ever been – doubling since 1993.

Worryingly, in United States, Japan, Germany and United Kingdom, the weighting of banks had fallen sharply from their peaks.

Yes. So, it’s a bit like we’ve put all our eggs into the property basket twice. Once through taking out huge mortgages in a property Bubble, but also through our superannuation accounts that own dirty big lots of banking shares which are exposed to real estate., and are also over-priced The scary bit is over here:

AMP also presented controversial findings about the ability of banks to withstand stress. The banks and ­the prudential regulator had conducted stress tests – based on a 40 per cent fall in property values and 4 per cent ­foreclosure costs – which AMP ­replicated. “We get the same number – $17 billion of losses,” Mr Brunton said.

“That’s nothing. That’s why the banks and APRA say our system is safe.

“But the insight we put on the table is that the remaining mortgages, those who haven’t defaulted, will actually be at a very different loan-to-value point than when they took out their ­mortgages. More than half of ­Australians will be in negative equity and a lot of us in significant ­negative equity.

So it seems there’s AUD $17bn sitting there on the ledger as potential losses that’s separate to the AUD $30billion mentioned above, but linked together by the health of the Chinese economy. All this robust property valuations and auction prices and what have you are sitting on a bubble that is the Chinese economy. When the music stops, there are going to be tears.

So how exactly is China doing? Here’s a glimpse:

Over the past month, we have explained in detail not only how the Chinese credit collapse and massive carry unwind will look like in theory, but shown various instances how, in practice, the world’s greatest debt bubble is starting to burst, resulting not only in the first ever corporate default but also in the bursting of the associated biggest ever housing bubble. One thing we have not commented on was how actual trade pathways – far more critical to offshore counterparts than merely credit tremors within the mainland – would be impacted once the nascent liquidity crisis spread.

Today, we find the answer courtesy of the WSJ which reports that for the first time in the current Chinese liquidity crunch, Chinese importers, for now just those of soybeans and rubber but soon most other products, “are backing out of deals, adding to a wide range of evidence showing rising financial stress in the world’s second-biggest economy.”

While apologists of China’s collapse have been quick to point out that China’s credit collapse would be largely a domestic issue, with little foreign creditor exposure at either the public debt, or private – corporate – debt levels, one thing nobody can deny is that if and when Chinese trade routes grind to a halt, the downstream impacts would be devastating, and spread like wildfire as the offshore supply chain is Ice 9′ed.

The fact it, it’s just starting. The way it’s going is that the importers of commodities have run out of liquidity so they’re cancelling and tearing up contracts.  The unsold glut of commodities is leading to the collapse in the price of commodities. Because the shadow banking system uses commodities as collateral, a lot of loans are going to get called in as result of this collapse. it’s pretty much as people have predicted the collapse of the Chinese credit bubble. When this collapse moves on to property, there’s going to be knock on effects to Australia and suddenly that $47bn problem is going to come home to roost. If that doesn’t scare you, its probably because you don’t have a mortgage and you don’t own bank shares.

Just watching the share price movements this week, it appears that twice this week, people bought in hoping for a stimulus package to be announced by the communist party bosses. Except they have made it explicit that they won’t be doing any more stimulus packages because it only kicks the can down the road. That means China will test a market downturn and all the people buying up shares this week were exercising what can only be described as irrational exuberance.

That’s really not great news.

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