Could our Interest rates sky rocket on the back of China

History huh?

When did you experience in your ancient history the same kind of globalised and QE'd situation we are in now?

 

Firstly, let me say I take offence to your phrasing "small-minded Australian Property Investor mindset." My post had nothing to do with you, and you know nothing about my mindset, or how many investments I hold. I also wonder why you are posting on a property investment forum if that is how you feel?

But I will agree with you, it is very dangerous to be stuck in a very strong mindset about anything in the investment world. The one thing I have learnt over my time investing across multiple asset classes, is that you should never be too certain about anything.

The most dangerous mindset of all, that i see is the doomsdayer/permanent bear. Why? Because right from the outset probabilistically you are almost certainly wrong. How can I say that with such confidence? Because all of human history has been about exploration development enterprise and growth. Look at any real asset market in the world going back for the last few hundred years what is a long-term trend? Of course there are bumps along the way. But in the long-term if you hold a constantly negative bias, statistically you are almost certain to lose.

I have been investing for twenty years now, not long compared to many others on here no doubt, but as far as I can recall pretty much every year in that time period there was always some drama somewhere in the world that was going to cause massive financial meltdown, recession, destruction of asset values etc etc blah blah blah.

Then the GFC came along, and yay finally some of the doomsday calls were validated, but hey have you been watching what the S&P 500 has done in the decade since then? Spoiler alert here if you are interested: Bloomberg - Are you a robot?

Do I know what the geopolitical climate, investment landscape, global trade, exchange rates, equity prices and yes even our small little world of Australian residential property will do in the next year? Not at all and neither do you. But I can tell you that I do hold a stong bias towards a positive longer term trend over my investment horizon and I would rather continue growing my portfolio than stuffing cash in my mattress and waiting for the sky to fall.

 

this latest, not so inspiring, from RBA's Lowe


We have already been experiencing income stagnation for last few years thanks to underemplyment (or lower wage gigs) inspite of high reported unemployment figure, and everything is pointing this trend to accelarate as the gig overlap starts thinning due to increased automation,

So what happens in a defaltionary environment?
can we have real deflation(tightening money aspect) with a determined RBA willing to take yield negative and start QE, they may literally start handing out money?

 

Japan provides some guidance of a deflationary environment... plenty of nice houses for under $100K AUD available now.

 

Certainly agree with this from a longer probabilistic perspective however too many on here are clearly ignorant to reasonable risk management and doomsdayers etc...

I realise psychologically it’s easier to just put all conflicting opinions into that opposing basket.

From a probabilistic perspective the risks are so much larger that property continues to fall. But I don’t have the same faith in Govt as some others in their infinite wisdom and central planning ability in a capitalist economy where risk and reward still have some relationship.

 

Pretty sure they also have a much higher savings rate amongst its citizens , much of which is used to borrow to business , compared to Australia which has very high household debt , with a fair proportion borrowed from overseas markets.
The more we dig into our savings, means more has to be borrowed from overseas markets.

 

too much gobbledygook

 

This issue has been known and debated for a long time. Short answer, it’s easy for the US to counter treasuries sales by anyone. The Fed has more capacity to buy treasuries than China can ever sell.

An academic paper I’ve read (but can’t find it now) found that if China sold its entire treasuries stock in a flash (say in one year) US interest rates would go up by around 0.3%. Annoying, yes. Scary, no. For Australia the impact would be small anyway, diverse and not necessarily all bad.

For all Trump’s misguided policies this is one area I think he’s right to address. Problem is, national economies are so intertwined nowadays that an attack on another economy will ultimately reverberate on your own and all others. True for the US and also true for China. The winner of this trading war will be the one that can sustain the most hits without succumbing, and as things stand the US still has the stronger base.

As for Australia and the world in general, a win by China would be something too horrible to entertain with regard to the loss of our freedoms. When the time comes to choose an ally to side with, our choice will be pretty clear. Better to be poorer but free.

 

Some people are gambling with the wrong dice..
Being a lifetime amateur like myself--which insults people within this site who maybe don't care 0---000001% or know you insult them..
IF you like to read spend a few minutes and look within this classic..

Classics in the History of Psychology -- Skinner (1948)

 

Not many rich professional economist billionaire probably none in existences

Amateur economist are the richest people on the planet, go figure -

One talk what can go right and wrong and do nothing , the other just action and let action do the talking, actions wins hand down

 

the new billionaires of the world are young and beautiful.

oldies' ideas can't keep up with the times.

 

Major world powers have always changed over the centuries , they come and go , the US will have its day and eventually will fade away one day.To be taken over by another country.
The worst thing the US can do is to try and back China into a corner and then something really stupid happens, when they really need to co-exist
You go back to the last 500-600 years and it was the Portuguese and Spanish that ruled for a couple of centuries, they were eventually overtaken by the French and then the British Empire that controlled colonies ,trade routes and navies that ruled the seas, they eventually lost their empires and made quite a few mistakes along the way.
The US has made numerous big mistakes along the way, and as China will.
Much of our recent problems seem to all centred around the U.S.
They pretty well caused the GFC, The recent possible global recession is pointed straight at the US with its trade war, and the issue with Iran is something that is completely of their own making.
They have overthrown many governments, got involved in a few nasty wars , and the irony is not lost on the issue with Iran, which goes back to the 1950s when they overthrew a democratically elected government and installing a puppet government , all to do with access to their oil supplies .

That ended in 1979 with a severe "black eye" And still continues today , and its all still about "access to oil supplies".

.

 

Economics is one area where a little bit of knowledge is a bad thing...

When people say, oh interest rates are going down, and recession is looming and that’s good for Australian property... yah that’s ignorant...

 

That's the problem when one looks at every different angle as i sometimes do ,and i have invested through several different lead-up's to recessions and all have a technical difference between noise and meaning ,then there is the fluctuations between media noise and signals and fluctuations combined ..

One only has to look within this and the priceless other site that ended to see the vast amount of opinions that
even once you filter out the schadenfreude drama queens 88 percent of the long running posts some have the illusion of being better at what they do and they are above the average .till it all blows up as it will..'WAFJ'


..Flix qui po tuit connoscere causas..

 

OK I declare my bias: as a refugee from a totalitarian regime I believe that western democracies are in serious need of our support.

In fact my wife and I are a second generation of refugees. Already in the 50s my parents had to flee North Vietnam when Ho Chi Minh took over and my wife’s parents fled China when they could foresee the bloodshed under Mao. We met and married in Saigon in the 70s when in turn we had to escape a communist labour camp to seek freedom in Australia. Sometimes I half jokingly tell my kids: don’t be the third generation straight to have to leave your country to evade persecution!

Our experience has taught us that democracy is a precious thing worthy of our protection and sacrifice. Despite its many flaws it is the more humane system and the best one around. Look around the world or back into history, it’s a very rare occurrence indeed, fragile and dangerously exposed due to all the freedoms that it allows, but at the same time formidable because it crystallises people’s hopes for a better life.

Knowing the Chinese psyche I can’t agree with your comment that US trade actions would “back China into a corner and then something really stupid happens”. China is already intent on doing something really stupid that must be stopped.

This realisation came to me when on one of my yearly trips to China my relatives showed me what was happening on Chinese social media. It was full of posts exhorting people to return China to its former imperial glory and smash all its enemies to the ground. What’s scary was the language used, extremely hateful, seeking revenge for the humiliation suffered a century ago and very similar to Hitler’s during his rise to power after Gernany’s defeat in WW1. Strikingly there was the same call for a Chinese Lebensraum that would include most of China’s present neighbours.

Now, to put this in context, these were not random posts. Political issues are rarely discussed except when they are fanned by the party’s propaganda arm. For the keen observer, it is the place where you can best understand China’s true intentions.

Also, when I say “smash all its enemies to the ground”, I mean it literally. In Chinese millennium-old political worldview, it’s winners take all. Political foes are destroyed not only in their careers, reputation, wealth but they also pay with their lives while their clan is slashed, their extended family banished. The countries that they invade usually disappear from the map, their culture and religions exterminated.

Since that trip, everything that I’ve seen have confirmed my fears: continued cultural genocide in Tibet and Xinjiang, exorbitant territorial claims in South China Sea even after being chastised by an international court, huge military build up, massive purge under the guise of anti-corruption, practically transforming Cambodia into a colony, interferring into other countries, Confucius Institutes, so-called New Silk Road,… the list is endless.

To Chinese readers, sorry for my strong words, but my rant is against the regime, not the Chinese people. After all I’m married to a lovely Chinese wife and our son-in-law is from there too.

@marmot, I understand your criticism of the US and won’t argue against it. I’m not a fan of America myself, especially Trump’s America, but this is going to be much bigger than party politics because what’s at stake is truly our way of life. We can no longer take our freedoms for granted and we need to make the right choice to protect them, even at the cost of siding with a highly imperfect ally.

 

Increasing disparity in wealth distribution is leading to populism creep in democracies world wide, Populism leads to majoritarianism

 

Quote..
It was full of posts exhorting people to return China to its former imperial glory and smash all its enemies to the ground.

With everything happening in Hong-Kong and the PLA already on location in Hong--Kong makes one wonder what would happen to the Banking Sections 'IF' the Tanks went into the street's --the present interest rates would be the least of problem's as a line of zero's will always remain zero even when repeated a billion times..

 

Time for Singapore to shine

 

It would be a very dangerous mix and a overriding curse if heavy handed controls were imposed on all sorts of financial transactions within that area --Singapore maybe but when one combines booms in real estate can only happen in FREE economies and the depth of unknown wealth that exists within that area gets a serious attack of nerves ,you can bet there will be a total exit meltdown ...


Hong Kong airport grinds to halt; China likens protests to terrorism - Reuters

 

For better or worse, Trump has been more aggressive towards China than any other world leader or previous president?

He may actually get a Nobel prize for thwarting future human rights injustices by crippling China now...

Eg look at the sterilisation ‘prison’ camps China has established to sterilise women from ethnic minorities.... remarkably Europe etc is very Quiet on these continued violations of HUman rights