Silver

[oh my florin]

I agree the GFC hasn't ended, I said the initial effects of the GFC are over the run on effects will take far longer to be resolved. On the other part of your argument it can't be defininitively proven either way as there are varied economic theories with vastly different outcomes. The one most opposite yours would be Keynsian economics which is in the short run economic output is influenced heavily by aggregate demand (aggregate supply takes longer to manipulate and change) so by providing the stimulus aggregate demand for goods and services increase exponentially due to the multiplier effect. Now this increase in aggregate demand is all well and good providing we are operating below Potential GDP above this we get inflationary pressures but below we are merely moving the economy to a point closer to full employment essentially increasing capital (both financial and labour) and by providing incentives technological innovation which will both increase the potential GDP.

Australia's dependence on China is unequivocal in terms of iron ore exports however iron isn't just used in construction of houses but also in manufacturing goods for export across the world. Add to this China's desire to become a superpower their concentration on their military is going to make up for the decrease in house construction as they move to build Aircraft Carriers, Aircraft, Guns, Missiles etc. Australia however should diversify a bit in this regard by exporting to India another high growth economy or by increasing domestic processing to increase production of higher value added goods. China is indeed Australia's key economy and frankly this reliance makes Australia exceptionally reliant on Beijing and Chinese State Policy. China at the moment is still moving up however and international tourism should increase exponentially as they become richer. Australia at the moment is concentrating heavily on providing tertiary education which should see tourism from China further increase but also an increase in permanent settlement should see house prices remain consistent if not rise in the long term.

The AUD as you said is ridiculously reliant on prevailing commodity prices. Which is ironically creatively nicknamed the commodity currency. So the AUD could depreciate rapidly however with Australian commodities being the primary inputs of a lot of production processes including advanced technology a depreciation below a certain level would very quickly slow it self down.

Anyway there are so many different theories you can't really mark anything as absolutely wrong as there is always some out there theory that supports it.

[nealeffendi]

The Indian economy is suffering some of the problems of the Chinese economy (unsustainable growth financed by easy money policies). If (more likely when) the  China bubble pops the other BRICS, the West and the world in general will all see serious economic disruption.
I wouldn't count on Chinese defence spending growth to require a few hundred million tons of iron ore a year (what currently is used in Chinese civil construction). If it did then we have a bigger problem with China engaging in expansionism on steroids and worse than Japan in the lead up to WW2. We already have a few signs of that with China now claiming parts of Vietnam, the Philippines, Malaysia, Indonesia and Japan and using their navy to aggressively promote their claims.
Technological innovation will reduce demand for coal and iron ore, not increase it. Not much iron in Iphones and other technology. Carbon (nanotechnology, carbon tubes, buckyballs) will really cut demand for most of what we mine (even silver) within a decade.
Chinese tourism is good and brings in billions, same with education. Risk is that other countries will improve on what we have to offer and do a better job and at a rate we can't compete with. Or they cut back on expensive holidays once their property bubble pops.
Keynsian economics is good if practiced the old fashioned way, you save in good times to have saving reserves for stimulation in the bad times (same as the Pharaoh and the 7 good/bad years). What the theory has morphed (degenerated) into is a permanent stimulus and letting the future generations pay for it.

[oh my florin]

I think the current disruptions in growth in China and India are more in shifting their economic production from mass produced low value added products to more advanced technological production. I don't think China is in a bubble as the increased demand from increasing wages should help not only fuel consumerist tendencies but also as incomes rise an increase in savings and investment will provide even greater growth potential in the banking and finance sectors. The chances of economic disruption would be quite low as most of the Chinese economy is either directly or indirectly controlled by the state and with the control of the Chinese currency being firmly controlled and actively manipulated by the government. Combine this with the size and influences of China in manufacturing and any disruption of moderate size would cause utterly catastrophic global economic effects.

The Chinese military iron demand would be massive as it is not only building Carriers which from what I hear they have a number slated for construction but also construction of tanks and aircraft but also the construction of Chinese military installations including anti aircraft installations, new barracks, new military industries, new docks, new aircraft bases and massive dry docks, directed at the nations which they have claims against.

While I expect the Chinese military to build up massively over this year and the next as the US now has to start withdrawing their Carriers from the region due to financial constraints. China would love to throw it's weight around and with the West marginalising Russia they have inadvertently pushed China and Russia further together which when combined provide a massive amount of primary resources in terms of oil, gas, gold and other commodities which can not be influenced by the outside world without risking war.

Innovation will reduce demand for most commodities however innovation to the extent that Carbon technologies replace Iron and Steels would require an absolutely remarkable technological innovation. I mean look at manufacturing gold from nuclear transmutation we have been capable of doing it since around 1947 however even in 2014 it still isn't anywhere near economical to do so.

In terms of education the Nordic countries have always been great with education however the high tax rate is a significant barrier for their education industry. However this advantage for Australia may change with the privatisation of HECS loans and the indexation changing from inflation to bond based.

I agree Keynsian economics should always be only spending what you have which as you said save during the good and stimulate during the bad however this has changed primarily due to the short terms of politicians which use the economy as an election tool and try to buy votes with tax breaks during the good times. Unfortunately unless Australia turns into China democratically this will not change. This permanent stimulus is a risk as you state it however it is a non issue as long as Potential GDP remains above Real GDP. If Potential GDP is exceeded by Real GDP then the concern of future generations paying for it would certainly be a risk.

[nealeffendi]

OMF, the Chinese banking system is a massive house of cards with a high percentage of non performing loans and more worryingly trillions in mispriced loan securities.Many loans are secured by collateral (such as copper) that has been used as collateral for multiple loans. The housing market there accounts for 70% of domestic savings and the rapid price rises of a few years ago have stopped. Now developers are having problems selling and the owners of the existing millions of empty apartment are looking at falling valuations. When they had rising valuations they would have felt flush and could splurge on that holiday to Australia, now they will rethink that next holiday.
As for China diverting excess steel from housing to the military the numbers don't wash.   The US WW2 economy was 50% war related at the peak and total annual production of steel 80 million tons.Even if most of the steel went to military related needs it is still tiny compared to current Chinese steel production (800 million tons). So if China diverted 10% of steel production to the military then they would develop a far bigger military force than the 13 million men in the US military (1941-45).
Bottom line is China might cut steel production by 500 million tons and they would still be producing more than they did a decade ago.
The US carriers needed to be withdrawn as carriers are now just reefs in waiting and belong to a past era (read up on the hypersonic torpedoes that the Russians have or the scramjet technology that the Russians, Indians and Chinese are all perfecting).

[oh my florin]

The Chinese Banking sector has reworked it self away from the 20%+ rate of non performing loans in 2000 to now being around 1% of total loans. There has been scepticism of how they manage this and possibilities of extending payment periods and selling of bad debt have been around this has not been significant enough to raise it any meaningful amount. Their profitability has risen also as now out of the world's 1000 largest banks 32% of their total wealth is from Chinese Banks as of June this year.

In terms of Chinese real estate there is significant oversupply however considering China has 1/7th of the worlds population and with population growth averaging 0.49% meaning an additional 7 million population a year combined with increasing speculation by foreign investors buying up investment properties while they are cheap should mean excess housing supply is taken up quickly.

In terms of military demand comparing the WW2 US and present day China would be quite lopsided. In WW2 16 million Americans served equivalent to 11% of the population while China has 2.285 million serving equivalent to 0.18% of the population not including the 800,000 in reserves or the 1.5 million in Armed Police which are also reserves for the army. These numbers do not include the nearly 600 million in personnel which can be called up under military laws. The US in WW2 did not have to invest as much iron in domestic construction of military defences as it was primarily a pacific war and they already had a lot of the infrastructure for construction. This however is not the case in China where the threat is just across the border and although there has been construction of barracks there would still be a large amount of construction left to bring the Chinese capabilities up to manufacturing Carriers and all manner of military vehicles as well as coastal defences.

Carriers may be outdated but the Chinese don't believe they are. Nonetheless they are still diplomatically and militarily critical in the Asian theatre as it serves as a direct barrier between China and it's ambitions as China attacking a US Carrier would force Congress to declare war however China attacking Japan directly would not be far less convincing if you know what I mean. The Carrier presence is more a threat of wider hostilities rather than a threat in it's own right.

[nealeffendi]

There are significant restrictions on foreigners buying property in China.You either need a minimum 1 year work visa to buy 1 unit or house and that is to live in. That won't make more than a minor dint in the 70 million empty units.
As for Chinas population growing by 7 million/year; average urban household is just under 3 people and the demographic trend is that China will have ZPG by 2029. So existing new empty apartments will cover the entire growth in population with more than 50 million apartments left over. Now that is enough apartments left to cover 150 million rural people moving to the cities.  At this stage of development there might not be that many moving as there are now about 55% of the population already urbanised and of those left in the countryside a disproportionate percentage are elderly (not likely to move).
If China did mobilize it would solve their gender imbalance as they have 50 million males more than females.
It is doubtful that the US congress will ever declare war on China. For one thing Mitch McConnell may well become Senate majority leader today in the US elections and he is closely allied (via his Chinese in laws) with the Chinese government

[oh my florin]

The current restrictions are likely to be lifted however as China moves towards a market based economy lifting red tape as they push for higher economic growth in areas other than construction and manufacturing. Zero population growth was projected for 2030 under China's previous family planning laws which have recently been modified to increase their population. Also China's tourism is still quite low due to hostilities between them and their neighbours as well as the Chinese governments unpredictable actions at times in both domestic and international matters. The rate of Urbanisation has slowed however as China moves to higher value added production they will be less reliant on their rural country side as they can import food from Australia and other countries (believe they are trying to buy Graincorp our largest grain producer.)

On declaring war remember John Kerry he was one of the staunchest anti war supporters back during the Vietnam war now he is pushing for US involvement in the Middle East and he is the Secretary of State now so anything is possible. Also on family relations preventing war back in Tsarist Russia, Tsar Nicholas II married a German and that didn't prevent Russia joining WW1 against Germany.

[nealeffendi]

A change in the family planning policy will not have a noticeable effect on housing demand for 25 years (other than maybe increasing the demand for bigger apartments).
Graincorp doesn't produce any grains, it just buys, transports and ships what the farmers produce. China is buying up farmland both here and elsewhere (especially in their African colonies). I'm only half jesting when I say colonies as within a decade a number of African countries will be so completely dependant on China they will be colonies in all but name and have large Chinese immigrant populations (in parts of Angola they are now over 10% of the population and rising).
Chinese tourism is massive in Thailand and a number of other Asian countries.
Mitch McConnell doesn't just have Chinese in laws (his father in law was a classmate of Jiang Zemin and McConnell has met Zemin a number of times), he is also a close ally of the Chinese government and sponsored Chinas most favoured nation trading status in the US. As the Chinese governments representative in Washington he can sway any anti China vote.
If a US aircraft carrier was sunk I'm sure that the Chinese would make sure that the evidence was equivocal (China/Russia/NK/Iran?) and congress wouldn't know what to do. BTW a recent navel exercise showed that the US would lose all their ships within hours of a war breaking out. Another exercise showed that if a major war broke out in the Middle East the Iranians would succeed in sinking all US ships in the Persian Gulf.
China is many years away from a market based economy as there are major hurdles (the Communist Party for one) to overcome.

[trout]

Silver spot is at $15.34 at the moment, It has lost about 25% of its value in the last week or so.
Gold is also down at $1,141.90.

[trout]

It is a shame that the low price for silver hasn't been reflected in the prices of Silver products from either RAM or the Perth Mint.
It has been below $20 per Oz for months now and RAM still want $50 per each 9g Coin with a melt value of $5.40 at todays prices:dodgy:

[colour]

It is spinning me too trout.

Auction res as well are not selling at all but they will not bring the PM price down.

They just will not drop the auction prices.

I am thinking another 6 months before we can see any real correction in prices.

Have noticed that there is plenty of good buys in the US so why not in the land of OZ.

[nealeffendi]

It is a shame that the low price for silver hasn't been reflected in the prices of Silver products from either RAM or the Perth Mint.
It has been below $20 per Oz for months now and RAM still want $50 per each 9g Coin with a melt value of $5.40 at todays prices:dodgy:

Trout, I paid $27 for a 2015 kookaburra on Friday (Downies), perfect looking and in a capsule and a full ounce. That is under 24USD so I'm only paying a fiver more than yanks pay for bullion ASEs by the tube.
So why buy the 9g grannybait? (yes, that is rhetorical as I'm sure it's for your $1 set, but as another thread has shown there are lots of collectors getting fed up with the flood of pricey RAM dollar coins).

[trout]

It is a shame that the low price for silver hasn't been reflected in the prices of Silver products from either RAM or the Perth Mint.
It has been below $20 per Oz for months now and RAM still want $50 per each 9g Coin with a melt value of $5.40 at todays prices:dodgy:

Trout, I paid $27 for a 2015 kookaburra on Friday (Downies), perfect looking and in a capsule and a full ounce. That is under 24USD so I'm only paying a fiver more than yanks pay for bullion ASEs by the tube.
So why buy the 9g grannybait? (yes, that is rhetorical as I'm sure it's for your $1 set, but as another thread has shown there are lots of collectors getting fed up with the flood of pricey RAM dollar coins).

Silver is at about $18 AUD per Oz at the moment, You paid a $9 premium for the Kook .
Yes the Silver 9g coins are WAY overpriced and I imagine that RAM will lower the price after most collectors will be staying away in droves for their latest 26 coin issue :angel:

[colour]

The silvers chart has been interesting over the last week.

Silver has stayed in the US$15oz area. No big bounce in price. Just sideways price movement really.

Looks like silver could be going down a lot more still in value.

A kilo silver Bullion coin is looking good.

It would be nice to get a kg silver coin at around $500. Here's hoping! There about $600 at the Perth Mint at present. Some other Mints have them at higher values.

Still a time to wait and see.

[colour]

Have just been looking around at silver coins.

A kg of 1966 50c coins about 2 years ago AU$1,000 now AU$650

A kg coin from Perth Mint + others about 2 years ago AU$ 1,300 now AU$650

Looks like the 1966 50c coins win!