ANDREW ROBERTSON: How bad do you think that recession will be?
MARC FABER: Well, you don't want to know.
ANDREW ROBERTSON: Yes we do, that's why I asked you.
MARC FABER: I think it will be quite bad. Because if you look we had an incredible global boom. If you travelled around the world six months ago, everywhere we had boom conditions, and now in the US housing has started to go down, meaningfully in some areas we're down 30 per cent. In Las Vegas business is down. We have businesses that have contracted, so the imports into the United States will slow down. This will have an impact on the Chinese export industries, and as China then slows down it will have an impact on the raw material producers of the world, the demand for commodities will probably no longer expand. It will lead to some discomfort among the commodities producers and among the export industries of Europe and Japan. I think it will be quite bad, yes.
ANDREW ROBERTSON: When you say raw materials producers, of course, Australia is one of the biggest. So you're suggesting that Australia will be hit hard?
MARC FABER: Well, I think that Australia will also get hit for two reasons: first of all, household balance sheets are not in a good position. The typical Australian household is very leveraged, is highly geared and the property market here is in for, in my opinion, quite a serious downturn. And so I think the Australian economy will be hit actually quite hard.
ANDREW ROBERTSON: You think a downturn of US-style housing slump type proportions?
MARC FABER: Yes, could be larger.
ANDREW ROBERTSON: Could be larger?
MARC FABER: Yes, could be larger.
ANDREW ROBERTSON: Well, we have, as you would know, what's loosely called a two-speed economy. Where do you see this slowdown hitting hardest, is it the eastern States or the West of the country which is based on commodity exports?
MARC FABER: Well, I think that if you look at, say, prices in Sydney and in Melbourne, they would seem to me to be on the high side. And, of course, obviously if commodity prices come down then the property market in Perth will also ease and possibly quite considerably.
Those who are familiar with Steve McKinight at PropertyInvesting.com (Author of amongst other 0 to 260+ properties in 7 years)
may also be aware that he has advised people to stay away from long term property investments for now. (Indicated he thought coming 1-2 years would see slumping property prices.) _________________ Lets take a ride, and run with the dogs tonight
In suburbia
You cant hide, run with the dogs tonight
In suburbia
- Pet Shop Boys
Posted: Wed Jul 23, 2008 2:28 am Post subject: Re: Marc Faber - dire prediction for Australia
good article(lateline is the only news on TV worthwhile looking, it's only a bit late)
I hope that interest rates do not rise infinitely!
Some think that the Asian market itself is big enough that they can live without the US. No idea if this is true.
Marc Faber acknoledges that commodity prices will rise that will be a sow on these economies.
Joined: Jun 26, 2007 Posts: 838 Location: The Canada of America
Posted: Fri Jul 25, 2008 4:32 pm Post subject: Re: Marc Faber - dire prediction for Australia
alokin wrote:
Some think that the Asian market itself is big enough that they can live without the US. No idea if this is true.
I'm not sure either but I'd like to think it is. China's got loads of money now. It got it by shoveling goods out the door to the West at pennies a ton. But they've been raising their living standard slowly all that time... they're at the point now where we're sweating the environmental effects of all the cars they're suddenly buying. I think, even though the average Chinese is not as wealthy as the average Western, that 1.3 billion people can easily keep themselves afloat by consuming more of their own production for what it's really worth, plus a small profit. It largely reduces the rest of us to hewers of wood and drawers of water, as the old Canadian saying goes, but at least it's a form of survival. Bottom rail on top this time, massah. _________________ I can has cheezburger?
Posted: Sun Jul 27, 2008 9:11 am Post subject: Re: Marc Faber - dire prediction for Australia
Not sure everything is so rosy in China. South China Morning Post reported this week that Chinese officials had been sent out to major eco regions to investigate eco situation amid concerns about rising inflation and rapidly declining exports. They were meeting to frame eco policy for the remainder of 2008.
Joined: Oct 23, 2004 Posts: 5522 Location: New Jersey
Posted: Sun Jul 27, 2008 10:28 am Post subject: Re: Marc Faber - dire prediction for Australia
I strongly disagree with Faber that lower demand for commodities will result in lower commodity prices, that is in the longer term. In short term rapidly changing levels of supply and demand can influence prices.
For example, in the bankruptcy of a major commodities dealer this last week, we saw oil demand suddenly fall in the Texas-Oklahoma area. What nearly refiners will do without the oil they usually get is another question yet to be answered.
So let's not confuse short term events with long term macro events, such as the US assuming on it's balance sheet $5 trillion in Fannie & Freddie debt, plus trillions $s more in derivatives, and other very inflationary policies.
As to China, lacking an FDIC, it has a hostory of plugging holes in its banking sector with its vast foreign exchange reserves - now approaching $1.5 trillion. I'm not saying a rcession in China is impossible, but they will not crash and burn if the US goes into a depression.
In the longer term, PO will catch up with everyone, but that's also inflationary in my view. _________________ It's already over, now it's just a matter of adjusting.
Posted: Sun Jul 27, 2008 5:25 pm Post subject: Re: Marc Faber - dire prediction for Australia
There is really a problem, that one reads heaps about the US and little about China, which is more important. I don't think that in China everything is rosy, and they have really nasty environmental problems and I guess social problems as well (At least in Australia there are some children of rich families in the Uni, they are spoiled).
One cannot forsee commodity prices and either for the rise of the price and for the lowering price due to demand destruction there are good arguments.
As for China I guess that there is the problem that most people won't be able to afford junk and they must learn to produce serious things, long lasting products, which are well designed. At least all what's exported is crab.
Posted: Mon Jul 28, 2008 5:34 am Post subject: Re: Marc Faber - dire prediction for Australia
I agree China is the key for Australia but it is really hard to get any sensible info in the Australian press about what is likely to happen in China going forward. I think it is dangerous to assume that growth in China will keep commodity prices up and Australia afloat. I'd like to know much more about how China will be affected by recession in the developed world. Obviously they have a huge internal population but they always have had and this has not translated to high eco growth in the past. It will be very interesting to see how much growth can be sustained once the bottom falls out of exports.
Also, I think China is capable of producing quality goods if that is the mandate, but I'm not sure that the Western co's doing business with them have actually ordered quality. Think Walmart - high turnover and cheap, not quality.
Beijing - Recent statements from Chinese President Hu Jintao and other senior leaders suggest a subtle shift in policy focus away from inflation control and towards growth creation, analysts said on Monday.
Quote:
"China has basically reached its earlier target of preventing overheating," said Li Huiyong, a Shanghai-based economist with Shenyin Wanguo Securities.
"So the policies that were designed previously will be shifted towards stabilising the economy and ensuring faster growth," he said.
_________________ Lets take a ride, and run with the dogs tonight
In suburbia
You cant hide, run with the dogs tonight
In suburbia
- Pet Shop Boys
Posted: Mon Jul 28, 2008 5:58 pm Post subject: Re: Marc Faber - dire prediction for Australia
Nickel wrote:
alokin wrote:
Some think that the Asian market itself is big enough that they can live without the US. No idea if this is true.
I'm not sure either but I'd like to think it is. China's got loads of money now. It got it by shoveling goods out the door to the West at pennies a ton. But they've been raising their living standard slowly all that time... they're at the point now where we're sweating the environmental effects of all the cars they're suddenly buying. I think, even though the average Chinese is not as wealthy as the average Western, that 1.3 billion people can easily keep themselves afloat by consuming more of their own production for what it's really worth, plus a small profit. It largely reduces the rest of us to hewers of wood and drawers of water, as the old Canadian saying goes, but at least it's a form of survival. Bottom rail on top this time, massah.
Nickel, I see China as hitting a cyclical rather than a structural downturn. The've been growing so fast for the last decade that they have to step back, take a breath and let some of the distortions unwind in their own economy. If they avoid this, and can transfer most of their export centered manufacturing toward their own country, that will make price inflation all the worse in the Western world.
Australia will remain a strong trading partner if China remains strong, but it's citizens will have to compete for the same resources, the Chinese use, which will hurt.
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