2017-11-20

Merkel Can't Form a Government

After Merkel's election "win" in September, I posted: Good Political News Peaks In Europe

I expected Merkel would be weakened, but it turns out she may be finished. She was unable to form a government thanks to rejecting to populist AfD and being rejected by the SPD. She was left with the smaller FDP and Greens, and they are to far apart on major issues. If you have been reading this blog for a few years you will not be surprised by the issue that torpedoed an agreement: immigration.

AFP: German coalition talks trip over immigration stumbling block
Merkel's CDU and especially their more conservative CSU allies from Bavaria, where tens of thousands of refugees crossed over the border from Austria, are pushing to limit Germany's annual intake to a benchmark figure of 200,000.

The Greens, who have long promoted migrant rights and a multicultural society, finally appear ready to accept the figure.

But they will not budge on their demand for a resumption of family reunions for those who have been granted temporary refuge in Germany, something opposed by both the CSU and FDP.

China Real Estate Mood Still Positive

At least in Nanjing, and when homes are offered at a 10,000 yuan/sqm discount.

Caijing: 南京1.46万人抢3177套限价房 有人斥资千万摇号
Cool the property market in the country is becoming the occasion, early winter Nanjing contrarian hot. Last week, more than 14,600 buyers who braved the cold, holding a picture of a few million dollars of bank promissory notes or certificates of deposit, real estate competition for 10 sets of 3177 Nanjing Hexi area housing prices.

After calculation, the total purchase verification of more than 37.8 billion yuan. Including one home buyers, even in five real estate registration number seven, into a number of banks to prepare for inspection at least 12.6 million yuan of funds.

It is understood that the hot property market in Nanjing, mainly due to price, resulting in the presence of about 10,000 yuan price difference between new and existing homes, which attracted a large number of buyers.

2017-11-16

Dual Citizenship Crisis in Australia

Coming soon to an Anglosphere nation near you.

Sunday Times: Eighth Australian lawmaker resigns over dual citizenship
A constitutional crisis roiling Australian politics claimed a new victim Tuesday with the resignation of the eighth lawmaker to be felled by a once-obscure rule barring dual citizens from federal office.

The departure of Jacqui Lambie, a colourful independent senator from the island state of Tasmania, comes after Prime Minister Malcolm Turnbull's centre-right government lost its grip on parliament as MPs were toppled by the citizenship issue.

Lambie announced her resignation in a tearful speech, telling MPs she had just learned she held British nationality from her Scottish grandfather and father.
The Australian situation was a result of existing law. The lawmakers in question are also citizens of New Zealand, Canada, Britain, Scotland and Canada.

If the law in other Anglosphere countries doesn't already proscribe dual citizenship, there will likely be laws passed in the coming decade or two, or at the very least, those with dual loyalties will be hounded from public office, lose security clearance and high ranking positions in government. Once the ball gets rolling on this issue, it creates its own incentives since political allies can benefit from having those above them kicked out of office. The United States won't be spared, if anything it is likely to have the most intense scrutiny because its status as empire provides real opportunities for foreigners to manipulate government policy.

2017-11-15

If China's Economy Goes, Australia's Goes With It

A very long and in-depth article on Australia's economy. If roughly one-third of Australian exports go to China and roughly 19 percent of the economy is exports, that's roughly 6 percent of GDP that is highly sensitive to Chinese economic conditions. Layer on the housing investment from China and overseas students, the housing bubble built on growth in those exports to China, there is a lot at stake if China slows meaningfully.

Steve Keen's Debtwatch: Australia’s Econ­omy is a House of Cards

NBS Shocker: Mortgage Growth Contracts 19pc in October, Goes Negative YTD

Caijing: 楼市数据继续下挫:个人按揭贷款增速首现负增长
National Bureau of Statistics released November 14 data show that the first 10 months of this year, the growth rate of the national real estate development and investment, sales, and other indicators of the funds in place to continue to decline. Among them, in September and October in a single month, real estate sales volume fell for two consecutive months. Affected by this, housing prices in the source of funds in place, the accumulated growth rate of individual mortgage loans for the first time negative growth.

The NBS report on real estate investment shows a YTD decline of 1 percent in individual mortgages.

For comparison, last year at this time the cumulative YTD growth was 51.5 percent.

I haven't tracked this data out of NBS, preferring the PBoC data, but I calculated the one-month October growth figure for this past month: negative 18.8 percent.

Put on the Pain Trades: China FAI Begins Slowdown Near Prior Cycle Lows

Here's the quick summary of the data:

1. Real estate investment is strongest relative to prior cycles
2. Fixed asset investment over the past three months is slower than it has ever been, and the downturn hasn't officially begun
3. Private fixed asset investment is near the prior cycle lows (set in spring 2016)

Implication: if the credit cycle isn't aborted earlier than before, it looks like nearly all measures of FAI could fall into full blown recession (at least mid-single digit declines in some categories) before growth bottoms out. That's assuming another bailout later next year.

As for the data:

China real estate investment growth was 5.6 percent in October, second slowest month in 2017 (after July's 4.8 percent). YTD growth fell from 8.1 to 7.8 percent.

Fixed asset investment (FAI) slowed to 3.2 percent, YTD slowed from 7.5 to 7.3 percent. Unlike real estate investment growth (not pictured), you can see FAI is potentially breaking down to an unprecedented pace.

Private FAI slowed to 1.2 percent growth in October; slowed from 6.0 to 5.8 percent growth YTD. The last time growth was this slow, there was a panic over private money pulling out of FAI. One post of the subject was Depression: State Council Investigates Drop in Private Investment

Private investment growth in the industrial sectors was negative for the second consecutive month.

All data from NBS.

Impulse Rally in Commodities Running on Fumes

At the start of 2016 it was deflation all over again. Then suddenly commodities take off and the global economy heats up. Three possible explanations are:

1. The depression is finally ending
2. The smart money knew Trump would win
3. China flooded its economy with cheap money

With respect to 1, Jeffrey Snider keeps pointing out nothing has changed. As for 2, that's just coincidence. The evidence for 3 is strong. The history of the post-2008 economy is slow credit creation, slow economic growth. Dollars are in high demand. China can break out for a time, but then devaluation pressure and inflation become a problem. It tightens. The global economy sinks back towards a deflationary crisis. China pumps.

Here's Chinese PPI through December 2016. Notice the PPI didn't start rising consistently until July 2016, many months after the initial credit surge and several months after commodity prices started soaring.
I thought this impulse would lose steam in the middle of 2017, but it moved into what looks like a blow-off top this autumn. Chinese PPI growth will cool substantially into 2018 and should turn negative again month-to-month assuming the current credit trends persist.

I'm not sure the rally is totally over in the sense of top ticking the price, but today's action in China suggests the smart money knows the party is over. Credit growth indicates the end of the party.

ZH: China Commodities, Stocks Are Tumbling
ZH: China's Credit Growth Is Freezing Up At The Worst Possible Time

Why does it matter?

Because much of the boost in GDP growth over the past 18 months can be sourced to China's credit boom.

ZH: UBS Makes A Striking Discovery: Ex-Energy, US GDP Growth Is The Slowest Since 2010
Message 1: The 2017 global growth acceleration was largely (70%) a commodity bounce. This applies even to the US which was 20% of the global growth improvement but, as the 1st chart below shows, it was entirely energy investment. Once you strip that out 'underlying' growth is only 1% or so (ex inventories) - the slowest since 2010 - and a significant amount of rotation now needs to take place from energy to non-energy investment just to sustain the current growth pace.

The slowdown cometh.

2017-11-10

7 Hot Words for China's Real Estate Market

Hot word 1: Volume down
Hot word 2: Tighter controls
Hot word 3: Rental era
Hot word 4: Moderating land prices
Hot word 5: Financial de-leveraging
Hot word 6: Developers break siege
Hot word 7: Property market inflection point

iFeng: 七大热点词汇 解读2017年房地产市场