Europe Passes the Last Exit. A Great Crisis Lies Ahead

The German people drew the wrong conclusion from their post-WWI experience.  They saw the damage from the Weimar hyperinflation of 1921-1924, probably an inevitable result of the WWI settlement.  They suffer amnesia about the Weimar deflation which brough Hitler to power (see A lesson from the Weimar Republic about balancing the budget).  It’s sounding a fire alarm while the ship sinks.  Now they repeat in different form Weimar’s mistakes of 1929-32, imposing a crippling austerity on the PIIGS while striving to balance their own budget — almost certain to result in recession and deflation (for description of this process see Debt – the core problem of this financial crisis, which also explains how we got in this mess).

The PIIGS nations grow weaker, the eurozone economy slows, and the centrist political parties lose support to extremists.  Greece leads this parade, but the other PIIGS – and France — follow in its path.  We can only guess at how this plays out, but it probably ends badly.

Today’s meeting of Europe’s Finance Minsters looks like the last chance to change course.  Like all previous opportunities, they will almost certain drive by this last exit.  They are ill-equipped to do otherwise, much like 13th century priests treating the Plaque on the basis of Scriptural precepts.
    Myopically focused on the need to protect politically powerful banks,
    seeing Europe as a morality play rather than the product of cold laws,
    believing in a mixture of pseudoeconomic economic myths (eg, confidence fairies, invisible bond vigilantes and the curative power of austerity), and
    unwilling to recognize their own role in creating this crisis.

The series of posts last Fall forecast a resolution –  a crisis-driven policy change — in the near future.  Three months later nothing has happened.  Europe leaders continue to improvise with sh0rt-term measures, while Europe — especially the PIIGS – grow weaker. Each passing month reduces their ability to avoid a crash.

The devotion of Europe’s leaders — both in the North and South – to the unification project exceeds my expectations, but no longer appears rational.  Perhaps they do not see the cost in broken lives.  Perhaps they do, but do not care.  Perhaps they value the shining dream of a future Europe more than blasted lives of proles.  Collateral damage.

Next are several articles report from the Greece, the front lines of Europe, watching their society crack under the stress.

“Can a return to the drachma save Greece as unemployment soars?“, Ambrose Evans-Pritchard (Business Editor), The Telegraph, 19 February 2012 — “Greece’s unemployment bomb has detonated. After a deceptive calm, the surge in job losses since last summer is shocking even for those who never believed that combined fiscal and monetary contraction could possibly lead to any result other than ruin.” Excerpt:

    A variant of this lies in store for Portugal as its “internal devaluation” starts in earnest. The young Schumpeterians in charge of the Portuguese economy insist otherwise — cocksure that shock therapy will triumph without the cushion of debt relief and devaluation — but events have a habit of  demolishing dreams.

    In November alone 126,000 Greeks lost their jobs in a country of 11 million, equivalent to three and a half million Americans in a single month. The unemployment rate jumped from 18.2pc to 20.9pc.  This has not yet fed through into social breakdown. Greeks receive unemployment support for an average of thirty weeks, with a ceiling of €454 a month, according to Professor Manos Matsaganis from Athens University.   Those with civil service tenure are placed on labour reserve for two years at half their basic pay, or a third of their actual pay.  Once these cushions are exhausted, Greeks are on their own. The monthly ratchet effect will then become painfully evident.

Dimitra Noussi, who runs two homeless shelters and a soup kitchen for the City of Athens, said the crunch comes once people have been unemployed for five or six months and cannot pay the rent. Most fall back on the kinship network   but there comes a point when critical mass overwhelms even this cultural backstop.
[/b

… [b]One can see why the high priests of the EU Project wish to prevent elections   taking place in April. The political centre is disintegrating, with the once triumphant PASOK party down to 9pc in the polls and New Democracy at 18pc – each party reduced to a pro-Memorandum rump after the mass expulsion of   dissidents, and each stunned almost senseless.

The latest best-seller is the Greek translation of Heinrich Winkler’s “Weimar   1918-1933: History of the First German Democracy”, narrating how an   indebted Germany pursued the same deflation policies under the Gold Standard as Greece is now pursuing under EMU — with the same results. The book culminates in the Reichstag elections of July 1932 when the Nazis and Communists between them won half the seats, and Weimar died. Such parallels are always inexact. The radical parties of Syriza and the Democratic Left are not authoritarian. Yet their ascendancy surely threatens to shatter the existing order. “If we achieve a Left-dominated government, we will politely tell the Troika to leave the country, and we may need to discuss an orderly return to the Drachma,” said Syriza MP   Theodoros Dritsas, choosing his words carefully.

Mr Papademos warns that default and EMU-exit would lead to “uncontrollable economic chaos”. But is that not already the case? No Greek bank has   been able to issue a letter of credit accepted anywhere in the world since November. Large Greek companies are having to relocate their headquarters to Bulgaria in order to conduct basic trade.

The “drachma risk” has already killed investment. Greece is suffering the anticipated consequences of EMU exit without the benefits, so it might as well lance the boil, impose capital controls, and create a new   banking system (as Iceland did).

Link -
http://www.economonitor.com/blog/2012/02/europe-passes-the-last-exit-a-great-cri...
==================================

Good luck & watch the Debt!

An Epic Australian Bust

The Australian economy today

What the bulls will tell you:
The Australian economy is a true success story compared to those of other developed countries. It almost completely escaped the "Great Recession" and with its GDP slightly dipping for only one quarter in late 2008, its unemployment stands today at an enviable 5.1%. Real estate is booming. Until recently, the Reserve Bank of Australia was raising rates to fight inflation and "economic overheating."

Reality:
The reality is starkly different: Australia has a very vulnerable economy where upcoming bad news has not been "priced in" at all. The country suffers from an epic real estate bubble that greatly exceeds those of US, Ireland, and Spain. The average Australian consumer is completely tapped out. Take out a "consumer credit" punchbowl and reduce the Chinese voracious appetite for iron ore and coal, and the Australian economy will collapse like a house of cards.

Dependence on exports to China
Australia today suffers from a classic case of "Dutch Disease." Its reliance on natural resource exports for its GDP growth stunts the rest of the economic development, especially manufacturing. Australian manufacturing has been declining in relative and absolute terms at a faster rate than it is in the USA and Europe. Today, it imports most of its manufactured goods.


Until several years ago, Australia had thriving tourist and wine industries. The appreciated Australian dollar put a severe dent in their growth.

Australian bulls like to talk about their low debt of 22.3% of GDP and a manageable budget deficit of 3.6% (2011). They, however, completely ignore overall indebtedness, which is on par with other "indebted" developed economies (USA and Italy).

Australia has an unusually high household debt of 105% of GDP, the highest in the developed world (much due to the astronomical real estate prices). The consumer will need to deleverage sooner or later. It's almost certain that, in a crisis, the government will transfer much of the consumer debt to its balance sheet via various "stimulus" programs.

Why the economy is bound to slow down
Looking at the data above, one can see that the Australian GDP is very dependent on two commodities, coal and metal ore, for its economic growth, with most of it going to China.

Should the Chinese economy slow down, there will be few palatable options left. Devaluing the currency may not work because Australia has little manufacturing left to pick up the slack. Lowering rates may not be enough to encourage Australian consumers to spend as the falling real estate prices will force deleveraging. Also, the falling exports would create an immediate current account deficit leading to capital flight, currency collapse, and likely inflation. The Reserve Bank of Australia will not have an option of monetary easing at all.

Australian Real Estate Bubble
What the bulls will tell you:
We hear bubble warnings all the time today as many people see bubbles everywhere where a price has appreciated. You can hear about "commodity bubbles", "treasury bonds bubbles", "new dot.com bubbles", etc.

Australian housing is built on solid fundamentals due to economic and population growth. There is not enough land in large cities to build houses to meet ever-increasing demand.

Reality:
It's always instructive to take a look at historical trends and plot a "mean-reversion" graph before concluding that something is significantly overpriced.

Optimist's claims are not supported by any other data such as high GDP growth rate, rising rates, or increasing construction costs

House prices are grossly overvalued


Australian prices matched some of the other country's bubbles until 2008. But while the real estate process elsewhere has been deflating, the Australian prices marched higher after a brief respite:




What may "pop" the bubble
The Australian real estate bubble has run longer and deeper than recent property bubbles in the USA, Ireland, and Spain. Heavily indebted Australian consumers, just like those in America, have a large portion of personal wealth tied-up in real estate. The price correction has not yet run its course (the mortgage defaults hover around 2%). When it does, it will certainly plunge the Australian economy into a severe recession.

Australian Banking System
Australia has four major banks: The Commonwealth Bank of Australia (CBA), The Australian New Zealand Banking Corporation (ANZ), The National Australia Bank (NAB) and Westpac (WBC in Australia, WBK ADR in USA). While all of these banks are international, the vast majority of their lending and assets are in Australia, with 86% share of all domestic lending in 2012.

Reality:
The banks look well-capitalized today but they heavily rely on a wholesale market (i.e. they issue bonds sold to foreign investors). There isn't enough deposit money from indebted Australians to cover all loans. While everything seems stable today, the foreigners may dump Australian bonds in a panic just like they did with Italian and Spanish bonds, pushing the yields up to prohibitive levels. The Australian banks will look healthy when the economy is good, but they are subject to a large "tail" risk if Australia stumbles, as the capital flow will dry up at the worst possible time.

Interest rates/currency conundrum
Australian currency is strongly correlated with the commodity prices and the health of the emerging markets (the exact opposite of the USA and Japan). Should emerging markets slow down (especially China), the Australian dollar will quickly depreciate.

Australia, which heavily relies on imports of most manufactured goods, will find itself with a sudden inflation problem. It may be unable to introduce a zero interest rate policy (ZIRP) to re-flate local asset prices and save its banks.

How the banks may fail
Australian banks seem safe today sporting low default rates, high ratings from credit agencies, and strong capital adequacy ratios. They will remain safe as long as the Australian economy keeps expanding and real estate prices remain stable. However, once the music stops, I expect a "perfect storm": loan defaults will spike, funding will disappear, but interest rates will still stay high.

Epilogue
The Australian economy seems to be doing well today: the external debt is small, the unemployment is low, and the currency is strong. Yet, in many ways, it's very similar to the US economy in 2007 where much of the economic "wealth" was created by real estate boom and over-leveraged banks. Australia is likely to face its own "Great Recession" in the upcoming years, perhaps when commodity exports slow down. In many ways, this recession may be worse than the American one of 2008, as Australia neither enjoys the benefit of "reserve currency" that would allow it to easily "print" money nor a strong manufacturing base that would benefit from a currency devaluation.

Link -
http://seekingalpha.com/article/394831-an-epic-australian-bust?source=email_macr...
==================================
A few observations -
1) There is more to the article.
2) I may not agree with all of the assertions, but there is enough there to give reason to pause & have some serious considerations!
3) Certainly the Global situation (including the USA, Europe & China), has a long way to run and that will continue to bear down on OZ, for many years.

Is Demography Destiny?

Economists assume that people attempt to smooth consumption over time. The data are consistent with this assumption. If you follow a cohort of people over a number of years, you will observe that their income will fluctuate a lot more than does their consumption. Income generally rises sharply early in peoples’ careers, peaks out in middle age, declines gracefully toward retirement and then falls off substantially in retirement.

Meanwhile, people go into debt when they are young to finance the purchase of education, durable goods (like a car) and a house. Then they begin saving a higher proportion of their income as income grows and they build a portfolio that is used to supplement income in retirement. This income supplement includes income off the portfolio and proceeds of the sale of assets.

If a generation is particularly large, like the baby boom generation, this consumption smoothing can have important effects on financial markets and economic activity.

Large generations will tend to bid up the prices of assets during their accumulation years and then push asset prices down as they attempt to liquidate portfolios in later years.

Economists have indeed found strong correlations between demographic measures and economic activity and stock prices. For example, the baby boom spike in birthrates in the 1950s was followed 40 years later by a booming stock market and solid economic growth in the 1980s and 1990s (the 30-40 lag allowed the boomers to grow up to be big spenders and investors). Most early studies along this line have used a simple measure of the age distribution, like the ratio of the number of middle-aged people (40-49 years) to the number of older (>60 years) people (this is called the M/O factor) or the ratio of middle-aged to young (<30) (this is called the M/Y factor). Investigators have found strong positive correlation between the level of stock prices and M/Y or M/O.

One problem with this analysis is that the number of data points is pretty small. Major shifts in birthrate occur only every twenty years or so; therefore we have just a few useful data points over the past 100 years. It is hard to make a convincing argument using such a small sample. But, in an interesting piece recently published in the Financial Analysts Journal1, investment researchers Robert Arnott and Denis Chaves attempt to address this data weakness by examining data on more than 200 countries. In addition to looking at many countries, Arnott and Chaves attempt to obtain a richer measure of the age distribution than using the simple M/Y or M/O ratios. While they would like to use the full set of age group variables (that is, the percentage of the population aged 20-29, 30-39, etc), they recognize that doing so would not enable precise estimates due to the high degree of correlation between the various age categories. So, they represent the age distribution using a low degree polynomial.

Specifically, Arnott and Chaves run regressions of five-year average growth and returns against measures of initial conditions and the age distribution as represented by a polynomial. The purpose of using five-year averages is to filter out transitory or so-called “high frequency” effects on growth and returns. The purpose of including a set of initial conditions (current growth for the growth equation, current bond yield for the bond equation and current price earnings ratio for the equity return equation) is to control for the state of the business cycle and current asset valuations.

Results
The major conclusions are consistent with prior research. The most favorable demographics conditions for economic growth are large numbers of people in their 30s and 40s. The most favorable demographic conditions for bond and stock returns are large numbers of people in their 50s. These results suggest that the impact of an aging population is first to slow the rate of economic growth, and subsequently to reduce investment returns.

Based on their regressions, Arnott and Chaves project dismal prospects for economic growth for Japan and much of Europe over the next decade or two. The growth outlook is not so good for the U.S. as well.

On the other hand, growth prospects are pretty solid for much of Africa and South America. Likewise, return prospects are poor in Western Europe and Japan and solid in Mexico, South America and Northern Africa.

Caveat
A major caveat is that there are many factors that affect economic growth and investment returns. The researchers attempt to adjust for these by using low frequency data and measures of initial conditions. But still, the results may easily be diluted by left out variable bias. Don’t bet the ranch on these results. However, they do support the narrative that investment returns in the U.S. over the intermediate horizon (next ten to twenty years) are likely to be lower than historical returns. This means you have to save more. It also suggests that investors should consider expanding their investment horizon to include emerging markets.

Link -
http://seekingalpha.com/article/419041-is-demography-destiny?source=email_macro_...
=================================
I prefer the 50 year rule, which simply means that 50 is the average bewteen the years from 45 to 55, which are the largest Income Earning years for any generation & their largest spending years.

This can be verified by taking 1933, which was actually the bottom of the Global birth rate, which happened to co-incide with the Great Depression, then move forward by 50 years to 1983, which saw the start of a long upswing in Economic activity & Global Stockmarkets, but still within the confines of the usual Business cyclic periods.

This reached a crescendo during the period 1995-2006, which co-incides with the great Baby Boom, from 1945 to 1956. The Baby Boomer era was actually 1945-1964, but the peak year was 1956 and after that the Baby Boom start to decline.

I also agree that there are caveats abd that there are many other factors that affect economic growth and investment returns. However, these factors may be either positive or negative & on this occasion the other factors are similar to this Demographic issue, in that they are also mainly negative and they include -
1) Peak Energy
2) Peak Debt
3) Climate Change

So, good luck & watch the Debt!

The current economic paradigm of continuous growth operates in a manner which is in direct opposition to the reality of life on this planet as a closed loop system with finite resources.  It will be challenging to shift our society to a sustainable one with major shifts in education, the built environment, green technology and renewable energy without major changes to the way the present economic system works.  Economic reform is desperately needed to reformulate economics to replace the woefully inadequate and incomplete GDP measure with a holistic human well being measure and  install the necessary checks and balances to prevent greed from destabilizing our society.

Our existing global economic / monetary system is one of those things that is ubiquitous and yet a complete mystery at the same time. Daily we hear the financial rhetoric as we glance by the financial section of the news. We glean reports about falling or rising interest rates and stock markets, even though we may be clueless to their true meaning.

We all use money in our day-to-day life. Indeed, it has become such an indespensible part of modern life that most of us cannot live without it. Yet, very few of us have bothered to look beyond our basic daily functions such as spending it, paying off a loan or receiving our paycheque. Quite frankly, the common man and woman are too busy staying afloat to pay attention to any issues beyond survival. We do not even understand the most basic things about money…..such as how it is made. Many still have a tacit assumption that the monetary system is operated by decent and smart people who are looking out after our best interests and may be surprised to learn the truth.

This ignorance of the actual nuts and bolts of the financial system by the common man and woman works in favor of the financial elite. As long as the majority remain silent and complacent, we cannot fight for freedom and financial, economic and monetary reform. If we cannot clearly see our own enslavement to debt, fighting to be free will never even cross our minds. Fortunately, movements such as Occupy Wallstreet  are like an alarm bell waking up the giant 99% at the bottom of the debt-based money system, which some have described as a 300 year old Ponzi scheme.

It is critical that we demystify money now. We all need to have a clear understanding of how the current economic system, combined with weaknesses that do not safeguard against the darker side of  human behavior has led to our current crisis. It is even more important to know that if we do not reform it, it can lead to a collapse of the global economy and plunge humanity into a crisis of unparalleled magnitude. We stand at a crossroads; we have the ability to create a prosperous and democratic world but we must arm ourselves with knowledge and act with compassion.

The startling truth is that our economic system is fatally flawed and the continuous exploitation of this flaw by those elite few who have worked their way to the top of the heap have resulted in a system about to implode upon itself, leaving the entire world population as casualties. How can governments claim to be responsible when they allow Trans National corporations, banks and financial institutions to gamble in Derivatives where losses of these bets can accumulate and exceed the GDP of the entire planet? There is simply no logic to explain this and no policy that can excuse it.

These same systems have not been reformed and the citizens of this global community need to urgently understand the economic system so that we can predict the great changes coming our way if we are to survive them.  We need to know our enemy if we are going to defeat it. Economic evolution cannot solve a problem when the system itself is fundamentally flawed; it will require an economic revolution, a paradigm shift which will replace the current monetary system with a new and more just one.

To really understand the depths of the power structure we are fighting against, it is important for every citizen of the world to educate him or herself on the way the international monetary system works. Knowledge is power and ignorance is NOT bliss. In fact, it is precisely due to the ignorance and apathy of the 99% that we have allowed the 1% to do as they please while it is due to the ignorance and unbriddled greed of the 1% which has caused them to make the mistakes that have  precipitated this global crisis.

Simply we will continue to go into recessions and global economic collapses as long as this monetary system of greed is in place.

Housing unlikely to support growth

Something may come along to give the economy the boost it needs, but it won't be housing construction.

Not for a while anyway.

The latest figures on dwelling unit commencements - the awkward expression the Australian Bureau of Statistics (ABS) uses to describe what everyone else calls housing starts -

warn against optimism.

The figures for the December quarter, released on Wednesday, showed a fall of 6.9 per cent in the quarter and 13.4 per cent from a year before.

It was the third sizeable quarterly fall in a row and left the level of commencements 14 per cent below the recent peak in the September quarter of 2010.

It is now not far above the lows seen in such episodes of weakness as the global financial crisis, the slump associated with the introduction of the GST in 2000, and the mid-1990s housing slump associated with the sharp tightening of monetary by the Reserve Bank of Australia (RBA) in the second half of 1994.

Signs from the bureau's building approvals data suggest the slide might flatten out, at least temporarily.

The level of building approvals in the first two months of 2012 was four per cent higher than in the December quarter, but that was a sad little bounce after declines since early 2010 totalling 28 per cent.

More recent housing finance figures this week showed no sign of a recovery.

They showed loans approved for new housing fell by 12 per cent in January.

This data includes the construction or purchase of new housing by both home-buyers and investors.

The fall was possibly influenced by an end of government incentives in NSW, but most likely also marked the end of a short-lived boost provided by interest rate cuts in November and December.

In any case, the fall completely reversed a rise in December and restored what the ABS estimates to be a trend that has been drifting down since August.

With housing process flatlining at best and giving investors little reason to take the plunge, and employment growth stalling and uncertainty over interest rates giving homebuyers no incentive either, there is no reason to expect the demand for new housing to pick up.

New dwelling construction might stagnate for a while, or it might contract further over the first half of 2012 but, the way the numbers are stacking up, they appear to be the only two plausible outcomes.

Link -
http://news.ninemsn.com.au/article.aspx?id=8435169
==================================
Whilst there will no doubt be occasional us, I would suggest the trend will no doubt follow a similar trend to the US market, where new housing construction has already trended down and is now down around two thirds on 2006.

http://www.forecast-chart.com/chart-housing-starts.html

Unless OZ went into another round of artificially bailing out the new housing market, we will most certainly follow the US trend, in both new & existing housing, over the next 5-10 years.

I highly recommend against another bailout, as that will be a waste of Public funds, as in the longer term the market will follow the Macro trends anyway.

We should bite the bullet and go with the trend, even knowing the likely effects that will generate!

China Reaches Peak Coal

Coal presently supplies about 67% of China's commercial energy but its National Energy Administration, 21 March, released its five-year 2011-2016 plan for Chinese coal, which features a near-term peak, and then decline of coal in the energy economy.

The world’s largest user and producer of coal intends to limit domestic output and consumption of the commodity by 2017, to reduce pollution and to curb reliance on this fuel, which also faces a rising number of supply problems from reserve depletion to coal import costs, infrastructure and transport needs.

The NEA announced that coal demand growth will be restricted to zero, and consumption to a maximum of around 3.9 to 4.1 billion metric tons a year by or before 2017.

China's coal consumption, including a growing amount of imports estimated at about 25 million tons this year but forecast to increase to 200 million tons a year by 2015, totaled about 3.75 billion tons in 2011.

At that rate and for China's estimated 1.33 billion population, this is a consumption rate of 2.8 tons per person a year, which we can compare with the coal consumption peaks attained by early industrializing Europe in the late 19th and early 20th centuries. In 1913 for example, the UK attained its all-time coal peak at about 215 million tons a year. For its 1913 population this was close to 5 tons per person a year. Current US coal consumption of almost exactly 1 billion tons per year yields about 3.3 tons of coal per person each year.

China is the world’s biggest producer of carbon emissions and coal-related pollutants, and its authorities intend cutting both of these by as much as 17% per unit of GDP through the period to 2017, but its coal path remains locked-on to its economic growth.

Throughout the period since 2000, Chinese coal demand growth has tracked the economy with a 1-for-1 relationship, resulting in coal demand growing at more than 8% a year, doubling the nation's need for coal every 7 years.

The main problem is therefore China's vast coal energy-dependence, and growing coal import dependence comparable to the OECD group's heavy dependence on declining and high-priced supplies of imported oil.

CHINA MULLS COAL ALTERNATIVES
China's coal demand growth will definitely slow, and reach a set limit, not only because of environmental concerns but also because of China's value-added and technology-based industrial and economic strategy. Coal remains cheap, is basic to iron and steel production, and for electricity production, but has nothing like the flexibility, ease of use and lower environmental impact of oil and gas energy. However, due to China's massive dependence on coal, achieving zero growth for coal by or before 2017 is a difficult goal unless the government substantially trims economic growth and accelerates its programme for phasing out energy-intensive industries, which are hard to reconcile.

Simply due to more than 66% of China's current electricity being produced from coal, with little potential for raising China's already impressive hydro output, and with the gas alternative currently based only on high-priced LNG imports, China's coal demand growth is locked-on to its economic growth.

Breaking that link will in no way be easy and the short timeframe for achieving major change may indicate that China will engage a massive energy transition plan away from coal, and may be constrained to import more oil in the short-term.

The Chinese government is considering a wide range of alternatives to coal, both on the economic structure side, and on the energy supply side. China's annual growth of windpower and solar electric generating capacity is now running at about one-quarter of its annual 90 GW increase in power capacity, this annual increase being equivalent to two-thirds of Germany's total installed power capacity, and may rise further. This however will not be enough to achieve transition away from coal, and the nuclear option remains dogged by very high costs and long lead times.

Under any scenario however, Its now official goal of cutting the role of coal energy “significantly” will have major impacts. Coming adjustments to the nation’s energy economy and energy structure, as well as new and tighter environmental protection measures, will cause impacts that can affect global energy.

The especially include China's rapidly building hopes for shale gas development, its alternate energy industries and its oil demand.

REPLACING COAL
China's NEA says that it is able to expand coal production and import capacity by 750 million tons a year in the short term, and might attain an ultimate peak of 4.1 billion tons a year, by about 2015, of which as much as 200 million tons/year could be imported. The role of China's coal imports, for energy traders, is almost as important as China's ever rising import demand for oil. This is due to both of Asia's giant emerging economies, India and China, being increasingly obliged to import coal due to their overstretched national coal mining and transport industries facing cost and infrastructure limits and their mines facing coal depletion issues. At the same time, coal import demand by Europe is rising, despite its clean energy programmes, and import demand remains strong in developed Asia. Coal export prices, which at oil parity would attain about $500 per ton, may however hit a ceiling due to rising LNG gas availability and declining gas prices triggered by US shale gas development, enabling China and India to import more coal at prices that cease to grow.

While costly high-tech LNG infrastructures like regasification terminals are rapidly being built by China and India, the gas alternative to coal for both countries mainly concerns their hopes for domestic shale gas development, but this is not growing at anywhere near the pace needed to phase out coal, or even cover their annual growth of coal demand. The net result is that both coal and oil import demand, by China, will likely tend to grow faster than previously anticipated and forecast.

Despite the Chinese target of cutting the energy intensity of its GDP by 17% over 5 years, coal demand growth has been running at 8% or more, per year, and this sets the "energy gap" for non-coal alternatives at around 300 million tons a year of coal, equivalent to 1.5 billion barrels of oil energy, by or before 2017.  Replacing this 0.3 Mtce (tons coal equivalent) with either gas or oil will have major impacts on world energy trades, leaving the green energy and energy conservation option as a major rational choice for Chinese planners.

To be sure, Chinese hopes for shale gas are high, with the US EIA crediting China with the world's largest national resources, but without major gas transport infrastructures and shale gas E&P only at a very early stage, Chinese hopes are not matched by results on the ground. LNG import expansion is also problematic for China, for infrastructure reasons and due to present very high LNG prices for Asian destinations, sometimes above $18 per million BTU, driven by sustained import demand from Japan, South Korea, Taiwan and other ASEAN countries.

As a net result, it is likely China's oil import demand may grow more than currently forecast - rather than tend to stagnate - with major impacts on global oil prices, going forward.

Link -
http://www.marketoracle.co.uk/Article33766.html
=================================
What is said by Politicians & others, often does not reflect Reality or the Truth, which Tony Abbott has already confirmed!

What is usually trotted out, is a load of -
Credible
Reliable
Abundant
Paradoxes

Which is again the situation here, with the Chinese Energy forecasting!

Of interest, is the fact that China is the worlds largest producer of Coal (by far), so given their Energy needs and the lack of alternatives, IF their Coal production starts to Decline, you can be assured that it would be because the CHINESE HAVE HIT PEAK COAL PRODUCTION!



And, when Chinese Coal production starts to Decline(NOT IF, BUT WHEN), it will transform Global Coal production into this -

Which coincidentally is a similar looking BUBBLE to that created by Peak Oil production and in fact, the Global Economy as a whole!

Aging population to impact economy: BoC

TORONTO – The aging of Canada’s population will put upward pressure on wages as the pool of available workers shrinks, and global aging might over time lead to lower interest rates, Bank of Canada Deputy Governor Jean Boivin said on Wednesday.

Aging will also affect the potential of the economy, meaning the level of activity at which it can operate without inflationary pressures, and this is something the Bank of Canada needs to assess, he said.

The high level of household debt in the country makes it even more crucial that individuals adjust their savings behaviour and plan over a longer horizon, he said in a speech in Toronto.

“As our society ages, we can either accept a lower standard of living or we can try to be proactive and adjust … The stakes are high and we cannot afford to ignore them,” Mr. Boivin said.

“There is no free lunch in that context ; something will have to give and someone will have to pick up the tab, so the least we can do is accept this fact and ensure that the bill remains small and that the burden is shared fairly.”

The mechanism for upward pressure on wages would be that with relatively fewer people left in the work force, employers will compete to attract talent.

Taken in isolation, he said, the scarcity of labour relative to capital could be expected to lead to higher wages and lower returns on capital in advanced economies, and eventually to persistently lower global interest rates.

Improved productivity, if any, would offset the downward pressure on rates.

But Canada’s tepid growth of productivity and potential output has preoccupied the central bank. Mr. Boivin said the latest estimate was for Canada’s potential output to grow by 2.2% in 2014, and without the decline in working age population it would be 0.2 percentage points higher.

“Aging is projected to continue to subtract from potential output growth until the end of the current decade,” he said.

He said Canada faced three options to avoid drastic declines in living standards or shifting too much burden on the next generations: more work, greater productivity and higher savings.

Without endorsing last week’s federal budget, he said policy steps could foster the needed adjustments and this was the objective of some of the measures in the budget.

The budget raised to 67 from 65 the age of eligibility for payments to seniors under its Old Age Security program, and hiked the age of retirement to 65 from 60 for new federal employees, starting next year.

Mr. Boivin also highlighted the important contribution of immigration to dealing with the aging problem. The budget announced plans to eliminate a backlog of stale applications by foreign skilled workers so that immigrants whose skills are in greater current demand can enter Canada faster.

He said a key challenge was to remove the barriers that keep educated and skilled immigrants from working in their fields.

Link -
http://business.financialpost.com/2012/04/04/aging-population-to-affect-economy-...
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Whilst there is much I can agree with in this article, there are also some areas where I would disagree!

Certainly, IF there is a perception that the burden is not being shared fairly, then that could/would lead to a great deal of Public unrest.

However, to suggest that this Aging event will only affect the Local & Global Economy until the end of this decade is a gross understatement, as it will most likely affect events for 2-3 decades, at least!

When looking at the likely effects of Aging, it must not be forgotten that this Aging event will not happen in isolation and that Peak Energy, Peak Debt & Climate Change will also be adversely influencing Economic events, over that same 2-3 decade period.

So, hold onto your hats, because WE ARE ALL IN FOR A WILD RIDE!

Last Report dated 03/12/2012

US$ Index (basket of Currencies):  @ 82.41 (Last Report - 78.68) (2010/06/04 - 87.85)
http://www.goldseek.com/quotes/charts/usdollar/usdollarindex24hour.php

Euro - US$: @ 1.2530 (Last Report - 1.3391) (2010/06/04 - 120.44)
AUD$ - US$: @ 1.0023 (Last Report - 1.0216) (2010/06/04 - 83.17)
AUD$ - GBP: @ 0.6432 (Last Report - 0.6548) (2010/06/04 - 57.04)
AUD$ - EURO:  @ 0.7999 (Last Report - 0.7629) (2010/06/04 - 69.06)
http://www.bloomberg.com/markets/currencies/fxc.html

Gold - @ US$1,574.10 (Last Report - US$1,745.30) (2010/06/04 - $1,207.80)
http://www.kitco.com/charts/livegold.html
Oil WTi -  @ US$80.09 (Last Report - US$100.96) (2011/03/19 US$101.01)  (2010/06/04 - $70.22)
http://www.bloomberg.com/energy/
BALTIC DRY INDEX (BDIY) - @ 978 (Down 42 @ Friday close) (Last Report – 1,866) (2010/06/04 - 3,844)
http://noir.bloomberg.com/apps/quote?ticker=BDIY:IND

DOW @ 12,641 - (@ Friday close) (Last Report - 12,019)  (2010/06/04 - 11,444)
http://au.finance.yahoo.com/echarts?s=^DJI#symbol=^dji;range=1y;compare=;indicat...
ALL ORDS @  4,094 (@ Friday close) (Last Report - 4,346) (2010/06/04 - 4,840)
http://au.finance.yahoo.com/echarts?s=^AORD#symbol=^aord;range=1y;compare=;indic...
SHANGHAI COMPOSITE @  2,293 (@ Friday close) (Last Report - 2,360) (2010/06/04 - 2,553)
http://au.finance.yahoo.com/echarts?s=000001.SS#symbol=000001.ss;range=1y;compar...

Last 5 years DOW -
http://finance.yahoo.com/echarts?s=%5EDJI#chart3:symbol=

THERE was movement at the FED, for the word had passed around, That the US$ was an old Regret and its value had long since passed away
==================


Since the last report, on December 3, 2011 -
The US$ index rose.
The Euro fell against the US$.
The OZ$ fell slightly against the US$ & the GBP, but gained against the EURO.
Gold fell, as the US$ rose.
Oil (Wti) fell significantly.
The Baltic Dry Index went into a Nose Dive!
The DOW continued to be Schizophrenic, with a rise.
The ALL Ords has continued a negative trend.
The SHANGHAI COMPOSITE is now slightly lower, on recent trends.

On the rise in the US$ Index & the increase in the DOW, all I can say is "GO FIGURE", they certainly don't recognise reality!

Conversely, the downward trends in the Oil & Baltic Dry Index, provides "reality checks"!

Good luck & watch the Debt!