October 07, 2021 Edition
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The biggest news this week I believe is the emerging energy and financial crisis emerging in China. It is becoming clear that things are not going well and that major problems could emerge.
In the US one gets the sense that the Biden administration is facing a widening range of issues and divisions that are causing real problems. A reset is clearly needed but one wonders if Biden is up to it at this point.
In the UK (and Europe) we have road transport crises and rising energy prices making it look like a pretty unhappy winter.
In Oz the big
news is the resignation of Gladys and the impact this might have on the Federal
election which is due in the next 6-8 months. The new Premier seems to be a bit gung ho on easing restrictions - it may or may not go well!
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Major Issues.
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Central banks start worrying that money’s been too cheap for too long
Having made billions available to households, companies and governments to borrow during the pandemic, the brakes are now being applied.
Chris Giles and Colby Smith
Sep 26, 2021 – 12.44pm
The world’s financial markets rarely sit glued to their screens waiting for the no-nonsense Norges Bank to pronounce its verdict on Norway’s monetary policy. This week was different. The 0.25 percentage point rise in its interest rate was the most visible expression yet of a turn in the monetary policy cycle that is spreading across the world.
No longer are central bankers seeking to do whatever they can to ensure money is available for households, companies and governments to borrow at exceptionally favourable rates.
Along with Norway’s monetary tightening, the first in any advanced economy since the pandemic began, four emerging economy central banks – Pakistan, Hungary, Paraguay and Brazil – also raised the cost of borrowing this week, while the US Federal Reserve and Bank of England both signalled a move towards tightening monetary policy.
These guardians of monetary policy are generally satisfied that the economic recovery has proved stronger than they feared at the start of the year. But they are beginning to worry that money might become too cheap for too long. That would threaten rising inflation, excess borrowing and even financial instability as the world emerges from the coronavirus crisis.
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Pitting good versus evil in the world of thematic ETFs
Jonathan Shapiro Senior reporter
Sep 23, 2021 – 9.36am
The struggle between good and evil is eternally fraught, but on one measure, the good guys have been winning.
The Global X Catholic Values ETF has returned about 63.4 per cent since it was created in December 2017, just about matching the S&P 500 index return. That’s smashed the AdvisorShares Vice index, which has returned just 25.85 per cent. Catholic Values dominates over both three and five years.
Readers of this column will be comforted to know that virtue is also more popular in the war for dollars, as Catholic Values has amassed around $US565 million ($781.4 million) of assets compared to Vice’s paltry $11.56 million.
These US-listed products are just two of a proliferation of thematic exchange-traded funds that don’t simply track a market-cap weighted benchmark, but hitch to a particular theme or sector.
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https://www.afr.com/wealth/personal-finance/what-to-put-in-your-when-i-m-dead-folder-20210923-p58u4i
What to put in your ‘when I’m dead’ folder
This seven-point checklist will help your loved ones make good decisions when you’re no longer here.
Tim Mackay Contributor
Sep 27, 2021 – 5.00am
Many self-managed super fund investors are emerging from COVID-19 in better financial shape. While there will be reconnecting with family and friends with shared experiences (like travel and restaurants), it will also be a great opportunity to reconnect on a financial level and share SMSF knowledge with family.
You are likely to have a will and nominated super beneficiaries to ensure your wealth goes to your loved ones. But if you died today, could your grieving loved ones take over your SMSF?
The honest answer is probably “not easily nor quickly”. The solution is to create a physical “When I’m dead” folder to help them.
While it may seem a morbid title, the notion of a “When I’m dead” folder is only ever going to be confronting to you. For everyone else, discovering a folder with that brutally honest title will seem a godsend.
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After Afghanistan, parliament must test all talk of war
12:00AM September 27, 2021
Afghanistan war veteran and Coalition MP Phil Thompson says few parliamentarians understand why Australian soldiers were in Afghanistan. He wants a review of our seven-year drawdown from the conflict. Others are renewing the call for Australia to change how it goes to war. A parliamentary inquiry has been convened to examine a Bill requiring parliamentary approval, except in an emergency, for the deployment of our troops overseas.
Committing to war is one of the most important decisions that can be made by a nation. This is reflected in the US Constitution. It states the president is the nation’s commander-in-chief, but vests the power “to declare war” in congress. The aim is to check the power of the president by ensuring declarations of war are made after careful deliberation and have popular support. The system is not foolproof and has often produced tension between the arms of government. The US has a long history of presidents bypassing congress by engaging in military conflict overseas in undeclared wars.
Australia’s Constitution says nothing about the power to go to war. It states only that the governor-general commands our military forces as the Queen’s representative. The answer instead lies in a centuries-old convention from Great Britain. It permits our governor-general to exercise the personal power of the monarch to send Australia to war. In practice, this royal prerogative is exercised by the governor-general acting on advice of the prime minister. There is no requirement that the prime minister involve parliament, although it is kept informed and on occasion has debated the deployment of troops.
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DIY super funds left out of ‘retirement covenant’
Aleks Vickovich and Michael Read
Sep 27, 2021 – 5.26pm
The Morrison government will require superannuation funds to better protect members in retirement from inflation and market risks, but has quietly exempted self-managed funds from the new obligations.
Draft legislation released on Monday would create a legal duty for prudentially regulated super trustees to devise, implement and regularly review a “retirement income strategy” for members.
The so-called retirement income covenant, which would be in place from July 1 next year, comes in response to a growing body of evidence showing retirees are dying with most of their wealth intact.
By 2060, one in every three dollars paid out of the superannuation system will be an inheritance rather than retirement income, according to the government’s retirement income review, chaired by Treasury veteran Mike Callaghan.
The new law would require super fund trustees to develop a strategy that would allow people to maximise their expected retirement income and have flexible access to expected funds during retirement. At present they are only required to have an investment strategy in place, focused primarily at those in “accumulation” phase and still putting money into super rather than taking it out.
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https://www.afr.com/policy/economy/frydenberg-flags-home-loan-curbs-20210927-p58v4k
Frydenberg signals home loan crackdown
John Kehoe Economics editor
Sep 28, 2021 – 5.00am
Treasurer Josh Frydenberg has given the green light for regulators to crack down on high-debt home loans to reduce financial risks from record-low interest rates and surging property prices.
Financial regulators are working on plans to potentially clamp down on a jump in high debt-to-income ratios among new borrowers, a trend exacerbated by ultra-low mortgage rates enabling home buyers to borrow larger amounts.
More than one in five home buyers are now borrowing more than six times their incomes, a risk that could be felt if interest rates jump or people lose their jobs.
The number of new residential mortgage loans where debt is at least six times greater than income jumped to 22 per cent of new loans in the June quarter, from 16 per cent a year earlier, according data from the Australian Prudential Regulation Authority.
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https://www.afr.com/policy/economy/no-point-keeping-money-so-cheap-20210926-p58uws
No point keeping money so cheap
Holding down interest rates to make inflation rise is long past any usefulness. The best way to start the painful adjustment is to begin early.
Stephen Grenville Contributor
Sep 27, 2021 – 3.47pm
Financial markets are on tenterhooks, trying to guess when inflation will arise, triggering a policy response. There’s not much at stake here for the real economy. Guessing the short-term time-path of price increases is a distraction from the important policy issues. It matters only to those betting in the casinos of financial markets.
Since the financial crisis of 2008, global interest rates have been stuck at unnaturally low levels. Policy rates are now in effect zero in most advanced economies – substantially negative in inflation-adjusted (real) terms.
It made sense to lower interest rates in 2008, in response to the financial crisis. But as the economy returned to normality, interest rates should have been normalised.
This was resisted by financial markets, where many participants were exposed to losses if rates rose and quantitative easing was wound back. The 2013 taper tantrum forced the US Federal Reserve chief Ben Bernanke to expand QE.
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https://www.afr.com/wealth/personal-finance/how-to-invest-with-etfs-20210924-p58ulq
How to invest with ETFs
A low-cost, diversified core portfolio with only a few exciting satellite ETFs is the best way to build your wealth without taking on too much risk.
Duncan Burns
Sep 28, 2021 – 5.00am
The full Australian exchange traded fund menu is truly world class – access to entire markets and diversified portfolios, both global and local, are available with just one click.
Innovation in the Australian ETF space is also booming, with ETF providers capitalising on investor interest and branching off into specific industry sectors, themes and more exotic areas of the market. For better or worse, we might even see a cryptocurrency ETF launched here before long.
But while this product proliferation is exciting, investors should consider the risks of shiny new thematic ETFs before investing. Many within this new wave of more exotic ETFs are highly concentrated and/or highly volatile.
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https://www.afr.com/politics/federal/labor-s-alternative-plan-for-australia-20210927-p58v6p
Labor’s alternative plan for Australia
Australians are sick of fighting. They want outcomes. The guiding principle under a new government is simple – no one held back, no one left behind.
Anthony Albanese Contributor
Sep 28, 2021 – 12.41pm
Former Labor prime minister Paul Keating once said that when our government changes, our nation changes.
It’s true. Governments manage day-to-day events, but they also shape our nation’s future and long-term direction.
While the Morrison-Joyce government’s focus is short-term political and media management, the election of a Labor government will fundamentally change our nation for the better.
Labor has a plan to rebuild the Australian economy so it is stronger and more resilient than it was before the COVID-19 pandemic.
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A relic of a bygone age? I might be, but I’m not a defeatist
Former prime minister
September 29, 2021 — 5.00am
Marise Payne, who has made an art form of hiding her light under a bushel, dashed onto the national stage on Monday, completely unfazed by the blazing footlights.
The purpose of this daring appearance was to attack me for having the temerity to say that the government’s AUKUS agreement re-staples us to the Anglosphere – the world of the Atlantic, while stridently turning its back on our geography, Asia, in the same awkward movement.
It has been an historic day in Washington DC, where Prime Minister Scott Morrison joined world leaders presenting a united front against China.
Payne and the Prime Minister were bedazzled by the grand reception they were afforded in Washington – a reception any strategic client of the United States would have received had they turned over control of their armed forces to the US. But in our case, turning over effective control of our foreign policy into the bargain. Any prime minister that shops Australia’s prerogatives and interests to another power will always be feted and celebrated by that power. And this is precisely what Scott Morrison and Marise Payne experienced.
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‘Clumsy, deceitful and costly’: Turnbull slams handling of nuclear submarine decision
By Anthony Galloway and Peter Hartcher
September 29, 2021 — 5.00am
Former prime minister Malcolm Turnbull has warned Australia will need to develop a nuclear industry to maintain its proposed fleet of submarines and lashed his successor, Scott Morrison, for not being upfront with France over its decision to dump a $90 billion contract.
Mr Turnbull, who chose Paris in 2016 to build a fleet of 12 conventionally powered submarines, said the government should have explored the possibility of building a nuclear-powered fleet using low-enriched uranium with France and the United States.
He suggested the French nuclear technology had “safety and non-proliferation advantages” over the weapons-grade uranium used in American and British submarines and accused the federal government of running a “clumsy, deceitful and costly” process.
“Safety and sovereignty dictate that we will need to develop nuclear facilities in Australia to maintain and support these submarines,” Mr Turnbull wrote in an opinion piece for The Sydney Morning Herald and The Age.
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Paid fund ratings create potential for conflict of interest
By John Collett
September 28, 2021 — 11.00pm
A new report has criticised the business models of some researchers who rate managed funds, as they are paid by the money managers they rate.
The 250-page report by Deloitte Access Economics into competition in the funds management sector, commissioned by the Australian Securities and Investments Commission, raises concerns that the payments create “incentives to give positive [fund] ratings”.
The report states that financial advisors employed by businesses that also own funds management divisions often have an incentive to recommend “in-house” managed funds, even if they may not be suited to the consumer.
The report says 86 per cent of all the money pumped into managed funds from retail investors in 2018 came via the recommendation of financial planners.
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New powers to protect critical infrastructure
September 29, 2021
Parliament’s intelligence and security committee has recommended emergency powers be swiftly legislated to counter growing threats to critical infrastructure.
The committee, in a report tabled on Wednesday morning, calls for rapid amendments to critical infrastructure legislation to expand the range of sectors to be protected under the Act, and introduce new “last resort” government assistance measures to crisis scenarios.
The committee also calls for new mandatory incident reporting obligations for operators of critical infrastructure to be urgently put in place.
It recommends a second bill be passed, after consultation with industry, on enhanced cyber security obligations, and declarations of systems of national significance.
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https://www.smh.com.au/politics/federal/wooing-the-hostile-beast-within-20210929-p58vnj.html
Wooing the hostile beast within
Award-winning political commentator and author
September 30, 2021 — 6.05am
Last Thursday night when the Treasurer Josh Frydenberg, whose seat of Kooyong has been targeted by Greens and cashed-up independents, rang the Resources Minister Keith Pitt to advise him he would deliver a speech the next day which effectively backed net zero by warning of serious economic and investment consequences if Australia failed to move, Pitt was not impressed.
Pitt warned Frydenberg he ran the risk of “blowing up the show”. Frydenberg knows only too well Pitt knows something about that. The Queensland National resigned as an assistant minister in 2018 in protest over the National Energy Guarantee that Frydenberg as environment and energy minister was negotiating.
The breakdown over the NEG was the trigger which cost Malcolm Turnbull the prime ministership a week later. This time Pitt is waiting to see Scott Morrison’s plan before he decides his next steps but makes no secret that he implacably opposes net zero.
It was shaping as deja vu all over again, then Gladys Berejiklian, John Barilaro and Matt Kean in NSW provided, without drama or conflict, a sensible roadmap which Morrison could follow to protect the economy and the environment to get to net zero by 2030. And it didn’t sound that hard.
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Sharemarkets are wobbling as risks grow for investors
Senior business columnist
September 29, 2021 — 11.59am
It wasn’t so much a taper tantrum as a taper twitch overnight as sharemarkets belatedly reacted to last week’s signal that the US Federal Reserve Board is about to start withdrawing the safety net under equity markets and prices.
The US market was down more than two per cent and the tech-heavy Nasdaq market 2.8 per cent on Tuesday as bond yields spiked. That followed last week’s meeting of the Fed’s Open Market Committee that indicated the Fed would start winding back its $US120 billion-a-month ($166 billion-a-month) of bond and mortgage purchases.
It is those purchases – more than $US4 trillion of them – which started in March last year as the Fed responded to the pandemic, and the liquidity the US central bank has therefore been pumping into the financial system and the ultra-low interest rates that have ensued that had created a rising floor under the markets despite the ravages of COVID-19.
With the Fed likely to start reducing its purchases in November and a majority of the members of the Open Market Committee forecasting a rate rise next year, the end of this cycle of quantitative easing is in sight and the complacency it had engendered in investors has been shaken.
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Malcolm Turnbull refuses to rule out voting or campaigning against Liberals
7:32PM September 29, 2021
Malcolm Turnbull is facing new claims of treachery against the Liberals after reserving his right to campaign for independents at the next federal election and refusing to say whether he will vote for the party he once led.
If the former prime minister were to campaign against any Liberal at the election, the NSW Liberal Party state executive would have the right to expel him without the right of appeal.
In an address to the National Press Club, Mr Turnbull said Scott Morrison’s decision to cancel a $90bn submarine deal with France was “blundering and deceitful”, accusing the Prime Minister of hurting the nation’s relations with Europe.
Mr Turnbull also revealed he had spoken to French President Emmanuel Macron about the submarine controversy since the AUKUS deal was announced, despite Mr Morrison not yet having done so.
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Rising bond yields show market is nervous on inflation
William McInnes Reporter
Sep 30, 2021 – 3.18pm
A sharp rise in bond yields has investors on edge amid signs that inflation is more persistent than central bankers have led markets to believe, challenging the consensus that rising prices from electricity to freight will be simply transitory.
Speaking at the ECB Sintra Conference on Wednesday, Federal Reserve chairman Jerome Powell, ECB president Christine Lagarde and Bank of England governor Andrew Bailey all pushed back against evidence higher inflation was here to stay.
While bond markets took those comments in their stride, consolidating around Wednesday’s levels, the rise in yields in the last few sessions invites discomfort.
“Nominal government bond yields have begun to creep up, indicating that the bond market may be rethinking its own sanguine inflation view,” said GSFM investment strategist Stephen Miller.
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Morrison races to quarantine the Berejiklian damage
The Prime Minister is rushing out announcements, increasingly confident the public mood is lifting and leaving Labor sidelined.
Laura Tingle Columnist
Oct 1, 2021 – 4.35pm
Just hours earlier, The Australian Financial Review’s annual Power list had been trumpeting the fact that, for the first time in the 21-year history of the list, the prime minister was not perceived as the nation’s most powerful person.
Instead, it was four premiers – Gladys Berejiklian, Daniel Andrews, Annastacia Palaszczuk and Mark McGowan – who were regarded as the ones running our lives.
But by lunchtime on publication day, Berejiklian – so often held up as the gold standard of pandemic management by Scott Morrison – was gone.
Prime Minister Scott Morrison has praised Gladys Berejiklian's work as NSW Premier, calling her a 'close friend'.
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https://www.afr.com/politics/federal/icac-claims-its-third-nsw-premier-20211001-p58wj3
Berejiklian’s exit threatens a fragile political consensus
The NSW Premier’s shock departure casts doubt on the coherence of a national cabinet at a time when Australia is facing its greatest peace-time challenge since the Great Depression.
Andrew ClarkSenior writer
Oct 1, 2021 – 6.57pm
Most nights are slow in the politics business, but every once in a while you get a fast one, a blast of wild treachery and weirdness that not even the hard boys can handle. It is an evil trade on most days and nobody smart will defend it. Gonzo journalist Hunter S. Thompson
Friday’s shock resignation of NSW Liberal Premier Gladys Berejiklian reflects a mounting crisis in Australian politics.
At a time when the nation is facing its greatest peace-time challenge since the Great Depression, Berejiklian has been effectively forced out of her job as leader of Australia’s most populous and economically powerful state.
Apart from Prime Minister Scott Morrison, she has been the key player in Australia’s 18-month struggle against the pestilence, although, like other state leaders, she has clashed with the federal government over its at-first inexplicably slow vaccine rollout.
Gladys Berejiklian joins a growing list of recent political casualties, including federal Industry Minister Christian Porter, Victorian Opposition Leader Michael O’Brien and Tasmanian Opposition Leader David O’Byrne.
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https://www.afr.com/politics/the-tragedy-of-berejiklian-s-downfall-20211001-p58wfv
The tragedy of Berejiklian’s downfall
Aaron Patrick Senior correspondent
Oct 1, 2021 – 2.28pm
Gladys Berejiklian presided over one of the strongest Coalition governments in NSW history.
She cut taxes, reduced the size of government, built roads, railways, stadiums and schools. She ran a disciplined administration, politically and managerially.
This successful premier was brought down by a flaw in her personality: a willingness to associate with the shady side of politics.
NSW Premier Gladys Berejiklian has announced she will resign as Premier of NSW and from NSW Parliament.
For a woman who boasted of her government’s high ethical standards, her decision to date the former MP and possibly corrupt Daryl Maguire was more than a misjudgment of character. It was a wilful flirtation with danger.
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If only economists could evolve and work out what makes humans tick
Economics Editor
October 1, 2021 — 11.43am
At the heart of the weaknesses of economics – its frequently wrong predictions and the bad advice its high priests often give governments – is its primitive understanding – its “model” - of how and why humans behave the way they do.
It’s taking economists far too long to realise that to understand how the economy works you’ve got to start by understanding how the people who make up the economy work. The model economists started with in the second half of the 19th century and haven’t really moved on from is the mere assumption that businesses, workers and consumers always behave “rationally” – with carefully considered self-interest.
In the 150 years since economists decided their stick-figure assumptions were a sufficient foundation on which to build their model of economic behaviour, the other social sciences – psychology, sociology, anthropology – have made much progress in understanding human behaviour and motivations.
So, just this once, let’s set aside “Homo economicus” and see what wisdom the more social social scientists have to impart.
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PM urged to abandon plan to build subs
12:00AM October 2, 2021
The Morrison government should abandon plans to build eight nuclear-powered attack submarines in Adelaide and instead accelerate efforts to acquire an Australian nuclear submarine capability by leasing a boat from the US or Britain, followed by an overseas build, according to a large group of centre-right elder statesmen, senior former defence department figures and leading think-tank experts interviewed by The Weekend Australian.
Former deputy prime minister, John Anderson is the most clear cut. He told The Weekend Australian: “We are no longer a manufacturing country. That is tragic but a reality we have allowed to evolve. We are being less than forthright if we think we can build something as complex as nuclear submarines here in an effective and timely way.”
Mr Anderson warmly praised Scott Morrison for choosing nuclear-powered submarines, but said: “We can’t hope to match the brilliance of those who have had decades of designing and building nuclear subs. Just buy the best, our people deserve nothing less.”
Dennis Richardson, a former secretary of the defence department, described the decision to switch to nuclear-powered subs, which he supports, as seminal, but is sceptical of the ability to build them, or all of them, in Australia.
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Value of all Australian housing stock set to break through $10 trillion barrier
11:28PM October 1, 2021
The total value of all Australian housing stock could break through the $10 trillion barrier as early as December, as prices increase at the fastest pace in more than three decades, stoking fears among regulators of an overcooked sector.
CoreLogic data released on Friday shows housing values increased by 1.5 per cent in September, bringing the total gain this year to 17.6 per cent.
Meanwhile, Australian Bureau of Statistics from earlier this year show that the total value of all residential dwellings leapt 23.7 per cent from $7.21 trillion in the December 2019 quarter to $8.92 trillion in the June 2021 quarter.
The average dwelling price in Australia shot up by more than $144,000 to $835,700 in that time, gaining $1575 in value every week.
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Seven dangers facing investors: it’s been a great year but the future won’t be as rosy
8:05PM October 1, 2021
The biggest risk you face today as an investor is not the sharemarket or the property sector or even the prevalence of artificially low interest rates. No, the biggest risk is that you are too optimistic about your expected returns.
In fact the greatest irony for investors just now is that things have been so good while the economy has been so bad. Spectacular house price increases, consistently better sharemarkets and cheap finance – it’s been ideal.
From here the story changes. In the real world things may well improve – but for investors it’s getting darker.
As investors we are seriously in danger of having our plans shot to pieces, but not because returns will be dreadful. Returns could be perfectly adequate by historical standards, but they are very unlikely to be anywhere near as good as the last 12 months.
If your house rose 20 per cent in price last year and your super did 10 per cent-plus and your share portfolio moved higher even if you picked the most mediocre companies, it’s time to ask a single question: do you seriously believe – even with rock bottom rates – that this can go on for much longer?
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Coronavirus And Impacts.
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Get beds ready now: Singapore’s reopening stumble a lesson for Australia
September 28, 2021 — 3.39pm
Singapore: Singapore’s top infectious disease expert warns that NSW and Victoria can learn from the city state’s troubles in opening up at 80 per cent vaccinated – by getting extra beds ready to ease pressure on hospitals as infection numbers spike.
Professor Dale Fisher, an Australian who chairs the WHO’s Global Outbreak Alert and Response Network, believes there are lessons to be learnt about the difficult transition to living with the virus.
Singapore, which opened restaurants, bars and gyms in mid-August before hitting the 80 per cent vaccination mark a month ago, tightened restrictions again this week as new daily cases skyrocketed to a record 1939 – surpassing even Indonesia, whose new infections fell to a year-long low of 1760 on Sunday.
The number of seriously ill on the island remains low – there were two deaths on Monday while 194 people required oxygen and 27 were in intensive care – but the sheer speed of the rise in cases caught the government by surprise as it began shifting towards home recovery and community care for the mildly sick.
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Sweden dancing as last restrictions are lifted
By Oliver Moody
The Times
October 1, 2021
Sweden’s health minister has defended the country’s light-touch handling of the pandemic as the last handful of remaining restrictions were lifted.
The limit on public gatherings has been scrapped, prompting Swedes to pack the dancefloors in nightclubs across the country.
Bars and restaurants are no longer required to keep their tables at least 1.5m apart and can admit as many customers as they like. The government is also considering a plan to hand out a culture voucher worth $24 to every adult in an attempt to bolster the arts sector.
Last year Sweden was the focus of intense international interest as it adopted a far more libertarian strategy than most other European countries, eschewing lockdowns in favour of public health guidance.
Over the past 12 months, however, its approach has become more like those of neighbouring states, with an extensive testing program and measures to limit indoor and outdoor socialising.
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Overrun hospitals not prepared for Covid-19 crisis
7:32AM October 1, 2021
Doctors have warned that the health system is so overburdened by Covid-19 that people are dying from other treatable conditions as patients are stuck in ambulances and the corridors of emergency departments, unable to access a hospital bed.
A discussion paper drawn up by top health officials from four states and presented to a recent urgent roundtable of health ministers warned the hospital system was buckling under the strain of not only Covid-19 but also routine care, while doctors warned conditions deemed low priority would develop into life-threatening emergencies as treatment was deferred.
The health officials said the government should consider deploying GPs to hospital emergency departments to tackle workforce shortages.
Thousands of patients should be transferred home for treatment to take pressure off hospitals, and the government should embark on an urgent immigration program to boost doctor numbers.
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Mental health crisis overblown as liberty is lost in lockdowns
Say you are pyschologically ill and governments will listen. Protest about inalienable rights, and you will be called an extremist.
Tanveer Ahmed Contributor
Sep 28, 2021 – 1.11pm
There is a good chance the mental health effects of the lockdown may be overblown.
As a psychiatrist, I may be crucified for making such a statement, a kind of blasphemy against the repeated framing of a mental health crisis. Professor Patrick McGorry has received widespread attention for casting the psychological distress from lockdown as a shadow pandemic.
He is right in some respects. There is an undeniable increase in presentation of adolescents with self-harm, eating disorders and substance abuse. NSW Health’s chief psychiatrist Murray Wright explains this as a pre-existing trend worsened by the pandemic, especially lockdowns.
Much like the pandemic speeding up historic shifts like digitisation, it has accelerated some social trends such as worsening youth mental health.
Acute mental health admissions in NSW for children and young people for the year to July 22 were up 43 per cent on 2020, compared with a 2 per cent rise for the general population. A similar crisis was playing out in Victoria. Lifeline has also recorded more calls than ever before this year.
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Freedom, interrupted: Will the liberties we lost to COVID be regained?
October 2, 2021 — 4.55am
It was in the early months of the pandemic that David Barton realised, as he sat by his dying wife, that in our singular determination to protect life from the spread of a virus, we were at risk of losing something just as precious.
Anne Barton wasn’t sick with COVID-19, she was sick with cancer. An inoperable, terminal liver cancer which, after enduring for 16 months the ravages of chemotherapy and the progression of the disease, she had decided to stop fighting. Now that she was in palliative care, what mattered was being as comfortable as possible and sharing the time she had left with people she loved.
Instead, COVID restrictions imposed on the small palliative hospital where she was receiving care meant she was allowed only one visitor a day, for one hour. That included visits from her husband of 44 years. If either of their children wanted to see their mum, David couldn’t see his wife. Their grandchildren couldn’t come at all.
Barton, a GP who throughout a long career in medicine has specialised in occupational health and safety, describes the situation as farcical. “No one wanted her to get COVID,” he says bitterly.
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Merck’s COVID-19 pill cuts risk of death, hospitalisation by half in study
By Deena Beasley and Carl O'Donnell
Updated October 2, 2021 — 4.13pmfirst published October 1, 2021 — 8.22pm
Los Angeles: An experimental antiviral pill developed by Merck & Co could halve the chances of dying or being hospitalised for those most at risk of contracting severe COVID-19, according to data that experts hailed as a potential breakthrough in the treatment of the disease.
If it gets authorisation, molnupiravir, which is designed to introduce errors into the genetic code of the coronavirus, would be the first oral antiviral medication for COVID-19.
A planned interim analysis of 775 patients in Merck’s study looked at hospitalisations or deaths among people at risk for severe disease. It arrived at the 50 per cent rate of reduction in hospitalisation and death by finding that 7.3 per cent of those given molnupiravir twice a day for five days were hospitalised and none had died within 29 days of treatment, compared with a hospitalisation rate of 14.1 per cent and eight deaths for placebo patients.
“Antiviral treatments that can be taken at home to keep people with COVID-19 out of the hospital are critically needed,” Wendy Holman, CEO of Ridgeback Biotherapeutics, Merck’s partner in the project.
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Climate Change.
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Europe’s renewables generated energy crisis
The Continent’s gas shortages and skyrocketing prices are a warning about taking a politics-over-engineering approach to climate change.
Matthew Warren Contributor
Sep 26, 2021 – 12.15pm
Europe has stumbled into a serious energy crisis, largely of its own making. It is heading into winter critically short on gas reserves, sending energy prices skyrocketing, threatening to shut down industrial production and imperilling its post-COVID economic recovery.
It should come as no surprise. Europe’s “sudden” energy fragility is the result of the same misguided politics-over-engineering approach to climate change that sent California into rolling blackouts last summer. Only on a much grander scale.
When you are rich and organised, you shouldn’t run out of energy. Energy security is a strategic priority for all functioning economies, up there with food and water. Energy has motivated key flashpoints in modern history: Pearl Harbour, the Battle of Stalingrad, the Suez and oil crises and two Gulf wars.
It might be that one way to manage the tail risks of big renewables is to keep some old coal generators operational and run them in emergencies.
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For farmers, climate change is both headache and a motivator
Unlike coal, there is no easy substitute for meat or dairy produced by belching livestock. But farmers do have other options in their own hands.
Tony Wood Contributor
Sep 27, 2021 – 1.02pm
Deep cuts in greenhouse gas emissions from Australia’s herd of grazing cattle and sheep will be hard to deliver. That’s partly why political leaders often exclude agricultural emissions from their climate change policies. Yet net zero without agriculture is simply not net zero.
If Australia is serious about a net zero objective, there are practical actions governments can take now to ensure that reducing emissions from agriculture is an effective and efficient part of the solution. Grattan Institute’s latest report, Towards net zero: Practical policies to reduce agricultural emissions, identifies such actions.
Agricultural activities contribute about 75 million tonnes a year to Australia’s emissions, or about 15 per cent of the total. The latest government projections indicate that, with steady herd recovery from extended drought conditions, these emissions will increase until 2030 unless new actions are taken.
As with all sectors, the actions that can be taken to reduce agricultural emissions range from low cost and relatively easy to high cost and very tough. And then there are the areas where no viable solutions have yet been identified.
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Energy crisis is moment of truth for Europe’s green ambition
Europe’s decarbonisation agenda requires making fossil energy use more expensive. That was always going to be a tough sell. Now that higher prices are suddenly here, it is going to be harder still.
Martin Sandbu
Sep 27, 2021 – 9.27am
The EU’s “green deal” is about more than saving the planet. It is a stab at hegemony. European leaders sense that the decarbonisation agenda will force fundamental reform on the world’s economies, and want Europe to be at the front of that technological and policy revolution.
The EU’s desire to be the global green champion reflects that, in many ways, it already is. Green parties are more prominent in Europe than elsewhere. They have gained power or won the battle of the ideas to the extent that other parties have adopted their agenda.
Europe creates its prosperity with relatively low emissions. Its cities are pioneering urban economies that rely less and less on the car.
But Europe’s big ambitions also mean it is first to face the headwinds, such as the political fallout from the current spike in energy prices. The imminent prospect of citizens unable to keep the lights on is the stuff of any government’s nightmare.
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Net zero pledges are easy when it’s the next person’s problem
The revolving doors of most C-suites will have spun several times before chief executives of multinationals are expected to keep promises made by predecessors.
The Lex Column
Updated Sep 27, 2021 – 2.02pm, first published at 2.01pm
The chief executive of a large financial institution made a striking comment in private conversation last week. He said it was easy for bosses to commit their companies to net zero carbon emissions because it was “next, next, next, next management’s problem”.
He was riffing on the phrase “next management’s problem” with which chief executives habitually – albeit quietly – dismiss issues they do not expect they will have to deal with during their incumbencies.
Emissions pledges often have agreeably long deadlines. The tenures of bosses have been shortening. The revolving doors of most C-suites will have spun several times before chief executives of multinationals are expected to keep promises made by predecessors.
Tesco, for example, said on Friday it was extending a target of net zero emissions across its operations by 2035 to encompass its entire product range and supply chain by 2050. The last boss of the UK supermarket chain, Dave Lewis, was in the post for six years.
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Morrison is out of excuses, and time, to act on emissions
Political and international editor
October 2, 2021 — 5.00am
Can you imagine a Liberal government presiding over an electricity grid with more than 60 per cent renewable energy, where power prices are falling and with no blackouts whatsoever?
You don’t need to imagine. It’s the reality of South Australia today. Five years ago it was a laughing stock. It was the butt of every joke about renewable energy. It was roiled by power failures and ridiculed by the Liberal and National government in Canberra.
“We’ve got the states pursuing these ridiculously high and unrealistic state-based renewable energy targets,” said Josh Frydenberg, then Energy Minister in the Turnbull government. “Only the Commonwealth, with 23.5 per cent [by 2020] is a realistic target.”
At the time of the 2016 blackouts, solar and wind supplied 48 per cent of South Australia’s electricity and it was aiming to hit 50. Now, it’s a world-leading 62 per cent, more than double the national tally, measured over the last 12 months.
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Royal Commissions And The Like.
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National Budget Issues.
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Why Australia will bear the brunt of China’s property blues
Canberra’s economic fortunes are highly leveraged to Beijing’s old economy – and that’s why we’re already feeling the chill winds from Evergrande’s woes.
Karen Maley Columnist
Sep 27, 2021 – 5.00am
No country likes to think its economic fortunes are inextricably linked with the continuing expansion of China’s house price bubble, and Australia is no exception.
But the threatened collapse of the Chinese property development giant Evergrande, which has coincided with a vicious decline in the iron ore price, has been a brutal reminder of just how much our economic wellbeing depends on Beijing persisting with the old Chinese economic model, which relies heavily on the $US60 trillion ($82 trillion) property market to drive growth.
Beijing’s refusal to rush to Evergrande’s aid – the company owes more than $US300 billion and failed to make an interest payment to holders of US dollar-denominated bonds late last week – shows it is serious about weaning highly geared property developers off their serious debt addiction.
But Beijing’s dilemma is it is cracking down on the real estate sector – which accounts for 29 per cent of the country’s economic output – when the Chinese economy is already slowing and Chinese consumers are becoming more cautious.
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Budget wisdom: keep your options open and don’t cry over sunk costs
Economics Editor
September 26, 2021 — 3.30pm
The nation’s economists are realising that what we need is not smaller government but better government – government that delivers value for money. That means stopping the waste of taxpayers’ money. But identifying genuine waste is harder than you may think.
As former top econocrat Dr Mike Keating has argued in a revealing article on the Pearls and Irritations website, the Coalition preaches that smaller government is best, but has failed to deliver it. Even before the pandemic, federal government spending had risen as a percentage of gross domestic product.
Why? Because as it realised after the debacle of its first budget in 2014, the government lacks the voters’ support for big cuts in major spending programs. So it’s been reduced to cutting a narrow range of spending that lacks public support and, otherwise, just trying to keep a lid on other spending.
As economics professors Richard Holden and Steven Hamilton have argued, this penny-pinching has led to many “false economies” – cost cuts that end up costing you more than you’ve saved.
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Budget bottom line $80bn better than expected, but still in deficit
By Courtney Gould
NCA NewsWire
September 30, 2021
Treasurer Josh Frydenberg is confident Australia’s economy will bounce back as restrictions ease following the budget bottom line turning out $80bn better than expected.
Mr Frydenberg on Thursday handed down the government’s final budget outcome, telling reporters the budget deficit was $134.2bn in the 2020-21 financial year.
The figure is a $27bn improvement on the most recent forecast given in May and $79.5bn better than flagged in October, but Mr Frydenberg conceded the final budget outcome did not take into account the impact the Delta variant has had on the economy.
“We recognise that since this final budget outcome, the economy has been hit by the Delta variant,” he said.
“But with the vaccination rates fast approaching the 70 and 80 per cent targets, restrictions will be eased, and what these numbers confirm is that when restrictions are eased, the Australian economy bounces back.”
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A blown budget but no honesty yet on how it will be repaired
By Shane Wright
September 30, 2021 — 4.44pm
It’s a brave treasurer with more front than Myer who stands up to declare how the budget is recovering strongly and the economy is on the mend while confirming the largest deficit in history.
At $134.2 billion, the shortfall for 2020-21 budget might be an “improvement” on what was forecast at the depths of last year as the globe was swept by the coronavirus.
But in dollar terms, this country has never recorded a bigger deficit. As a percentage of GDP, you have to go back to when Japanese mini-submarines were in Sydney Harbour for anything comparable.
That’s after the $85.3 billion deficit for 2019-20, which now stands as the second-largest deficit on record.
And let’s not get started on the current financial year which, by Josh Frydenberg’s own admission has been hit by at least $20 billion in extra spending due to the Delta strain outbreak across the east coast.
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Health Issues.
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International Issues.
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AUKUS exposes global Britain’s post-Brexit desperation
The subs deal plays straight into Boris Johnson’s needy nostalgia. It’s allowed Australia to extract a major military upgrade from the wreckage of the 2016 referendum.
James Curran Columnist
Sep 26, 2021 – 12.34pm
After the announcement of the AUKUS partnership last week, commentators in Australia focused largely on the diplomatic meltdown with France, and the likely consequences of tightening the Australia-US alliance to counter China’s rise.
The question of what’s in it for Britain has attracted less attention, but this aspect is crucial to grasping the depths of Gallic fury with the Morrison government.
Ten years ago we wrote The Unknown Nation, a work that charted Australia’s hesitant path out of Empire in the 1960s and ’70s, as Britain withdrew its military from south-east Asia and looked to join the European Community. We could not have imagined that a fundamentally historical question had so much more to give.
When British Prime Minister Boris Johnson spoke at the launch of AUKUS, his emphasis was on job creation in Glasgow, northern England and the Midlands. Symbolic, he said, of his government’s “driving purpose of levelling up across the whole country”.
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https://www.afr.com/world/asia/look-to-japan-for-lessons-on-evergrande-20210926-p58uuc
Look to Japan for lessons on Evergrande
The Evergrande crisis is less ‘Lehman moment’ and more domestic property and bank asset bubble, like the one which dogged the Japanese economy for decades.
Gillian Tett Contributor
Updated Sep 26, 2021 – 12.13pm, first published at 12.07pm
Is the saga of Evergrande akin to the collapse of Lehman Brothers in 2008? Or is the rescue of AIG that year a better parallel? Or the 1998 bailout of Long-term Capital Management?
That is a question being raised by investors as China’s second-largest property group struggles under the weight of more than $US300 billion ($413 billion) of debt (including $US20 billion in dollar-denominated bonds) and a cooling domestic property market.
But for my money there is another historical parallel to ponder: Hokkaido Takushoku, the Japanese regional bank, which imploded 24 years ago when more than a tenth of its $US75 billion loan portfolio turned bad.
At first glance, that comparison might seem odd. Evergrande is a property developer not a lender. But what links them is a question that stalked Japan in 1997 and now hangs over Chinese finance: namely, what is the pillar of faith on which asset values rest? Is it government support? Or is it the independent scrutiny of accounts by investors? Does either pillar work?
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https://www.washingtonpost.com/opinions/2021/09/23/robert-kagan-constitutional-crisis/
Opinion: Our constitutional crisis is already here
Opinion by Robert Kagan
Contributing columnist
September 23, 2021 at 3:32 p.m. EDT
“Is there no virtue among us? If there be not, we are in a wretched situation.”
— James Madison
The United States is heading into its greatest political and constitutional crisis since the Civil War, with a reasonable chance over the next three to four years of incidents of mass violence, a breakdown of federal authority, and the division of the country into warring red and blue enclaves. The warning signs may be obscured by the distractions of politics, the pandemic, the economy and global crises, and by wishful thinking and denial. But about these things there should be no doubt:
First, Donald Trump will be the Republican candidate for president in 2024. The hope and expectation that he would fade in visibility and influence have been delusional. He enjoys mammoth leads in the polls; he is building a massive campaign war chest; and at this moment the Democratic ticket looks vulnerable. Barring health problems, he is running.
Second, Trump and his Republican allies are actively preparing to ensure his victory by whatever means necessary. Trump’s charges of fraud in the 2020 election are now primarily aimed at establishing the predicate to challenge future election results that do not go his way. Some Republican candidates have already begun preparing to declare fraud in 2022, just as Larry Elder tried meekly to do in the California recall contest.
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https://www.afr.com/world/europe/german-election-marks-end-of-merkel-era-20210926-p58uvr
German election marks end of Merkel era
Andrew McCathie
Updated Sep 26, 2021 – 7.45pm, first published at 7.35pm
Berlin | German voters were at the polls on Sunday in national elections that will usher in a new era for Europe and its biggest economy.
The election marks the beginning of the end of Angela Merkel’s 16 years in power, with the Chancellor planning to leave the political stage soon after.
Opinion polls are pointing to her Finance Minister, Olaf Scholz, taking over as head of a new, potentially volatile three-party coalition. “My impression is a lot of people want a new start,” Mr Scholz told a campaign rally on the eve of the election.
The ballot also sets the stage for long and tense negotiations to forge the new coalition government, with wide differences having already emerged between the major parties on key issues including climate change and government spending.
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https://www.afr.com/world/europe/colonialism-it-gets-very-complicated-20210927-p58v3m
Colonialism: it gets very complicated
We should stop generalising about empires and colonialism. The real history came in many episodes.
David Abulafia
Sep 27, 2021 – 1.20pm
I sympathise with Kemi Badenoch, the British minister of state of Nigerian descent, who was lambasted last week after a leaked message revealed that she once claimed not to “care about colonialism”.
The woke view is that anything that can be labelled as “colonialism” is inherently bad. But what is colonialism?
Its critics never define the term, though they evidently mean European empires established across the world since the 15th century, beginning with the Portuguese and the Spaniards, continuing with the Dutch and the English (the worst malefactors, in their view), and including surprising imitators such as Latvian peasants settling in Tobago.
Yet each of these episodes of colonisation had a distinctive character.
The Portuguese long concentrated on creating trading stations – the last one, Macau, was abandoned only in 1999. Spain concentrated on land empires, not just in vast swaths of the Americas but in the Philippines, Italy and the Netherlands, so that there was enormous variety within this vast assortment of territories.
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The fight to control the $2.7 trillion crypto market is heating up
By Claire Ballentine, Alice Kantor and Blake Schmidt
September 28, 2021 — 10.12am
It’s not that governments like China are banning cryptocurrencies because they necessarily expect the technology to fail. It’s that they want to be in charge of an experiment with potentially trillions of dollars in play.
With its latest move, China joins a small list of nations that are crypto prohibitionists. And it is a swing in the opposite direction of El Salvador, which adopted bitcoin as legal tender this year and was lauded by libertarians as well as bitcoin believers. In the US, where crypto trading is allowed but regulators are taking a close look, some see an opportunity in China’s deepening crackdown.
Understanding the many dimensions of this multi-pronged battle to control the market will be key for the millions of investors hoping to cash in on the crypto craze. The fight is set to reverberate through the global financial system, where every day brings news of products such as bitcoin exchange-traded funds, bizarrely named digital tokens and NFT assets. The ultra-rich are also involved, and mainstream financial institutions are embracing digital currencies.
More broadly, the fight will also influence socio-cultural discussions over everything from climate change to inequality, and trade to fiat currencies. How the world’s two biggest economies — the US and China — fare in their effort at oversight over the market will likely have the most far-reaching impact.
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Meng’s release marks a shift in China-US relations that could leave Australia behind
By Eryk Bagshaw
September 27, 2021 — 4.04pm
As Joe Biden was negotiating a nuclear submarine partnership with Scott Morrison and preparing for a Quad meeting at the White House last week, the US was secretly working on another deal.
The US President had spoken to China’s leader Xi Jinping by phone two weeks earlier. China had made it clear that the price of co-operation on big issues such as climate change was some concessions on key disputes that had plagued the relationship for the past four years.
High on the list was Meng Wanzhou, the chief financial officer of Huawei and the daughter of its founder Ren Zhengfei. The corporate princess had been under house arrest in Canada for almost three years on US fraud charges related to alleged Iran sanction violations.
China had detained and charged two Canadians in retaliation. Consultant Michael Spavor and former diplomat Michael Kovrig were locked up on vague national security grounds.
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Why Washington was so ecstatic about Morrison’s AUKUS pact
Political and international editor
September 28, 2021 — 5.00am
An ancient Chinese text decrees: “If one man defends a pass, 10,000 men cannot force it open.”
At its most fundamental, that’s the core idea behind the Australian decision to try to build nuclear powered submarines.
That quote from 22 centuries ago, cited in Linda Jaivin’s The Shortest History of China, applies to land. The newly announced Australia-UK-US security partnership applies the concept to underwater passes in the event of an outright war between the US and China.
For many years, a critical element of American war planning has been to defeat China’s navy by bottling it up in the shallow waters of the South China Sea.
It would do this by blocking choke-points that allow passage in and out. And submarines are the most effective tool for achieving this.
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Serb troops put on high alert at border with Kosovo
AFP
5:47PM September 27, 2021
Serbian troops were on a heightened state of alert on Monday after Belgrade accused neighbouring Kosovo of “provocations” by sending special police units to the border.
Already tense relations between Serbia and its former breakaway region have grown worse since the ethnic Albanian-led government there last Monday despatched the police units to an area mainly populated by minority ethnic Serbs, who reject the authority of Pristina.
The deployment came as hundreds of ethnic Serbs have staged daily protests against a decision to require drivers with Serbian registration plates to put on temporary ones when entering Kosovo – a “reciprocal measure”, according to Pristina.
“No one here wants a conflict and I hope there won’t be one,” said 45-year-old protester Ljubo, who was camped at the Jarinje border crossing.
“We want Pristina to withdraw its forces and cancel the decision on licence plates.”
No, the UK’s energy woes have not really been caused by net zero
September 29, 2021 — 5.36am
London: The United Kingdom has a bit of a retro vibe to it right now – and I don’t mean the fashion or music.
Long queues at petrol stations, empty supermarket shelves and soaring electricity bills are evoking memories of the dark, trying days of the 1970s. While Prime Minister Boris Johnson is trying to play down the seriousness of the situation, nobody can say with certainty that things won’t get even worse.
For Scott Morrison, the timing is far from helpful. As his government embarks on a fraught internal debate over whether to take a net-zero emissions policy to the COP26 climate summit in November, some MPs are seeking to frame the energy and transport crisis in Britain as a cautionary tale on why taking tougher action on climate change is a bad idea.
Nationals senator Matt Canavan already had a crack at it on Monday by attempting to link a picture of a depleted supermarket shelf to the net-zero agenda. Deputy Prime Minister Barnaby Joyce says Britain has “completely botched” its transition away from coal. And a group of Conservative MPs in Britain also hopes a potential winter of discontent will force Johnson to scale back his green agenda.
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Donald Trump is a political criminal, not just a populist
12:00AM September 29, 2021
With Donald Trump heading the field as the most likely Republican candidate for the presidency in 2024, America’s constitutional crisis seems far from over as new material surfaces about Trump’s effort to illegally seize power in January this year.
Trump has forfeited any claim to be seen as a mere populist conservative politician. Earlier this year, Trump sought to overthrow the 2020 presidential election result, subvert the American Constitution and seize power by corrupt means. As conservative commentator Andrew Sullivan argues, Trump is a combination of farce and ineptitude on one hand while imitating elements of the fascist playbook on the other hand.
The Trump story, as documented by Bob Woodward and Robert Costa in their recently released book, Peril, invites parallels with the intimidation, egomania and will to power of petty tyrants down the ages.
But the dilemma confronting America is apparent: whether the crisis of January 2021 is a danger never to be repeated or merely the dress rehearsal for a deeper crisis in 2024 when Trump will declare beforehand that only another “stolen” election can defeat him.
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https://www.afr.com/world/north-america/the-strange-death-of-american-democracy-20210929-p58vqa
The strange death of American democracy
A constitutional crisis looms as Donald Trump tightens his grip on the Republicans ahead of the 2024 presidential vote.
Martin Wolf Columnist
Sep 29, 2021 – 2.13pm
“An American ‘Caesarism’ has now become flesh.” I wrote this in March 2016, even before Donald Trump had become the Republican nominee for the presidency.
Today, the transformation of the democratic republic into an autocracy has advanced. By 2024, it might be irreversible. If this does indeed happen, it will change almost everything in the world.
Nobody has outlined the danger more compellingly than Robert Kagan.
His argument can be reduced to two main elements.
First, the Republican party is defined not by ideology, but by its loyalty to Trump.
Second, the amateurish “stop the steal” movement of the last election has now morphed into a well-advanced project.
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China’s trade bid a chance to mend fences
Beijing can’t be happy with where its Australian relations have ended up. But Canberra should be wary of overplaying its hand.
Geoff Raby Columnist
Sep 29, 2021 – 2.46pm
Distracted by the audacity, indeed recklessness, of the twin announcements of ditching the French conventional powered submarine contract and the creation of an Anglosphere-minus pact of some description, China’s diplomatic activity has been overlooked recently.
With equal verve, China has announced that it seeks to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) formerly the TPP, or the TPP11, following the the Trump administration’s withdrawal.
China has also been busying itself with new security arrangements for Afghanistan and central Asia following the NATO-led forces’ precipitous abandonment to the Taliban. On the margins of the Shanghai Co-operation Organisation meeting in Dushanbe in Tajikistan, it formed a new group comprising Russia, Iran and Pakistan to work together on issues of common interest over Afghanistan and to support Afghanistan reconstruction. This will strengthen further China’s dominant influence over central Asia.
For its security, China looks more to the steppes of central Asia than it does to the Pacific. As Paul Keating said recently, China is only concerned about what is happening in front of its porch, mainly Taiwan. But its backyard of central Asia is of great importance to strategic thinkers in Beijing. It is here that it has extensive land borders to defend. It was from here that most invasions and threats to its security have come.
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https://www.afr.com/world/asia/evergrande-is-not-china-s-biggest-problem-20210929-p58vtk
Evergrande is not China’s biggest problem
People should worry less about the property developer and more about a major rethinking of the country’s growth model.
Stephen Roach Contributor
Sep 30, 2021 – 8.00am
All eyes are fixed on the dark side of China. We have been here before. Starting with the Asian financial crisis of the late 1990s and continuing through the dot-com recession of the early 2000s and the global financial crisis of 2008-09, China was invariably portrayed as the next to fall. Yet time and again, the Chinese economy defied gloomy predictions with a resilience that took most observers by surprise.
Count me among the few who were not surprised that past alarms turned out to be false. But count me in when it comes to sensing that this time feels different.
Contrary to most, however, I do not think Evergrande Group is the problem, or even the catalytic tipping point. Yes, China’s second-largest property developer is in potentially fatal trouble. And yes, its debt overhang of some $US300 billion ($414 billion) poses broader risks to the Chinese financial system, with potential knock-on effects in global markets. But the magnitude of those ripple effects is likely to be far less than those who loudly proclaim that Evergrande is China’s Lehman Brothers, suggesting that another “Minsky Moment” may well be at hand.
Three considerations argue to the contrary. First, the Chinese government has ample resources to backstop Evergrande loan defaults and ring-fence potential spillovers to other assets and markets. With some $US7.5 trillion in domestic saving and another $US3 trillion in foreign exchange reserves, China has more than enough capacity to absorb a worst-case Evergrande implosion; recent large liquidity injections by the People’s Bank of China underscore the point.
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The US ‘lost’ the Afghanistan war, Milley tells inquiry
By Karoun Demirjian and Alex Horton
Updated September 30, 2021 — 9.29amfirst published at 9.01am
Washington: US President Joe Biden’s top military adviser has told an inquiry the Afghanistan war was lost through a series of pivotal decisions spanning the last four presidential administrations, offering his latest defence of the commander-in-chief whose order to end the 20-year campaign and the treacherous evacuation that followed have come under withering scrutiny on Capitol Hill.
“It wasn’t lost in the last 20 days or even 20 months. There’s a cumulative effect to a series of strategic decisions that go way back,” Chairman of the Joint Chiefs of Staff General Mark Milley told the House Armed Services Committee during a rancorous hearing that further underscored the deep partisan split following last month’s deadly exit from Kabul.
“Whenever you get some phenomenon like a war that is lost - and it has been, in the sense of we accomplished our strategic task of protecting America against al-Qaeda, but certainly the end state is a whole lot different than what we wanted,” Milley added. “So whenever a phenomenon like that happens, there’s an awful lot of causal factors. And we’re going to have to figure that out. A lot of lessons learned here.”
Milley’s testimony came a day after he and another key figure in the American exit from Afghanistan, US Central Command commander General Kenneth McKenzie, told a Senate panel that the war had been a “strategic failure” but that Biden was within his right to dismiss their counsel that a complete military withdrawal would hasten the Taliban’s takeover.
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China runs out of steam as shortages of coal bite
By Philip Aldrick
The Times
September 30, 2021
Goldman Sachs has slashed its growth forecasts for China as the world’s second largest economy struggles with energy shortages.
The Wall Street investment bank cuts its GDP growth forecast for this year to 7.8 per cent from 8.2 per cent, after similar downgrades by Nomura, the Japanese bank, and Fitch and Standard & Poor’s, the rating agencies.
A shortage of coal has caused power outages that halted production at factories, while a commitment to reduce emissions to meet environmental goals threatens to impose more constraints on energy consumption at a time when demand is soaring.
Goldman described cuts in power as “yet another growth shock” for China after the pandemic that has added “significant downside pressures”.
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https://www.afr.com/markets/debt-markets/bond-sell-off-is-a-warning-to-the-fed-20210930-p58w13
Bond sell-off is a warning to the Fed
The longer central bank tapering is delayed, the more the risk of a disruptive markets move.
Mohamed El-Erian Contributor
Sep 30, 2021 – 10.50am
The combination of extremely low and relatively stable US government bond yields has confounded many market watchers for quite a while now, also challenging traditional economic analyses.
This has made the move up in yields over the past couple of weeks particularly notable, raising interesting questions for markets, policies and therefore the global economy.
It is usual to characterise US benchmark government bond yields as the most important market indicator in the world. Traditionally, they have signalled expectations about growth and inflation in the world’s most powerful economy. They have been the basis for pricing in many other markets around the world.
Breaking with a long history, these benchmark measures decoupled in recent years from economic developments and prospects. Their longstanding correlations with other financial assets, including stocks, broke down.
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https://www.afr.com/world/asia/china-s-housing-market-engine-is-dead-20210929-p58vv6
China’s housing market engine is dead
Beijing will dip into its deep pockets to ring-fence the financial fallout from Evergrande’s bankruptcy. But it’s the end of relying on a massive real estate boom to drive economic growth.
Kenneth Rogoff Columnist
Sep 30, 2021 – 1.56pm
The impending bankruptcy of Chinese real estate giant Evergrande, with its $US300 billion ($414 billion) in debt, has roiled global investors. Analysts have focused mainly on whether the Chinese government will succeed in ring-fencing the problem, so that it does not spill over into a broader Western-style financial crisis.
Given the government’s deep pockets, including more than $US3 trillion in foreign exchange reserves, and its ability to dictate restructuring terms without long court delays, few would bet against such an outcome. But concentrating only on near-term financial stability misses China’s larger challenge: rebalancing an economy that has depended for far too long on its massive real estate investment sector for jobs and growth.
The outsize share of real estate and related services in Chinese GDP – a staggering 25 per cent, and only slightly less after adjusting for net exports – is even larger than the property sector’s share of the Spanish and Irish economies at its pre-2008 peak. Because of its knock-on effects on other sectors, a significant slowdown in China’s real estate sector could easily cut 5 to 10 per cent from cumulative GDP growth over the ensuing few years.
Moreover, real estate is by far the most important savings vehicle in an economy where capital controls constrain citizens’ ability to invest abroad. Any significant decline in real estate prices would lead not only to widespread disaffection, but also to a potentially significant pullback in consumption of other goods and services.
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China’s energy crisis will send a chill through global markets
By Ambrose Evans-Pritchard
October 1, 2021 — 8.15am
The time-honoured cure for high energy prices is high energy prices. Demand wilts. It is happening in front of our eyes with breathtaking speed in China, the elephant in the global energy boat.
Chinese coal stocks are down to 18 days’ cover, deemed dangerously low by Beijing. It has long been the nightmare of Communist planners that the US might weaponise China’s dependency on fuel imports in a crisis.
State-run China Energy News said thermal coal inventories at power plants are critically low. “We are looking for coal everywhere, but no matter how high the price is, it is not easy to find,” said one utility.
Plants cannot pass on the surging cost - hitting $US300 ($414) a tonne in places, up four-fold in a year - and are losing money on a systemic scale. One producer said his plant is losing US10¢ on every kilowatt of power. Banks are pulling credit lines.
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China braces for a chilly winter as its home-grown energy crisis intensifies
Senior business columnist
September 30, 2021 — 12.00pm
The energy crisis engulfing the UK and Europe is being driven by the global shortages and soaring costs of gas and oil. In China, it’s coal-driven and is largely the result of decisions made in China.
Two-thirds of China’s provinces are now rationing power. Factories have closed or have reduced production. Households are going dark and street lights have been turned off. Demand for candles has soared. The impact on food processors is creating a threat to food security.
Heading into a winter that is typically extremely cold, China is facing threats to its people and its economy that have no quick or easy solutions.
While there is some commonality in the issues confronting the UK, Europe and China – the interaction of responses to climate change with a shortage of oil and gas supply relative to the rebound in demand as the world bounces back from the worst impacts of the pandemic (and the consequent surge in LNG and oil prices) – the core elements of China’s difficulties are homegrown.
Nearly 60 per cent of China’s power is generated by coal, with about 90 per cent of that coal sourced domestically.
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China’s ‘miracle’ economy under threat at the hands of authoritarian Chairman Xi Jinping
Despite his seemingly wholesome intentions, President Xi Jinping’s authoritarian acts could be choking China’s once prosperous “miracle” economy.
October 3, 2021 - 8:35AM
Coal. Meat. Wine. Cash. Beijing paints itself as playing a powerful game of coercive diplomacy. But the price may be a homegrown economic reckoning – with Chairman Xi Jinping’s authoritarian acts choking the nation’s “miracle” economy.
Xi wants the Chinese Communist Party (CCP) to return to its “original mission” of economic, social and cultural control. He wants to see a “rejuvenation of the great Chinese nation”.
Things weren’t going all that bad before he took power in 2012.
Economic growth was in the double digits. Innovation and confidence abounded as spirits soared.
Xi’s intentions sound good. He wants “common prosperity” for all. He wants China to become a world superpower on the back of being its factory for high-technology goods.
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I look forward to comments on all this!
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David.
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