- Date published:
10:48 am, January 13th, 2016 - 154 comments
Categories: capitalism, climate change, disaster, Economy, Financial markets, global warming, monetary policy, overseas investment, sustainability - Tags:
The global sharemarkets continue to decline on the basis of poor growth figures coming out of China. And the deck of cards that is our financial system is reaching that perilous state that the respected Royal Bank of Scotland is advising its investor clients to sell.
From the Sydney Morning Herald (h/t Paul):
The Royal Bank of Scotland (RBS) has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that the major stock markets could fall by a fifth and oil may reach $US16 a barrel.
The bank’s credit team said markets are flashing the same stress alerts as they did before the Lehman crisis in 2008.
“Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said in a client note.RBS’s credit team said markets are flashing the same stress alerts as they did before the Lehman crisis in 2008.
Andrew Roberts, the bank’s credit chief, said both global trade and loans are contracting, a nasty cocktail for corporate balance sheets and equity earnings, and uncharted waters given that debt ratios have reached record highs.
“China has set off a major correction and it is going to snowball. Equities and credit have become very dangerous, and we have hardly even begun to retrace the ‘Goldilocks’ love-in of the last two years,” he said.
China’s decline has clearly had an effect on the world oil market with the RBS predicting that Brent oil prices could crash to $16 a barrel. And if the oil industry is struggling it appears that the coal industry may be on its last legs, if this recent news about the likely failure of the Carmichael Mine in Australia getting off the ground is anything to go by.
A $US16.5 billion idea born in the throes of the greatest resources boom in history, [Gautam] Adani has a great deal riding on the Carmichael mine project, the economics of which appear increasingly foolhardy.
His Indian based conglomerate has spent upwards of $US3.3 billion and five years successfully navigating the regulatory maze of state and federal resource project approvals, only to watch the appetite for thermal coal evaporate.
Prices have collapsed and global demand is waning, in the oft-repeated boom bust cycle of the resource world.
But as a growing band of financiers turn their back on the project and as global momentum on climate change gathers pace, the question is not so much whether Adani has missed the boat on a once-in-a-century cyclical opportunity but whether his firm is embarking on a dangerous quest that could end in ruin.
Rather than a mere cyclical downturn, coal appears to be in structural decline.
If global finance refuses to fund the project, Adani’s failure to turn Carmichael into reality may become the defining moment, marking the point when the world turned its back on coal.
If the world is to recover mass conversion to renewable energy sources may be enough to keep the consumption occurring at least for a while. But it seems clear that steps taken in 2008 to address the global financial crisis have not worked. And the ability of governments to engage in further quantitative easing may be limited.