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“Wall St braces for a brutal open after China rout”

Written By: - Date published: 10:12 pm, August 24th, 2015 - 121 comments
Categories: capitalism, Economy, Financial markets - Tags:

Every bubble must pop some time. And since GFC 1 the powers that be have been blowing up massive asset price bubbles all over the world. Now it looks like a reversion to mean in the global markets might be on the cards and be truly vertiginous. If the world central banks are out of QE bullets as the buyer of last resort (long gone are the idea of “free markets” in the financial system), things are going to get very messy in the crony capitalist world over the next 2-3 months.

Remember, true financial market crashes don’t happen in a couple of days or even a couple of weeks. The kinds of massive greed driven imbalances which have built up tend to unwind over much longer periods of time: many months, or longer. But day to day movements can be horrifically volatile.

Meanwhile ZeroHedge suggests that the real global economy is currently falling through the floor, as evidenced by massive declines in global container freight rates.

I like the article heading on MarketWatch: “How market carnage is only going to get worse: in 4 charts.

Depositor bail-ins, anyone?


121 comments on ““Wall St braces for a brutal open after China rout” ”

  1. thatguynz 1

    Spot on CV. Keep an eye on the signals for when is a smart time to remove and cash holdings from banks to avoid the OBR “haircut”.

    [Cheers 🙂 CV]

    • weka 1.1

      what does that mean?

      • thatguynz 1.1.1

        The “OBR” part? It’s the Open Bank Resolution which while ostensibly being a tool for minimising the likelihood of banking failure in the event of a fiscal crisis also enables the bank to tap into the funds on deposit (ie. our savings) – commonly referred to as an “account haircut”. In effect it means that the depositors bail out the bank with no recompense.

        • weka

          so to put that in lay person’s language, any bank can take money we have in accounts with them? Can they do that at will, or is it regulated when and under what conditions they can do that?

          Has that ever been done in NZ?

          Were you being serious? Are you going to share what the signals are?

          • thatguynz

            In laypersons terms they can’t strictly do it at will however you’d be putting a lot of faith in the regulator / Reserve Bank that there will be adequate controls and oversight. The conditions to do so are when the bank has been placed under Statutory Management.

            More (official) details can be found here – http://www.rbnz.govt.nz/regulation_and_supervision/banks/policy/4368385.html

            This article may do a better job of explaining it – http://www.stuff.co.nz/manawatu-standard/opinion/9988749/OBR-policy-a-scary-bank-secret

            It has never been enacted in NZ as we haven’t had any banks in financial strife since it was passed in 2013.

            Serious – yes, deadly.

            • weka

              thanks, that’s very helpful. Ok, so a new thing then, for the raiders presumably.

              “The conditions to do so are when the bank has been placed under Statutory Management.”

              Done on a bank by bank basis then, rather than a nationwide thing?

              And the signs?

              • thatguynz

                Yes a bank by bank basis – I don’t believe the OBR can be applied universally by the RB although I could be wrong about that.

                The signs should be pretty straightforward given the interlinked nature of multinational banking. First and foremost you don’t want to wait until the bank in NZ has closed its doors before you try to get money out – at that stage it is too late as there is every likelihood that deposits will have been frozen. Typical signs (IMHO) will be a number of limit down (or close to limit down) days in key international stock indicies, questions around lending liquidity – particularly in the US (ie. people asking aggressively for further QE or TARP). There are a multitude of other things you can look at however they are probably the simplest. Queues outside the bank would of course be a bit of a dead giveaway but it’s likely the horse has bolted by then 🙂

                They key thing for me is that it is easy to take the money out (within reason) and easy to put it back if the worst case scenario doesn’t come to fruition – a bit of a pain for sure but unless you have millions on deposit its not like you’re losing out on significant interest payments while you’re in cash rather than bank deposits.

  2. infused 2

    It’s already started and you’re late to the party. The reasons you’ve stated are wrong though.

    * China has scared the shit out of everyone.
    * N / S Korea is causing sell off.
    * Oil has plummeted.

    But mainly China.

    Zerohedge is a joke. Go get some tinfoil while you’re at it.

    • Colonial Viper 2.1

      ZeroHedge is what it is. It reports a lot of info that you won’t see in the MSM – like the collapse in global container shipping prices.

      As for the root causes of the current market meltdown – you need to look deeper than the obvious proximal causes.

      • infused 2.1.1

        No, it’s pretty simple really. Everyone tries to make it out like something very complex. It’s not.

        • Colonial Viper

          If it’s so simple then there’s no need to comment further, is there.

        • thatguynz

          Really? if it’s so simple by all means inform us of its simplicity.

          I’ve traded and watched the markets and the associated geo-politics and macro economics for well over 10 years and I’m all ears as to what you may view as simple. What I do know however is it’s not what you have posited above – that is the window dressing.

          • infused

            Because the ‘window dressing is what scares the markets, regardless of the underlying reasons.

            • thatguynz

              No, the window dressing is what scares the retail investors – not the wholesale investors which is where the vast majority of the volume (HFT notwithstanding) comes from.

      • AmaKiwi 2.1.2

        +1 Yes, “you need to look deeper than the obvious proximal causes.”

        Human beings are often irrational, especially when we make bets which we justify as being “investments.”

        We could just as soon take “infused’s” negatives and turn them into positives:

        1. Low oil prices are fantastic because oil is so essential for all our industries. It’s like everyone just got a pay raise.
        2. N/S Korea have played this game many times before, the deadline is past, and they are negotiating. All is well there.
        3. The China sell-off is a normal correction by Chinese standards and hasn’t even retraced the irrational rally of the past year.

        There you go. “Infused’s” news is all good and that’s why the markets are going up today.

    • Zero hedge is a joke? The guy who runs it is a serious Wall street insider and he’s been predicting this for a couple of years now. Just because the banksters have managed to kick down the road a bit longer doesn’t mean this is not very serious.

      Here are my 2 cents:
      On China, Fiat Money And Why John Key Is Lying When He Calls The Crash A Mere Correction!

  3. Clemgeopin 3


    Stock market rout wipes another £40bn off FTSE 100 in China panic –


    see Below


    Wall Street expected to tumble, following losses in Europe and ASsia, as concern grows over China’s economy, and Beijing’s ability to handle the crisis

    Summary: European market slide after Asian rout
    FTSE 100 loses £40bn of value
    Chinese stock market tumbled 8.5%; biggest fall since 2007
    Analyst: Beijing isn’t in control
    Beijing poised to flood the market with cash, says WSJ
    Japan’s Nikkei slid 4.6%
    Australia has worst day in six years

  4. Bill 4

    I can’t see anyone arguing with this line of logic.

    Freight rates for container shipping from Asia to Europe fell by a fifth in the second week of August, when they should be picking up a bit. If container ships are not being hired, it’s a sure sign there is less importing and exporting going on.

    Or will they?

    edit: Oops. Just msm verification of info already linked to in the post. Sorry.

    • I think China has about 2 years supply of ‘stuff’, so no more overtime, which means not as much money, which means not as many babies = no need for milk powder.
      Buy a flat screen for the farmers sake, we need to consume our way out of this.

  5. Raf 5

    Can anyone explain what it will mean, in practical terms, for NZ?

    • Colonial Viper 5.1

      house prices, our interest and exchange rates, commodity prices and our banking stability, are all going to come under pressure

      • adam 5.1.1

        We got buffered by Australia in 2009, now the gloves are off.

        I’m predicting, houses going up in flames.

        • Colonial Viper

          Esp if thousands of Chinese Auckland house owners decide they have to liquidate portfolios ASAP, at any price.

          • Pat

            maybe , depends on whether the Chinese property investors in Auckland used borrowed money to invest in Chinese sharemarket….one of the main reasons for the property investment in western economies was to remove it from the risks associated with having that investment in China…assume you have seen the capital outflows from China of late?

            • Pat

              of greater concern are the reasons for the crash and relates to your shipping data…trade, what are the implications for world trade if China slows consumption even further?

          • Lanthanide

            No, the Chinese will be buying up Auckland houses, trying to get their money out of China while it still has value and before they’re wiped out.

            • Colonial Viper

              Money will go to the far more liquid and safe haven US dollar denominated Treasuries first.

              In a crash it takes too much time to buy a house, let alone $100M worth of houses.

              • Lanthanide

                Why do you need $100M worth of houses?

                You just need 1 house, and plane ticket to get to it.

                • vto

                  I think Lanthanide that you are missing the point of how people behave at times of financial panic.


                  I have observed you the last few years pinging back at those (including moi) who have called this GFC2 for a while now…. lets see who ends up being correct….

                  The unsustainable world of debt was never resolved at GFC1, the powers of money-printers was always limited, the final correction was always going to come. This is likely it.

                  place a bet on it?

                  edit: for an assessment of chines house buyers in Auckland, check Auckland real estate agency anecdote and stats over the next week – that will be the sign

                  • Colonial Viper

                    Buying (and liquidating) houses is a slow process; if more foreign Chinese do flood the Auckland market it will only show up in the stats a month or four down the track.

                    • Pat

                      the buying has occured over a period of years, and the intention is not necessarily for short term liquidation…it is a hedging measure against all sorts of scenarios…granted some may need to liquidate rapidly but would suggest it is in no way a given….future purchases i believe can be safetly expected to significantly decrease which will impact values.

                    • vto

                      I must disagree. The process of actually buying and selling may be slow but the enquiry phones react instantly. It will show up today and over the next week.

                      And I will also posit that it wont be enquiry to buy, it will be enquiry to sell.

                • Colonial Viper

                  Why do you need $100M worth of houses?

                  I thought your comment was about wealthy Chinese wanting to quickly move large sums of cash out of China.

                  • Lanthanide

                    Fiar enough. I’m talking about the wealthy Chinese getting out of China to live somewhere else…

            • lprent

              It could go either way. Either renewed purchasing or realising assets to cover positions. But the changes in the exchange rate and the marked increases in supply of apartments will probably drive what happens.

            • Pat

              IF they still can access funds and the chinese gov dosnt move to restrict outflows.

          • travellerev

            Fun part is: China’s been printing funny money for the last couple of years. They are responsible for half of the global money supply created out of nothing by the privately owned banks and yes, the Chinese banks are owned by the ruling elite.

            The Chinese elite have been buying real world assets such as real estate, land, huge amounts of gold with that funny money also known as counterfeited money.

            Ask John Key, he knows all about how that works!

      • b waghorn 5.1.2

        What would trigger radid interest rate rises.?

    • AmaKiwi 5.2

      I go a bit farther: A sovereign debt crisis is close at hand.

      That means credit dries up worldwide, including here. Without credit (lending), business dries us. People stop buying anything except essentials. And yes, NZ property prices take a dive.

      • Colonial Viper 5.2.1

        Let’s see if they can maintain trust (and liquidity) between financial institutions this time around…

  6. Clemgeopin 6

    7 minutes ago

    FTSE 100 hits new lows, now down 3.5%

    The rout is deepening.

    The FTSE 100 just fell below the 6000 point-mark again, as traders react to predictions of a heavy selloff on Wall Street.

    The blue-chip index is now down over 220 points or 3.5% at 5964 points, its lowest level since January 2013.

    If it finishes there, then more than £50bn would have been wiped off the collective value of the 100 companies on the index (we’ll get the official verdict after 4.30pm BST, when the market closes).
    Earlier, one fund manager called it a “disaster”, which could drive many firms under.

    The scale of the crash, though, is raising fears that Beijing is losing its grip on the crisis — which Bloomberg says has wiped $5 TRILLION from global markets this month.

    Asian markets were left reeling by the selloff in Shanghai, as they were dragged downwards in a wave of selling.

    • Clemgeopin 6.1

      6 Minutes ago:

      This is turning into a major selloff — the FTSE 100 is now down a whopping 275 points, or almost 4.5%, at 5914 points.

      • Clemgeopin 6.1.1

        1 minutes ago:

        Dow Jones index tumbles as Wall Street opens

        The Dow Jones index has fallen 485 points at the open of trading in New York…. make that 502 points….

        ….it’s still falling, now down over 900 points, or more than 5%.

        Now it’s down 950 points!

        And the Nasdaq index had plunged by 8.3%…..
        FTSE 100 plunges 5.5% amid global rout

        Bye, good night.

  7. Pat 8

    European stocks face biggest fall since 2009

    It gets worse and worse….

    More than €400bn has been wiped off the value of Europe’s three hundred largest companies today, according to Reuters data, as the selloff continues.

    The FTSeurofirst300 index has now plunged by 4.5%, as stock markets in London, Paris, Frankfurt and beyond suffer heavy selling.

    Euroean stocks at 1pm BST Photograph: Thomson Reuters
    FTSeurofirst300 is now on track for its biggest one-day decline since March 2009, Reuters says.

    The Stoxx 600 index, which includes smaller European firms, is taking even more of a pounding.

  8. I wonder what will happen to the derivatives market

  9. Tricledrown 10

    Derivatives will stop trading as they will be worthless ie 2007/8 all over again.
    The big trading blocks will start the printing presses again our dollar will become over valued as we don’t print money so not a pretty sight.
    Key and English have borrowed up to the Max so won’t be allowed to borrow more.
    Commodities will fall further gold will recover!

    • AmaKiwi 10.1


      I’ll agree with most of your forecast except the part about gold. I expect a temporary recovery in gold. Price bubbles happen when the speculative price of something (gold, AKL houses, whatever) becomes separated from its economic value.

      Gold’s run-up to $1920 USD/oz. was a speculative bubble. Businesses that use gold knew it was never worth that much because at that price they and their customers find substitute materials.

      The experts I read (i.e. industrial users) say the present price of $1,150 is still several times gold’s economic value as an industrial metal. The estimates I read of its economic value are between $300 and $500 an ounce. I suggest you do not buy gold now unless you are very quick to sell it as soon as it starts down again.

      I would not be interested in buying gold much above $350 per ounce. For the same reason I have no interest in owning any property except my own home until prices drop by at least 50% to 60%.

      • vto 10.1.1

        Interesting but incomplete view. You have ignored gold’s historic (long longly historic) position as currency when all else fails (like bits of paper printed by some defunct bank).

      • Lanthanide 10.1.2

        Gold has practically never traded at its pure economic value. To suggest that it should demonstrates you don’t understand gold’s position in trading.

      • Tricledrown 10.1.3

        A speculative bubble funded by the printing of money .
        Lowering the value of the US dollar.
        Inflating the price of gold in other currencies that weren’t devalued as much.
        A double whammy .
        The price declined when the federal reserve slowed its printing presses!

        • AmaKiwi

          @ vto
          @ Lathanide

          Why was gold at $1920 only 4 years ago? Speculators using credit.

          Today, at $1140, it is still supported by speculators using credit.

          When credit dries up the speculators will ask themselves, “Do we sell the gold or lose the house?” I predict at that point gold will be at $300 to $500 per ounce.

          And Lathanide, don’t insult me when you have no idea who you are talking to.

  10. Colonial Viper 11

    Dow futures plunge 660 pts before open. Black August it is, then.

  11. Tricledrown 12

    Goldman Sachs bailed out again.
    Glencoe bankrupt.
    Headlines next month.

  12. Clemgeopin 13

    4 minutes ago:

    Trump tweets:

    Markets are crashing – all caused by poor planning and allowing China and Asia to dictate the agenda. This could get very messy! Vote Trump.— Donald J. Trump (@realDonaldTrump) August 24, 2015

  13. Clemgeopin 14

    5 min ago:

    Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, fears that US stocks will keep falling until policymakers get a grip on the situation.

    Luschini says (via Reuters):

    “Until we have some sign that China and the emerging markets aren’t being sucked into some vortex from which they can’t recover … it is unlikely this selloff will stem.”

  14. AmaKiwi 15

    Which derivatives?

    Stock/Share derivatives will be frozen by the respective governments.

    Like 2008, many derivatives will be revealed as smoke and mirrors. They were unregulated in 2008 and so they remain today.

    The difference is that in 2008 there were nations that bailed out their banks that had bad derivatives. Today those countries are so broke they can’t plausible print more money without investors saying, “No thank you. I’m not going to buy Greek government bonds.” Now add to the bad countries list Italy, Spain, Portugal, France, etc.

    This ain’t gonna be pretty.

  15. AmaKiwi 16

    The NZD lost 5.4% against the USD

    in the THREE MINUTES from 1:10 am and 1:12 am this morning, (Tues, Aug 25).

    Expect that kind of volatility during this crash.

    5.4% in three minutes.

  16. ScottGN 17

    A quick look at headlines at some of the major papers and this is leading everywhere except the NZ Herald online, they’re leading with a spat between motorists and windscreen washers. Further proof (if you needed it) that the Herald is now complete and total crap.

    • Raf 17.1

      But how can windscreen washers be more important than Easter Sunday legislation …?

    • Keith 17.2

      The good folk of New Zealand don’t want the downtrodden and the net result of the policies they voted for to rear their ugly little heads in public by trying to earn a buck window washing.

      They have discovered that they bite and they are scary.

  17. mary_a 18

    Many thanks to all the posters to this site, who have kept us up to scratch with what’s going on in the financial markets overnight. Your efforts are appreciated.

    Far more information given here, than through msm, which last time I read, the details had been posted halfway down the page!

    Great work guys. Yet another reason for alternative news sites. Again, thanks 🙂

  18. Ad 19

    Surely a much lower $NZ is good for our exports esp dairy?

    Increase in gold good for mining?

    Immigration and housing shortage will sustain Auckland property price?

    Australasian stocks not worth spooking about when earnings are pretty solid?

    I think the political question for the Opposition is to pressure Nation for an economic plan that transforms New Zealand, as NZHerald has been.

    This doesn’t feel like a GFC. Yet.

  19. les 20

    the U.S stock market is in a correction phase.The P.E’s of companies have been quite ludicrous.Its been just another sponge to soak up QE ,like western RE. and now a few have the jitters.

  20. Stuart Munro 21

    I don’t imagine Auckland property buyers will bail out quickly – more likely is that demand will increase as capital flees tender exchanges like the NZSE.

    If the crisis progresses businesses dependent on consumer liquidity will be hit first – the water trade – restaurants, bars, tourism, transport. Then large layoffs will create a large unwaged population from conventional employment.

    A good day to plant potatoes or buy a sack of rice – just to be on the safe side.

    • Keith 21.1

      Yep, with our dear government doing nothing about it, Auckland’s property market will be promoted as safer than gold!

  21. vertiginous? Great word!

  22. hoom 23


    Thats what I heard from the Radionz interview with the Wallstreet stockmarket reporter

    No talk about the mighty unseen hand of The Market, no talk about Masters of the Universe, no worries about the mere possibility of Govt intervention, no complaints about introducing distortions into The Market or any of that bullshit, purely ‘what will be the intervention by the Chinese Govt & will it be enough’.

    Truly the world economy is hanging on the decisions of a committee of bureaucrats in the Big, Interventionist, nominally Communist Chinese Govt.

  23. Lanthanide 24

    A local contact who is in the business of importing stuff from China to NZ, said that 12 month ago it cost $2,000 to bring a container from China port to Lyttleton.

    Now, the price is $380, because the ships are empty and there’s unused capacity.

    • Colonial Viper 24.1

      Yep; it’s a sign of how much consumer demand has fallen in Australia and NZ.

      • Keith 24.1.1

        But are we not a Rockstar economy is was it all a lie?

        • Colonial Viper


          Also this is the kind of event which leaves the obsolete 1980’s 1990’s “high value export led growth” strategies of our political class high and dry.

  24. les 25

    there are a number of fairly recent NZ IPO’s reminiscent of the companies around pre the 87 crash,that were overpriced and will fall dramatically.The companies big on projections and ‘irrational over exuberance’…that do not make a profit,and are unlikely to in the near future but who usually insist they are sacrificing profit for ‘growth’!(spending $2 for a $,1 of revenue)

  25. Ovid 26

    It’s going to be rough for a while. With the decline in oil and natural gas, Russia is pretty much hosed. Going be his previous Form, Putin is more likely to lash out rather than worry about domestic issues. Australia’s minerals sector has been suffering for a while and we all know about milk here in NZ (I wonder if Chinese mums are breastfeeding more than buying infant formula).

    A lot of workers are going to be losing their jobs. A lot of families are going to suffer. The CEOs and the 1%ers have insulated themselves from this (oh, their net worth may drop, but their living standard won’t).

    I don’t know if this is going to be GFC II, though. I do think it heralds a recession but I’m not yet convinced it will match the collapse of 7 years ago.

    • Colonial Viper 26.1

      It’s going to be rough for a while. With the decline in oil and natural gas, Russia is pretty much hosed. Going be his previous Form, Putin is more likely to lash out rather than worry about domestic issues.

      FFS that’s the US MSM characterisation.

      Go find Putin’s 4 hour long 2015 annual press interview. No questions barred. Judge the man for yourself.

    • thatguynz 26.2

      “Going be his previous Form, Putin is more likely to lash out rather than worry about domestic issues.”

      What absolute tripe. Fuck me, do your OWN thinking man..

      • Ovid 26.2.1

        I see the invasion of Georgia in 2008, I see the annexation of the Crimea. I see the dioxin poisoning of Victor Yuschenko. I see the crackdowns on the press and I conclude Mr Putin is an authoritarian with an ambition to restore Russia’s influence to pre-1991 levels.

        • Colonial Viper

          The Georgians tried to fuck up South Ossetia and killed a bunch of Russian soldiers doing so. RUssian forces drove to the Georgian capital to make a point – and drove away again.

          Crimea was annexed because Russia was not about to lose its only warm sea naval base get turned into a NATO installation on its doorstep. That was an utterly defensive move by Russia. No lives lost.

          Yuschenko – many different forces within Russia could have been responsible for that. No doubt, it could have been the Russian secret services.

          Meanwhile – has Russia started any wars in the last decade which has killed or displaced a million civilians?

          • Tricledrown

            Russia is no different to any other super power.
            Russia is one of the largest arms exporters their weapons are used in every conflict.

            • Colonial Viper

              Correct: there are utterly unscrupulous and amoral operators in the Russian elite, government and military forces.

              But at this stage, the western MSM is blaming Putin for putting his country closer and closer to new NATO military bases, which is absurd.

          • lprent

            You really should learn to see more than Russian Television propaganda.


            During the Crimean crisis from 23 February through 19 March 2014, six people were killed. The dead included: three protesters (two pro-Russian and one pro-Ukrainian),[5][6][7][8] two soldiers[9] and one Crimean SDF trooper.[10] The two Ukrainian soldiers who were killed are regularly included in the military death toll from the War in Donbass.[11]

            Since then the Russians have been running their usual oppressive techniques complete with show trials in their corrupted legal system. For instance

            THE latest episode in Russia’s long history of judicial travesties played out this week in a stuffy courtroom in Rostov-on-Don, a provincial city near the Ukrainian border. As two defendants sat in a cage behind their lawyers, a prosecutor in dark glasses described them as bloodthirsty Ukrainian radicals who ran a terrorist cell in Crimea in early 2014. They had allegedly plotted to blow up a statue of Lenin.

            The lead defendant is Oleg Sentsov (pictured), a Ukrainian film director, and the supposed terrorist plot is every bit as fictional as his screenplays. Mr Sentsov’s real offence was to oppose Russia’s annexation of his native Crimea, helping deliver food to Ukrainian soldiers trapped on their bases after the Russian invasion. After his arrest, Mr Sentsov says, he was tortured by Russia’s Federal Security Service (FSB). (The prosecution claims his injuries came from sadomasochistic sex.) Mr Sentsov faces a potential life sentence. Dmitry Dinze, his lawyer, estimates his chance of acquittal at “none”.

            You don’t have to look far to find such reports. But you don’t appear to be looking at all – why is that?

            • Colonial Viper

              oh sorry lprent, I see that kind of corrupt and politicised behaviour out of Russia as the Russian norm, not anything to write home about.

              Yes I accept there were a few deaths during the Crimean takeover, but it was not fatalities on the scale of a military invasion.

              Now, let’s compare the deaths which occurred in the Ukranian “colour revolution” funded by the USA.

          • Tricledrown

            CV You forget the complete annihilation of Checnia.
            Every empire is always flexing its muscles pushing its borders.

        • thatguynz

          Rewriting history much Ovid? Do you rely on the MSM for ALL of your news?

    • lprent 26.3

      I do think it heralds a recession but I’m not yet convinced it will match the collapse of 7 years ago.

      I don’t think it will be more than a minor recession. It looks like a pretty classic overshoot that hits hardest in recently opened up stock exchanges like those in China where investors haven’t learned to be careful about debt leverage in purchasing shares and other property. The NZ stock exchange in 1989 for instance is a fine example of the issue.

      There appears to be little that is fundamental in this one. It reflects a slowing in the rate of growth in the world economy that has been quite evident for the last 12 months or so. The Chinese markets kept rising despite the manufacturing, trade and base investments there diminishing. They are readjusting hard and everywhere else is getting the sniffles.

      I think that the biggest effects will be in commodity markets supplying industrial raw materials to China – like Australia and many Asian countries from Mongolia to Thailand. But they have largely had the bulk of the effect already in diminished orders.

      • Poission 26.3.1

        The shanghai bourse has retreated to levels seen in march this year.

        • Colonial Viper

          China’s export led economy has been crushed by a lack of western consumer demand growth over the last 2-3 years. People simply cannot afford to buy the volumes of consumer gadgets and crap that they used to, any more.

          Fewer and fewer consumers are credit worthy.

          That’s as real economy as it gets.

          • Pat

            that and the substantial slowdown in infrastructure investment…China has accounted for 50% of global growth in recent years (and much of the rest on its coat-tails) and that growth is scaling back by a massive amount…..and all the while the rest of the world who have been suppling the wherewithal for this (commodities, industrial machinery/systems) have been struggling for growth to save themselves since the GFC are now faced with even further reduced demand….it dosnt auger well, even with the direct financial implications set aside.

          • lprent


            But that is exactly the pattern you normally see country by country when they do overshoots. Production creeps up above consumption.

            In the last few decades we have been seeing this more and more happening globally. Producing regions push capacity above consumer demand in other regions. It overshoots in the markets as well. Then there is an abrupt reversal.

            Why does consumer demand stagnate or even drop? Not just the credit.

            Why in the hell do I need to replace my 2009 HDTV with one that won’t fit in my apartment? I’ll get a much cheaper bluray player as an upgrade. My 1997 Caldina still runs perfectly. But my mortgage debt needs killing otherwise it will be a pain when I retire.

            These are the attitudes of older people, and if there is one thing we are sure of in the western consumers – they are getting older.

            The manufacturing in China and other asian powerhouses has been built on providing cheaper better gear. But at some stage older consumers simply say “good enough”

        • lprent

          Don’t be a lazy fool. Read your own link.

          Bad as the 1997 asian flu crisis? “not likely”

          “There is nonetheless good reason for concern, if not for panic. ” .. “The [chinese] government’s ability to manage market gyrations and animal spirits is very much in question, suggesting that a descent into Japanese-style stagnation is a possibility.”

          “The global market rout may also represent a definitive end to the period of rip-roaring emerging-market growth that began around 2000.” … “That hangover may not take the form of a broad financial crisis. A protracted slowdown, however, would be plenty painful enough, especially if weak growth leads to political instability.”

          What they are saying is that is is quite likely to portend a slowdown in growth throughout the world. Something that has been visible for the last 18 months. I suspect that they are right.

          But something like the GFC? Hardly.

          • Pat

            lmao…whose the lazy fool…where have i stated it is like the GFC…it is however a continuation of the GFC…why did China embark on a loose credit and infrastructure overbuild?
            The pattern may be typical but the circumstances are most definately not…other than China with a reported 7% growth rate the other major economies have struggled to stabilise and grow even with zero interest rates(in some instances negative) and QE…and now the effective last area of growth is scaling back what hope those remaining economies will gain any traction …I reiterate in excess of 50% of global growth post GFC.
            You can cast aspersions on my reading ability if you wish and I shall question the colour of your eyeware

  26. Keith 27

    Wait for it!!!!!!!

    Key will be thanking his money Gods for this. Just when the NZ economy is deflating through Nationals sheer incompetence, along comes something else to blame. Fucking perfect.

    But we are so lucky to have the steady hands of Bill, “Sell it” English and “Honest” John Key to see us/them right!

  27. johnm 28

    The truth is the Planet cannot provide more growth: we have permanently maxed out our credit card with nature, that card is now useless.

    Therefore the markets and governments are living in a fantasy land, the rich are feather bedding their lives by increasing inequality: that is take from the poor.

    ” Meanwhile, we in the west seem to have maxed out government and consumer credit, and that realisation is sending financial markets into fibrillation. With energy resources and credit both stretched tight, that means more economic growth may simply not be possible in the US and Europe, regardless of our opinions about it.

    If policymakers fail to recognise this and continue assuming that the current debt crisis is just another turning of the business cycle, then we may lose whatever opportunity still remains to avert a crash that could bring civilisation to its knees. Over the short run, this is scary business. Financial markets have a hair trigger, and fears about flagging growth could bring down governments and banks.

    Still, over the longer term there will undoubtedly be life after growth, and it doesn’t have to play out under miserable conditions. With less energy to fuel globalisation and mechanisation there should be increasing requirement for local production and manual labour. We could meet everyone’s basic needs by prioritising jobs in manufacturing and agriculture while downsizing the financial industry and the military. We will also have to reduce economic inequality and corruption (as the rapidly spreading Occupy movement rightly insists). ”


  28. Smilin 29

    Now that the money game we have all been concerned about is starting to unravel maybe Keys ego armour will finally admit that the weight of the masses is greater than his power of 1 in his Dirty Politics
    which I believe he,the National party,and all associated with the planning of the coup of the last election will pay this country what they owe
    Isnt strange you could save all your life and have it robbed out of your bank by a financial crash and then see false values of property become the new standard all because of an uncontrolled marketing system which is perpetrated on us with the belief of its infallibility by people who have never created anything but money with no real value in perpetuity

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