FIRE on the Barbie

[don]

Australia Feels Chill as China’s Shadow Grows

By MICHAEL WINES

SYDNEY, Australia — If outlanders tend to associate Australia with kangaroos, broad-brim leather hats and an opera house, many Australians are different. They think of iron ore and bauxite, copper and coal, nickel, gold and uranium, a trove of mineral riches that is their nation’s birthright and the bedrock of its prosperity.

Which explains much of the breast-beating that has ensued since the Chinese announced plans this year to buy a big chunk of it.

Since three state owned Chinese companies said they would buy stakes in Australia’s storied mining industry totaling $22 billion — as much as China’s entire investment here in the last three years — some of this nation’s 21.3 million people have reacted with aggrieved nationalism.

The government of Prime Minister Kevin Rudd, which generally favors the sales, has been savaged as naïvely cozy with China, a view some in his own military appear to share. Opposition politicians have flogged the specter of an Australian future more or less as a giant open-pit mine in which the locals toil, but Beijing takes the profits.

http://www.nytimes.com/2009/06/03/wo...a.html?_r=1&hp

Better check their parking meters.....

[The Outback Oracle]

Re: FIRE on the Barbie

It doesn't matter! We have to sell all our assets to someone. It does not matter whether it is Chinese, USA, French whoever. In any case we have already sold off 80% of our mineral resources.
We have external debts we cannot repay at getting on towards 100% of GDP, and our government, of either political persiuasion, has no interest in trying to right the sinking ship. Government policy at the moment is to avoid recession, at all costs, including the cost of selling the bit of the country we still own to the Chinese. If we don't want to sell the country off we should have made that decision 50 years ago. Now it is too late! Australians want the good life without working or hardship, the same as all the rest of the Anglo-Saxon world.
In addition we have a whole industry of Bankers, Lawyers etc who earn outrageous amounts of commission and fees who will, in their selfishness, never say anything to stop the haemorrhaging of our National wealth and identity.

We are screwed and there is not a thing that can be done about it. The cause of the problem dates back to 1959.

[hayekvindicated]

Re: FIRE on the Barbie

It doesn't matter! We have to sell all our assets to someone. It does not matter whether it is Chinese, USA, French whoever. In any case we have already sold off 80% of our mineral resources.
We have external debts we cannot repay at getting on towards 100% of GDP, and our government, of either political persiuasion, has no interest in trying to right the sinking ship. Government policy at the moment is to avoid recession, at all costs, including the cost of selling the bit of the country we still own to the Chinese. If we don't want to sell the country off we should have made that decision 50 years ago. Now it is too late! Australians want the good life without working or hardship, the same as all the rest of the Anglo-Saxon world.
In addition we have a whole industry of Bankers, Lawyers etc who earn outrageous amounts of commission and fees who will, in their selfishness, never say anything to stop the haemorrhaging of our National wealth and identity.

We are screwed and there is not a thing that can be done about it. The cause of the problem dates back to 1959.

What happened in 1959?

[The Outback Oracle]

Re: FIRE on the Barbie

What happened in 1959?

We started to run Current Account Deficits. We have only had one year of a small surplus since and that was around 1971. We became content to borrow to finance our lifestyle. However not only have we borrowed but we have continuously sold our resources to whoever would buy them just so we could live a lifestyle to which we wanted to become accustomed.
In Australia right now, the problems with our external account, and the sale of our Sovereignty is part of the great unmentionable. 99.99% of people would argue with you that we have any Foreign Debt. I encounter the problem every day.

[marvenger]

Re: FIRE on the Barbie

I think number two said it best in austin powers. 'there are no countries anymore only corporations'. countries are mearly holding companies looking after corporate interests.

[c1ue]

Re: FIRE on the Barbie

Marvenger,

What you are saying is not true.

Nations have sovereignty. Corporations have money.

One can be gotten with the other - as Chavez demonstrated in Venezuela.

What is so sad about what is happening here is that the controlling hands in our government are allowing the sovereign power of the US government to be used by corporations.

As Kipling said: "Iron - cold iron - shall be master of them all"

[ASH]

Re: FIRE on the Barbie

Since three state owned Chinese companies said they would buy stakes in Australia’s storied mining industry totaling $22 billion — as much as China's entire investment here in the last three years — some of this nation’s 21.3 million people have reacted with aggrieved nationalism.

It's numbers like this that make me doubt China can possibly have off-loaded a significant portion of their US dollar holdings by buying up resources (or using said dollar holdings to secure loans to buy up said resources).

[EJ]

Re: FIRE on the Barbie

It's numbers like this that make me doubt China can possibly have off-loaded a significant portion of their US dollar holdings by buying up resources (or using said dollar holdings to secure loans to buy up said resources).

I can assure readers that it is not true, or that if it is true it is true it is only so by coincidence.

I came up with the idea several months ago but rather than simply trying to verify it and, as usual, not report it if I was unable to verify it, I decided to use it as part of an experiment in spreading a financial and economic meme via the Internet. I did so by mentioning it here as an unverified possibility. I also ran the idea by two well connected contacts in the industry, one in China and another in Australia, who I believed were likely spread it as a rumor--not intentionally, but by posing the question to others. Within a few weeks, by the process of frequent communication of the idea, it took on the accouterments of fact.

Sometimes these ideas take off and become memes and other times they go nowhere. My Economic MAD idea, for example, became, according to my sources in China, at one point a hot topic at high levels in the Chinese and U.S. government. The inherently unstable mutual economic and political dependence of the U.S. and China is still discussed as "balance of financial terror." I talk about the experience in an article I'm writing about China to be published in the future.

Who knows who will ultimately be credited with my idea about China offloading the currency risk of the U.S. debt holdings by using their bonds as collateral. I've learned over the years there is little point in trying to control that outcome.

The process cuts both ways. I am often credited with the idea of the FIRE Economy. I am quick to point out to anyone who does so that I learned about the idea of the FIRE Economy from Michael Hudson, but there is not much point to it except that it makes me feel better. The meme transmission process is like a fire that either burns out or burns out of control.

There is nothing so fungible as an idea, and nothing funges ideas like the Internet. All writers are thieves, and there is little honor among us. My sister, a successful Hollywood screen writer, once called me to run an idea by me. It was clever and original. But before she told me what it was she demanded, "You're not going to steal it!"

And she's my sister.

[ASH]

Re: FIRE on the Barbie

I can assure readers that it is not true, or that if it is true it is true it is only so by coincidence.

An elegant experiment (although I wonder if all readers will perceive it as such). I'm simply grateful, for once, to have an absolute calibration for my skepticism.

[jk]

Re: FIRE on the Barbie

I can assure readers that it is not true, or that if it is true it is true it is only so by coincidence.

I came up with the idea several months ago but rather than simply trying to verify it and, as usual, not report it if I was unable to verify it, I decided to use it as part of an experiment in spreading a financial and economic meme via the Internet. I did so by mentioning it here as an unverified possibility. I also ran the idea by two well connected contacts in the industry, one in China and another in Australia, who I believed were likely spread it as a rumor--not intentionally, but by posing the question to others. Within a few weeks, by the process of frequent communication of the idea, it took on the accouterments of fact.

Sometimes these ideas take off and become memes and other times they go nowhere. My Economic MAD idea, for example, became, according to my sources in China, at one point a hot topic at high levels in the Chinese and U.S. government. The inherently unstable mutual economic and political dependence of the U.S. and China is still discussed as "balance of financial terror." I talk about the experience in an article I'm writing about China to be published in the future.

Who knows who will ultimately be credited with my idea about China offloading the currency risk of the U.S. debt holdings by using their bonds as collateral. I've learned over the years there is little point in trying to control that outcome.

The process cuts both ways. I am often credited with the idea of the FIRE Economy. I am quick to point out to anyone who does so that I learned about the idea of the FIRE Economy from Michael Hudson, but there is not much point to it except that it makes me feel better. The meme transmission process is like a fire that either burns out or burns out of control.

There is nothing so fungible as an idea, and nothing funges ideas like the Internet. All writers are thieves, and there is little honor among us. My sister, a successful Hollywood screen writer, once called me to run an idea by me. It was clever and original. But before she told me what it was she demanded, "You're not going to steal it!"

And she's my sister.

what you "proposed" was a clever financing mechanism for the purchases made by the chinese. we know about the purchases, but we don't know the form of payment. however, most international trade is done in dollars and it seems likely that payment has been in dollars, at least until the recent announcement of bilateral trade agreements with payments to be made in the currencies of the nations involved. as ash points out, however, the e.g. $22billion spent of aussie resources doesn't make much of a dent in the chinese dollar pile. but every little bit helps. with chinese exports down, theyve got fewer new dollars to worry about anyway.

[don]

Re: FIRE on the Barbie

June 5, 2009
Giant Mining Firm Rio Tinto May Spurn Investment by China

By DAVID BARBOZA
SHANGHAI — China’s proposed $19.5 billion investment in Rio Tinto, the Australian mining giant, could be scrapped this week, ending this country’s bid to gain a larger stake in one of the world’s biggest resource companies, a person briefed on the talks said on Thursday.
The board of Rio Tinto was expected to meet in London on Thursday to decide whether to end an agreement with the state-controlled Aluminum Corporation of China, also known as Chinalco. A statement could be released by the board late in the day.
Rio Tinto made a deal with Chinalco last February, hoping to raise much-needed capital to pay down huge debts that are coming due this year. It was the largest investment ever proposed by a Chinese company and would have been the biggest investment ever in an Australian company.
At the time of this deal, shares in Rio were severely depressed because commodity prices had dropped late last year and Rio had recently fought off a proposed and potentially lucrative takeover by rival BHP Billiton.
A spokesman for Chinalco declined to comment late Thursday. Rio Tinto issued a statement from London that said: “Rio Tinto notes press speculation. Rio Tinto is pursuing a range of options, some of which are at an advanced stage, for maximising shareholder value and improving the group’s capital structure. A further announcement will be made in due course.”
A person briefed on Rio’s plans said on Thursday that the company is considering raising as much as $15 billion through what is called a rights offer in London, a move to sell additional shares in the company to existing shareholders and others.
Such a move is possible now, experts say, because the global financial markets have strengthened in recent weeks and commodity prices have rebounded.
Last February, shares in Rio Tinto were selling for for as little as 1,606 pence in London. On Thursday, they were trading at 2,720 pence.

http://www.nytimes.com/2009/06/05/bu...05mine.html?hp

[ThePythonicCow]

Re: FIRE on the Barbie

what you "proposed" was a clever financing mechanism for the purchases made by the chinese. we know about the purchases, but we don't know the form of payment.

Good point, jk.

Given that:

• the Chinese are sitting on a large pile of Treasuries, about which they are sensibly and publically nervous,
• the Chinese need good supply chains for various commodities from other nations,
• the Americans (big banks, Treasury and Fed ... whichever) need to support the Treasury market, and
• the American Banksters are in a better position than the Chinese to continue to manage the Treasury market,

it would seem unlikely if the Chinese and the American money interests had not worked out some arrangements to

1. transfer some of the Treasury risk to the Americans, while
2. transferring some dollars to the Chinese supply chains.

Whether this was a loan against Treasuries, or some other swap, derivative, securitization, special-investment-vehicle, or other monetary voodoo is rather secondary.

So while EJ may have started the loan rumor, and while he likely has good evidence once again of how easily such ungrounded speculations turn into "reported fact", this doesn't tell us much either way as to what really happened.

My wager is that there is some truth to EJ's rumor. I'd further wager it was some form of monetary voodoo more elaborate than a simple loan, for the trivial reason that seldom to trillion dollar arrangements with New York banks end up being simple.

But the affect to us ordinary citizens is likely about the same as if it was a loan of Dollars to the Chinese against their Treasury collateral that moved some of the risks on those Treasuries from Beijing to New York, and left the Chinese with an obligation to some future payments in return, with the option to make these payments in dollars or Treasuries.

If there was some way in these deals to move some of the Treasury risk to the poorer nations feeding these Chinese supply chains, that might be part of this as well. The poorer nations often get the short end of these deals.

All pure speculation, of course. I trust, since I do not have the (well deserved) reputation of EJ, my speculations here will not make the rounds as his did, turning into "reported fact" along the way.

[marvenger]

Re: FIRE on the Barbie

Yeah you're right, and I think there's some great things happening with Venezuela and the ALBA group. It's hard to always communicate well at the best of times and harder on blogs, I didn't mean to be interpreted 100% how things were, rather its more like an underlying trend of nations sovereignty becoming increasingly irrelevant to the profit extracting ability of large TNC's and the commodification of everything. I hope that Polanyi was right and society does starting fighting back as markets start intruding on all aspects human interaction.

[don]

Re: FIRE on the Barbie

Foiled Chinalco rethinks future
By Olivia Chung

"We continue to believe our proposal presented an outstanding value-creating opportunity for all Rio Tinto shareholders and would have provided a strong platform for a long-term strategic partnership between the two companies."

The Chinalco agreement was criticized by other Rio shareholders, including its third-largest investor, Legal & General Group, for excluding their participation. Many Australians were also concerned at seeing a foreign entity, and particularly one run from communist-ruled China, take such a sizeable stake in an important company and foreign-exchange earner.

The Rio board's decision saves Australian Prime Minister Kevin Rudd from having to decide whether to permit Chinalco to increase its stake as planned. Australia's Foreign Investment Review Board was preparing to make a recommendation. If followed by a Rudd vote for the deal, he would have angered many voters; a decision against would have risked undermining dealings with Beijing.

China is the top buyer of iron ore and Rio the world's second-largest supplier. A closer relationship between Chinalco and Rio could have put more power into the hands of China in price negotiations.

http://www.atimes.com/atimes/China_B.../KF06Cb01.html