The New Australian

Proudly nearly Australian since 2010. "I'm not grumpy, the rest of the world is just unrealistically upbeat"

The New Australian - Proudly nearly Australian since 2010. "I'm not grumpy, the rest of the world is just unrealistically upbeat"

Best economy in the world

Managed by the world’s best Treasurer.

That’s the only logical conclusion to be drawn from today’s IMF forecast, confirming that “Australia leads the world“.

According to the 10,000 staff at the International Monetary Fund, Australia will “medal” in first place in the world economic growth race next year. I’d say they’d take the gold medal but quantitative easing has reduced that to a rubbish medallion made out of milk bottle tops and manufactured by a small child in China.

3% growth next year.

Must be true, I read it in the paper.

Just out of interest, what’s the IMF’s track record in this prediction game then?

Well, according to their own figures, their average margin for error from actual growth rates for western economies has been 39%.

So…. going by past performance (and that’s usually a shit method of prediction too), we could see growth rates of anywhere between 4.1% or 1.8%. Or a completely different figure. You choose.

How did they do in predicting economic shocks? Pretty fucking awful, come to think of it. Completely missed the events of 2008 and variously predicted better recoveries than were experienced for the USA and worse than the one that actually occurred in Australia.

They’re about as good at predicting as anyone else with an historical graph, a pencil and a ruler placed at the end.

I’m not certain what will happen next year, but I am certain of this; no-one in the IMF is going to stand up at the press conference and say any of the following;

- A country will exit the Euro and devalue
- China will have a hard landing
- The USA will engineer another bloody oil war
- Apple will pop
- Something else will happen that the markets don’t like

Any of which would make a prediction of growth about as accurate as the average Australian’s understanding of the non-ANZAC casualty numbers at Gallipoli.

  • Vegemite Wife says:

    IMF predictions haven’t been the same since that German octopus died. That was his real job, everyone knows that.

    April 18, 2012 at 11:53 pm
    • Bardon says:

      Both the IMF and the World Bank love releasing their fairy stories and the children always react accordingly. It is a kind of policy and propaganda projection by internet rhetoric and another fine example of Orwellian methodolgy that has been in place for a long time.

      As fas as Australia’s economic ranking is concerned, it has been different this time down under, as when the commodity prices fell during the GFC, Australia never entered a recession. That is the first time in our settled economic history that this sequence of events did not occur. Why it didn’t occur is anybody’s guess but in my opinion it was due to unique set of circumstances where you had the immediate and massive easing policy by the big boys including China which fed down to Australian supply.

      The four main central banks which account for more than the 80% of the market are still very much in easing mode. There is an extra $9trillion of free money in the system and they all have near zero interest rate settings. Yes the US Fed has said it wont print any more for the moment but it has also said that it wont raise rates until 2014 at the earliest. Japan is now expected to print a large swathe of money which will only pile more surplus into the system. This set of circumstances is similarly unprecedented.

      The talk now if of deleveraging and deflation and I know TNA is a zealous Deflationista, but my money is very much on a tsunami of inflation building now and being unleashed at any moment and certainly in the near term. This extra money has to find a home and will eventually trickle down into the base economic system including wages. When it does trickle down the money base will be devalued overnight, prices will rise, wages will rise, debt levels will remain the same, repayments will become peanuts, savers and pensioners will be punished and asset prices will rise once again.

      As Hemingway said, “The 1st panacea of a mismanaged nation is inflation of the currency; the 2nd is war. Both bring a temporary prosperity; a permanent ruin.”

      So take your pick it has to be one or the other, or both.

      April 19, 2012 at 8:21 am
      • TNA says:

        Great Papa quote.

        Yes, I think we are at a crossroads in the western economies; Japan or Weimar Germany.

        If the latter, a truck load of debt would be the smart move if you are confident of maintaining your revenue stream.

        There is the apocryphal story of the German family who survived the Weimar years because they owned a gold chain necklace. They gradually sold a link at a time and it lasted until (relative) normality was restored.

        If you’re a dead set hyper-inflationisa, then presumably you’ve taken out loads of debt to buy physical gold?

        April 19, 2012 at 10:33 am
        • Bardon says:

          Yes the Weimar is a fascinating subject. Something that we would do well to understand when it comes to debasing the currency. Often overlooked was the additional debasing of the current moral set, which was another magnificent feat attributable to that region. It arguably had the best night life and bohemian set, with rampant hard drug use, sexual deviancy, promiscuity and exotic transvestite stage performers, something that has never been repeated in modern society.

          As for Gold I have never been lured by its lustre for either bling or investment. I shine away from it due to the fact that it has no income producing element. It has no tax advantages and unless you have it under your floorboards then all you have is a piece of paper saying that you own it, which kind of defeats the point of getting out of paper cash and into gold in the first place. I do have a couple of sovs that have been handed down as heirlooms.

          I am about 70% property, 20% shares and 10% cash. Strategy from now in is to incrementally increase share holdings through super and increase cash holding as a debt payment buffer. Should we go Weimar, I will blow my loot in one big night out and then barter with my tenants for their rent, pay down my debt in a month, watch my house price and shares shoot to the moon and make sure that I am friendly with my enemies.

          April 19, 2012 at 11:07 am
  • Bardon says:

    It looks like we are over the peak of the cycle with this latest major pull out by Rio. It could also trigger a chain reaction as many other major projects were dependent on Rio developing the load out facility for their projects to be viable. Some blood will be spilt on this one.

    It is also going to be another major slap in the face for the Govt and the Unions who must take some of the blame for the endless reasons that they put up to stall the green light.

    Its not a disaster, far from it, but I think it is a watershed in the mineral boom. There are plenty of existing projects and the big guys knew that they would struggle to keep the lid on wage rises if they brought more projects on line. Lets hope this one is piled on to the Julia out juggernaut at least we will get some mileage out of it after all.

    Rio Tinto casts doubt on Queensland’s coal export plan

    http://www.heraldsun.com.au/business/rio-tinto-casts-doubt-on-queenslands-coal-export-plan/story-fn7j19iv-1226334849389

    April 21, 2012 at 1:47 pm
    • TNA says:

      Let’s see what that does to QRN’s shares. I’m watching those closely as I think they will act as a good canary.

      April 21, 2012 at 1:58 pm
      • Bardon says:

        I guess we all now know why Clive Palmer’s hair went white overnight. He was probably the first canary given his total reliance on Abbot Point going ahead for his new coal development to get up.

        April 21, 2012 at 2:12 pm

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