The Oncoming Burst of the China Credit Bubble

History has proven that credit bubbles always burst. China by far is the biggest credit bubble in the world today. We lay out the proof herein. There are many indicators signaling that the bursting of the China credit bubble is imminent, which we also enumerate. The bursting of the China credit bubble poses tremendous risk of global contagion because it coincides with record valuations for equities, real estate, and risky credit around the world.

The Bank for International Settlements(BIS) has identified an important warning signal to identify credit bubbles that are poised to trigger a banking crisis across different countries: Unsustainable credit growth relative to gross domestic product (GDP) in the household and (non-financial) corporate sector. Three large(G-20) countries are flashing warning signals today for impending banking crises based on such imbalances :China, Canada, and Australia.

china credit bubble

The three credit bubbles shown in the chart above are connected. Canada and Australia export raw materials to China and have been part of China’s excessive housing and infrastructure expansion over the last two decades. In turn, these countries have been significant recipients of capi
tal inflows from Chinese real estate speculators that have contributed to Canadian and Australian housing bubbles. In all three countries, domestic credit-to-GDP expansion financed by banks has created asset bubbles in self-reinforcing but unsustainable fashion.

Post the 2008 global financial crisis, the world’s central bankers have kept interest rates low and delivered just the right amount of quantitative easing in aggregate to levitate global debt, equity, and real estate valuations to the highest they have ever been relative to income. Across all sectors of the world economy: household, corporate, government, and financial, the world’s aggregate debt relative to its collective GDP (gross world product) is the highest it has ever been.

Central banks have pumped up the valuation of equities too. The S&P 500 has a cyclically adjusted P/E of almost 30 versus a median of 16, exceeded only in 1929 and the 2000 tech bubble. The US markets are also in a valuation bubble because US-owned financial assets have never been more richly
valued relative to income as we show below. The picture is equally frothy if we include real estate, also at record valuations to income. China’s capital outflow spillover from its credit bubble has driven up real estate valuations around the world.

Read the full article here


India, Australia May Sign Nuclear Pact

Australian Prime Minister Julia Gillard, whose bold move overturned a longstanding ban on uranium sale to India, comes here Oct 15 on a three-day visit that could see India and Australia sign a landmark civil nuclear pact. Gillard’s visit takes place months after a reversal of Canberra’s long-standing policy by the ruling Labour Party on supply of uranium to India, paving the way for the sealing of a civil nuclear deal that could have a force-multiplier effect on broader ties both bilaterally and regionally. The agreement on civil nuclear cooperation is likely to be signed during the visit, well-placed sources told IANS.

The negotiations are, however, set to go down the wire as Australia will be insisting on a stringent uranium safeguards agreement and greater access to Indian nuclear facilities to inspect safe use of uranium supplied to India. Australia will be looking to optimise the bargain as the leadership will have to sell the deal to the non-proliferation hawks who are firmly opposed to any uranium deal with a country which has not signed the Nuclear Non-Proliferation Treaty (NPT).

Pic source:

If the negotiations succeed, the India deal will be the first country-to-country agreement by Australia to sell the yellow cake to a country outside the ambit of the NPT. A host of factors, including the state of cash-strapped Australian uranium mining industry, has, however, brightened the chances of such a nuclear pact. With the global slowdown set to be prolonged, Australian uranium companies like Paladin, Toro and Energy Resources of Australia are pitching for the nuclear deal with India as it will bring them millions of dollars in business.

Australia has the world’s largest deposits of uranium, but it is only the third-largest supplier at about 7,000 tonnes per year due to high operational costs. The India deal could, therefore, prove a godsend for uranium mining companies in Australia, specially as India, unfazed by scepticism about nuclear energy following the Fukushima disaster, is set to ramp up the share of atomic power in the country’s overall energy mix.

Pic source:

Intensifying trade and investment will be another key theme of Gillard’s India visit. The talks are expected to give a fresh thrust to negotiations on Comprehensive Economic Partnership Agreement which will provide greater market access to Indian exporters of goods and services. Bilateral trade grew to $20 billion last year.

Besides nuclear deal and trade, an array of regional and global issues will also be on the table when Gillard holds talks with Prime Minister Manmohan Singh. Gillard will be seeking India’s support for her country’s bid for a non-permanent seat in the UN Security Council. Amid competing ambitions of the US and China in the Asia-Pacific region, the two sides will be looking to ramp up their cooperation in the 16-nation East Asia summit which the leaders of the two countries will be attending in Cambodia in November.

Hard diplomacy apart, there will be a spot of soft power diplomacy as well, with the two countries launching a three-month long ‘Oz Fest’ during Gillard’s visit which is expected to create new cultural synergy in bilateral ties.

News source: Assam Tribune

Update:  Australia has agreed to supply uranium to India for its civil nuclear plants though it will take 1-2 years for the safeguard pact details to be thrashed out.

Uranium sale to India: Australian PM Julia Gillard safeguard pact may take 1-2 yrs

Defending her move to start talks on supplying uranium to India, Australian Prime Minister Julia Gillard has said the ruling Labor’s previous stance against the sale was becoming an obstacle in ties, but made it clear that a safeguard agreement is likely to take one or two years. Gillard, who is on a three-day visit to India, hosed down any suggestions that uranium sales to India will start quickly, the Sydney Morning Herald reported today.

She said that negotiating a safeguard agreement is likely to take one or two years, rather than months. Gillard, undertaking her maiden India visit as Prime Minister, deflected criticism of future uranium exports and said Australia knew how to negotiate a proper agreement to ensure uranium was used for peaceful purposes. “I think India is a wonderful example of everything we have been talking about as the possibilities of the Asian century,” another newspaper ‘The Australian’ quoted her as saying.

Gillard said she was sure the uranium issue would be raised during her talks with the Indian leadership. The Australian Prime Minister is set to meet her Indian counterpart Manmohan Singh and Congress President Sonia Gandhi during her India visit. Gillard said Australia had negotiated agreements in the past and done so on the basis that its uranium “is only used for peaceful purposes”.

She said the International Atomic Energy Agency would be involved and India would have a protocol with the IAEA in any agreement.

Above news source: Economictimes


The biggest games of India begins today – Commonwealth Games

The wait is over. The complaints built up (courtesy our incompetent media). A few players stayed away.  When the players actually landed, they were astonished at the amount of misinformation and lies told to them by their own media back home.  Which was partly or fully supplied to them by our own homegrown media.

Well, ignore the naysayers.  No matter what we say or do, the first thing the western media likes to portray when it comes to India is a cow standing in the middle of the road.  What they cant seem to understand is how inspite of being the so-called beacons of democracy themselves, the cows of India have so much rights on walking on the roads of India.

Let’s face it.  Poverty sells.  Else the movies of Satyajit Rays and Adoor Gopalakrishnan’s of India wouldn’t be patronised whole-heartedly by the western media / public when they are themselves consigned to the garbage by the Indian public (the world’s biggest patrons).  Of course its not easy for some of the snooty public / media in the western world to understand why and how the games could be awarded to a developing nation.  The same happened with the Australia and English cricket teams.  Today they see that their traditional source of power in cricket has been usurped by the BCCI.  Its not easy to accept the truth that you are not longer relevant in the grander scheme of things.   Wiser people accept the truth and mould themselves accordingly to the changing situation.  Fools are buried in the shifting sands of time screaming and kicking.

The collapsed rainbow bridge is up; courtesy the Indian Army which put it up in 5 days flat.  Eventhough, its a bailey bridge, it still does its job of standing up when people walk over it.   The stadiums are ready, the games village has been praised by officials and players from all across the world.  The food has been simply divine (according to the players), there are regular cultural programs and the players themselves are actively participating in them.

Lets admit it, the city of Delhi and its citizens are the biggest benificiaries of the games.  A new world class metro, many flyovers, bridges, roads, parks, traffic lights; in short great infrastructure for Delhiites.

Of course there will be detractors who will complain of child labour being used for the construction of venues (What else will the child do sitting around when their parents are working at the site?  They will also contribute and earn some money…so what’s wrong with it?). Shanties and slums being demolished (they were all illegaly occupying the government land and they were demolished.  Is that wrong?  Why don’t those bleeding heart liberals take each of the families affected by the demolition and give them shelter in their own homes?).

So ignore all the crappy complaints, rest and relax as the biggest ever carnival on the land of India begins tonight.  The opening ceremony of the 19th Commonwealth Games gets underway at 1900 hrs IST.  Watch it on TV or at the stadium (if you are lucky to get the tickets).  As for all the ones who complain of human rights abuses and corruption, go and take a hike.  The people of India care two hoots for your complaints.

By yesterday, 6700 players had confirmed their entries to the games making it the biggest Commonwealth Games ever (beating the 5766 athletes and officials who took part in Melbourne four years ago). 71 teams from 54 countries.  Millions of viewers across the world watching the games and a giant alien over the Jawaharlal Nehru stadium for the opening ceremony. 5000 years of civilization and the secular ethos of the country will be a part of the ceremony.  Enjoy.

Come out and Play.


Aussie attack on Indian students

The mailtoday newspaper has gone further with another cartoon lampooning the Victorian police and the state of Indian students studying in Australia.

Read more in the paper about how the Australian police have systematically ignored the racist attacks on Indian students.  1447 people of Indian origin were either robbed or assaulted in the previous one year in Australia.  Yet the Aussie police refuse to acknowledge the targetted violence.

Its high time the parents in India realise that its not worth sending your kids to Australia to study some god forsaken courses for which there is no future anyway, but also that there is no future in contributing to increasing the Aussie education market.  Lest your kids come back in body bags.

Similar articles on Australia on this blog previously

More ramblings

Now Murali ends up with an egg on the face

Racism in Cricket? Read the damning Aussie report

Sreesanth’s Agression


India are the champions again

india celebrate

I always believed, that a true champion is one who can beat the opposition on their ground and in the front of their own fans. Very often, the Indian cricket team has been branded a tiger at home but not abroad. Its time to change the script. India are the 20-20 world champions and now they beat Australia in Australia to lift the Commonwealth Bank trophy.


As for all the naysayers and the critics of the Indian team (including the Aussie media), they can go eat some shit. As for the fatso called Hayden, he can stuff his backside with lots of weed on which he thrives. Michael Clark who played rugby with Tendulkar on the cricket pitch was downright pathetic. Anyway, no one expects anything civilised from the Aussie cricket team. Just shows how low the Aussie team can go to win a match. They might be champions, but never role models for any team or youngster to emulate.

hayden bhajji

I loved the way the Indian team rubbed the Aussie noses into the ground. Victory was never sweeter. The look on (P)ricky’s face was worth a watch. Unfortunately the fatso Hayden was nowhere to be seen. Not that anyone wants to see that ‘pukeworthy’ face. Maybe he had already started to smoke some weed.


I just cant wait for the IPL to start. What an opportunity to sledge now. Tonight, i will sleep in peace. Amen.

All pictures courtesy: Cricinfo


Now, Murali ends up with an egg missile


The controversies never seem to end 😉 Am betting for more action off the field during this tri-nation tournament.

Australian fans showed no let up in their hostility towards Muttiah Muralitharan and a group of fans threw an egg on the Sri Lankan spin wizard’s face in Hobart.

“An egg was thrown at Muralitharan and it struck him”, a top Sri Lankan official said in Colombo adding, the authorities were looking into the incident that happened last night. The Sri Lankans are in Australia to play a tri-nation ODI series which also involves India.

The Island Newspaper reported that Sri Lankan cricketers, including Muralitharan, were jeered and attacked by some local residents in Hobart when they were returning to their hotel after dinner last night.

“The Sri Lanka team management had then taken action to safely guide the players back to their hotel and the police arrived at the scene,” the Newspaper said.

Full article here.


Gilchrist prefers to walk on his terms


When I dropped that Laxman edge off Lee, I realised that I hadn’t moved as well, I was slow and after 10-15 minutes and I realised, that’s it,” said Gilchrist in his first press conference since announcing retirement on the third day of the Adelaide Test.

“The missed catches of the series were bugging me. I was working hard, and training well but there was absolutely no desperation for me to continue to maintain those standards. That night I spoke to Mel [his wife] and decided that’s it.

Now…how’s that for honesty. Wish some of the dead wood in the Indian cricket team would also take the drift.

Above picture courtesy: Cricinfo