THE LAST GASP: Lost gold and bad dragons

Gold bugs lose their shine, the Chinese dragon hits turbulence and the business lobby gets confused.

The Last Gasp is a wry take on the week’s news, every week.


Well, this was the week when we realised that all that glitters is not gold. In fact, nothing that glitters is gold after the so-called precious metal’s price fell 10 per cent just in two days, the biggest gold brush in 30 years.

The market is still trying to pinpoint exactly what the bullion was going on with most analysts noting the plunder began just after the US Fed – accidently – released minutes suggesting a sooner-than-expected QE reversal, which would rob the inflation-hedge of much of its lustre. But with Japan joining the unconventional monetary madness and the EU still with the option up its sleeve, we're betting the old ingot could yet have the last laugh.

Staying on international news, fear of China rose to new levels this week and not just among Washington defence hawks and Senkaku islanders. Economists and investors are starting to get nervous that the dragon is seriously running out of puff. The straw that seems to have broken the communist giant’s back appears to have been rather small – about three-tenths of a straw actually. After three decades of 10 per cent-plus growth, a tiny 0.3 per cent shortfall between actual annualised growth and estimated annualised growth (of 8 per cent) sent China-exposed stocks diving, highlighting the fickleness of investors these days – when I was a boy, I held onto my USSR-exposed stocks as the wall was coming down (figuring it would only have to be rebuilt again).

The China news also sparked renewed debate about how the central government would manage the country’s politically and socially awkward rebalancing to a more consumption-driven growth model. While the 20th century was dominated by concern of reds under the bed, it seems the 21st century brings a much more benign threat: reds going to bed.

Back at home, incoming BHP Billiton chief executive Andrew Mackenzie announced a management reshuffle which will see the Scot receive a salary about 25 per cent less than outgoing boss Marius Kloppers and still a bit less than what Kloppers was offered when he came into the role, giving new meaning to the term Scot-free. Mackenzie has also expanded his management committee by three to 11 as he goes about implementing his streamlining strategy. It all made perfect sense to us, but did little to stop the stock’s China-driven dive, with the Big Aussie dipping to 12-month lows, giving new meaning to the phrase, Scot-no-friends. Welcome, Macca.

Meanwhile, the Business Council of Australia dipped its head into the election campaign with its president Tony Shepherd making this plea to politicians via the National Press Club in Canberra:

"Australia requires political leaders who are prepared to lose their jobs to get things done," he actually said.

"The test of reforms for us is whether it advances national prosperity over the long term, not whether it advances the attainment or retention of power," he actually added.

He later apologised to everyone, claiming he’d accidently grabbed the speech he’d written for his private appearance at the Melbourne Comedy Festival later in the week.

The newly naive BCA was also joined by other key industry groups AiG and ACCI in strangely condemning the government’s carbon trading links with Europe in light of the crash in the continent’s price this week, to a new low of $3.33. Business will now be faced with dirt cheap carbon permits when the Aussie scheme floats in 2015 and is obviously disappointed with that fact, preferring to continue with the $24 price in Australia, one presumes. We’re still waiting for the press release from shareholder associations, who are presumably still too aggravated to type.

Also in politics, Gonksi is gonski – for at least the time being.

Finally we’d like to end with this quote from Business Spectator columnist Jessica Irvine in a piece about the errors found in a previously seminal macroeconomic research paper by Harvard academics Carmen Reinhard and Kenneth Rogoff.

It might help guide young-uns weighing up whether to pursue a career in economics or politics.

The usually grey world of academic macroeconomics has been rocked by scandal this week. Of course, the profession did it the only way it knew how, not with Bunga bunga parties, but revelations of erroneous Excel spreadsheet 'coding' errors.

Seems like Gasp has got a little competition. I’m going to Vegas for two weeks to get in shape for the challenge. See you on May 10.

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