John Edwards’ Small Target Strategy

by C H

Edwards adds an interesting perspective on the mining boom. His analysis is sound, but reductive and narrow. It focuses on the impact of the mining boom on growth and employment.

What he doesn’t cover is the larger economic ecosystem that has grown up around the mining boom. The housing cycle, the levering of banks to the housing cycle, Basel III and it’s effect on bank capital adequacy, the fact that banks still determine their own risk weightings internally and the overall loan composition on balance sheets. He doesn’t go near Broker Dealer regulation. He does elaborate on the structural state of the budget though. He fingers Costello on that one.

I doubt he’d touch risks in the wholesale markets for bank funding with a ten foot pole.

Granted, members of the RBA are hamstrung in what they can say publicly.

Keating is clearly also in the Edwards camp that falling prices will be compensated for by growing volumes.

I fear the picture is more complicated, personally.