Korea Calms, US Speeds

While the North Korea situation seems to have moved into relatively calmer waters, the US economy has hit a new fast patch! Just as we have been forecasting.

No one is particularly comfortable that something unexpected can happen at any time due to the volatility of the North Korea dictator, but this is all in the context of a very strong global economy.

As the weather heats up for what is likely to be a ripper of an Australian summer, the overall heating up of the US and global economy will continue to be the major factor in booming property prices here.

The wealthier the world is, the greater the foreign demand for property here in Australia. As well as the further enthused state of local first home and investment buyers. For sellers, there really is no motivation. They have been assailed constantly with property collapse forecasts that we said on each and every occasion were absolute rubbish, and that is just what they have been proven and shown to be.

Not many sellers, and happy excited buyers is the dominant theme for the Australian property market for the next several years.

Which brings us back to that one fly in the ointment, North Korea. We have seen increased UN resolutions and trade restrictions against the increasingly embattled nation. It can always be dangerous to corner a crazed animal. Something to be very aware of in this situation. At the same time, the military might now amassed against them at a hair-trigger state of readiness, doesn’t give North Korea much wiggle room left for grandstanding. It best be careful and it knows so.

The big news of the moment in this regard is that China has today given North Korea companies just 120 days to close and leave.

Yes, that’s right. All Korean companies including restaurants and galleries and even joint venture companies have just 120 days to be completely gone. This comes on top of China also reducing oil supplies by 30%. China has a valid argument in that a full reduction would lead to a humanitarian disaster.

We previously mentioned that China recently moved an extra 180,000 troops to the North Korean border. It has also been conducting a lot of combat drills and air defence practice along the border. This is all happening for a reason. To tell North Korea there is indeed a limit, and they are very close to crossing the line. Literally. One of our favoured solutions is a US lead pre-emptive strike on nuclear facilities and missile systems, while at the same time there is an internal coup and quite possibly China sweeps into the country. It would be all over in 24-72 hours. Problem solved.

What a lot of people do not realise, is that it would not be a case of US boots on the ground, but of Chinese boots on the ground in a conflict. This is China’s sphere of influence and the North Korea leader is creating all sorts of problems by threatening Japan and the US. It brings those military forces to bear in what should be China’s domain. China will have no doubt spent quite some time strategising this.

The above, is in fact, the worst case scenario. The best is that there is a coup all on its own, but this may be too much to hope for.

Meanwhile, the US economy is growing as fast as we forecast, around 3%, but much faster than most people thought. The Gross Domestic Product, GDP, number for the US for the second quarter of the year was just revised upward to 3.1%.

Let there be no doubt, this is a stunning rate of growth and confirms the age of prosperity that we have been highlighting for many years now. We really, each of us, all of us, have to pinch ourselves and truly recognise that we are living in the most prosperous age in history. We are truly fortunate, and being able to partake and invest in such an economic period is an opportunity to be respected.

Australian property prices will continue to be supported by historically low interest rates in a period of global prosperity never before witnessed. Yes, we’re bullish property!

Clifford Bennett