For Australians, its resources - raw materials and energy. What's the market cap of resources on the ASX? It was 40% in mid-2007 and that was before stimulus like the Chinese acquisition for 10% of Rio Tinto threw fat into the fire. When resource prices rationalize, our property valuations will be just about as tangible as a Saharan igloo.

Asian economic activity & growth has been driven by export production and the capital investment that has supported it. Locking that as a negative with any slowdown in the US an EU we can debate scale later.

Import merchandise purchases are at the top end of discretionary consumer spending. Behind that sits Asia. Lock another one.

The price of import merchandise is dependent on exchange rates. Demand downturn on discretionary items at inflating import prices is accentuated.

A downturn in discretionary spending will hit services economy jobs hard & there is likely to be a significant flow-on effect in the economies that have had the steepest growth in the discretionary & financial services sectors. Can history provide a precedent or are we in uncharted waters?

The discretionary spend component within fuel is limited in an economy that has developed like the US. US inventories have been centralised or mega-regionalised (read interstate delivery), regional distribution has been collapsed in favour of hubs and spokes, and mass transit of commuters to jobs and retail has no infrastructure and extended distances. This will mean an amplified hit on other discretionary spending sectors.

Going back to Asia and capital investment. Right now the lever being applied by the Chinese on domestic inflation is by increasing banking liquidity requirements. The effect has yet to flow through on domestic capital investment.

What is the affect on capital investment of the entrepeneurs losses on the Shanghai exchange?

If China lets the Yuan float the appreciation will likely be steep and the affect on export pricing and a steep downturn in capital investment in that sector.

The other Yuan appreciation effect is on Chinese import commodity prices. What immediately happens to them in USD terms and what happens to the USD? So what is value in a Baosteel negotiated ore price to a global reserve currency begging all corners of the world.

India appears to be in a bad corner with little to contribute to anything but gold consumption and Japan/Korea are flatter than ....

On the countervailing side to support minerals demand growth. Can the Chinese consumer savings? What is in the pipe on Chinese and Asian government infrastructure projects.

So let the optimistic arguments get a little deeper than ABARE cares to go on the demand side and meantime watch the Baltic exchange to see whether I'm proved a dill http://investmenttools.com/futures/bdi_baltic_dry_index.htm

Bull markets are born on pessimism, grow on scepticism, mature on optimism, and die on euphoria.
– Sir John Templeton

Your in there hard aren't you.

You forgot to list uranium as an important mineral which would feed the nuclear power industry as oil goes ballistic and which Australia is richly endowed with.

Keep up the good write......I find it informative & enriching.

Cheers,

Heng