Thursday, June 18, 2009
More relevant that yesterdays house price movement in a square mile of berkshire
The sickest joke yet
Just broadening horizons! House price movements will ultimately be determined by the bigger factors at work and its interesting to see the China story being described as a sick joke by Albert Edwards
Posted by bellwether @ 09:23 AM (1157 views)
7 thoughts on “More relevant that yesterdays house price movement in a square mile of berkshire”
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icarus says:
It’s a no-brainer. China is highly dependent on its American and European markets, which are shrinking.
Also, watch as the Chinese bubbles burst. China has printed huge amounts of renminbi to buy dollar-denominated assets to keep China’s currency low against the dollar and its exports competitive. This has injected a lot of renminbi into the Chinese economy, making for easy credit, which has been used by companies and local authorities to invest in what is likely to be overcapacity in capital goods and by others to create bubbles in the prices of houses, land and financial assets. Then they borrow against this collateral – the ‘wealth effect’. The rest we know.
uncle tom says:
“China is highly dependent on its American and European markets, which are shrinking”
Not as dependant as is portrayed – for China, the export markets are more the icing on the cake rather than the bread and butter.
China has twice the population of the US and europe put together – that’s a lot of domestic demand; and while the export market demands may have shrunk, they certainly havn’t gone away.
Reports of China’s impending economic death are greatly exaggerated..!
bellwether says:
I had understood that the bulk of the chinese people were living at sudsidence levels. That being the case it is not clear where the disposable income comes from to expand internally. A large population is not a one way bet.
icarus says:
@bellwether – agreed. @UT – that’s like arguing that the UK economy is OK because 20-odd million people are still employed.
uncle tom says:
I’ve been to China some forty times over the last fifteen years (I’m off again in a couple of weeks) – the pace of economic development is breathtaking, and not just in the cities.
The increasing demand for consumer goods from the domestic market is amply compensating for the slackening on the export front.
icarus says:
Economic development in the west looked pretty good too until it turned out to be bubble-based.
bellwether says:
UT if you have visited that often I’m not wanting to argue but then again people most people living in this country thought our economy was healthly and the implosion came as a complete surprise and indeed is still being denied. I also struggle with the notion that our spending has been the icing on the chinese cake. It may become that but to date it has been everything in the cake other than the icing.
Recall too that pace of development in the US was breathtaking before the great depression and at that time there was less competition for resources. I do wonder if the size of population will actually prove to be a huge draw back in this regard, especially when it seems to always be cited as a reason for optimism,
A discussion for some other time.