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John Furlan
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John Furlan has been familiar with financial markets for many of the past thirty years. Please contact him at
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  • Washington Post: "In China, fear of a real estate bubble" 0 comments
    Jan 11, 2010 1:07 PM
    There are more articles like the one in the title on a China real estate bubble in today's Washington Post (Bloomberg also had a good one a week or two ago).
    Greenspan notwithstanding, large bubbles are no secret, they are well known and discussed, by definition.  Parts of China's residential real estate markets increasingly have the characteristics of a bubble, in that they are being inflated by very easy credit, and people are buying expecting prices to continually rapidly rise, even when they have increasing difficulty affording it (sounds familiar).
    Who knows when it will end, China's economy has strong growth in personal income and a very high savings rate, both unlike the U.S. during its housing bubble.  As usual, many investors/traders believe that the trick is riding the bubble and/or its global ramifications, and then trying to get off before it's too late. 
    In that sense, basically nothing has changed in financial markets, it's still the same speculative game, the crisis wasn't deep enough to change that basic reckless behavorior (which is the economic point of having a crisis, so this last one seems to have been wasted by the bailouts). 
    Bernanke's extremely easy money policies are intended to re-start real estate inflation, especially his buying well over $1 trillion of mortgage securities.  It just so happens that he's managed to do so in China, which is "importing" U.S. easy money through its fixed exchange rate to the dollar.   I'm sure that fact is not lost on either Bernanke or China's leaders.

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