Now *THIS* is a bubble!

www.businessinsider.com...

Great read on how bubbles can really get out of control - and quickly.

"One clear clue (regarding the rising real estate prices in China) is that the average price-to-income ratio in Beijing has reached 27:1, five times the world average, according to data from the Bureau of Statistics of the Beijing Municipality. In addition, the average price-to-rent ratio neared 500:1 in the city, far above the international alarm threshold of 300:1, which sends out a clear signal that the foundation of the real estate boom is losing stability."

This is an important topic, because we've seen how bubbles can cause social unrest and create major havoc in world markets.

Its hard to predict exactly how this would play out internationally, but the last thing anyone needs is for China to face internal strife along with a real estate crash. It seems the sort of thing that would lurch them back into the dark ages.

I don't think you'll find many that will cry over poor China's fate. They have artifically maniupulated the Yuan for over a decade now, giving them an unfair trade advantage. If their bubble bursts, it's their own fault just like it is everywhere else.

Excellent points Krunchy. One of the reasons why China stepped on the money supply gas pedal to the point of pushing it right through the firewall early last year is because there were very real pockets of violence erupting throughout the country as their economy (like everybody elses at the time) was falling apart. Factory owners were literally walking away.

This is a bubble that has to burst and when it does you can take it to the bank China will have to engage in a MAJOR military crackdown to quell the resulting social disruption. Sadly, some desperate governments have historically started a war to deflect the public's concern about the economy.

[edit on 23-3-2010 by leo123]

Originally posted by pavil
I don't think you'll find many that will cry over poor China's fate.

Many people (like me) share this opinion about America's financial mess. After all they created it, right?

But the thing is, in today's economy something that hurts one of us hurts all of us. The US is currently married to China because they buy debt. A sudden change in that relationship could harm both parties quite seriously.

reply to post by leo123

Sadly, some desperate governments have historically started a war to deflect the public's concern about the economy.

Wars also artificially increase spending and simultaneously keep people confidant of their currency.

What is interesting about China is that their control over their currency is like when they were in complete control of the means of production in the Great Leap Forward. This time, instead of millions starving for food, there will be millions starving for value. The same effect will occur.

Originally posted by krunchy

Originally posted by pavil
I don't think you'll find many that will cry over poor China's fate.

Many people (like me) share this opinion about America's financial mess. After all they created it, right?

But the thing is, in today's economy something that hurts one of us hurts all of us. The US is currently married to China because they buy debt. A sudden change in that relationship could harm both parties quite seriously.

Yes, we created our mess, we need to own up to it, regardless of who enabled us.

I think China's undervaluing of it's currency is the major cause of much of these problems. That, definetly affects people worldwide as well.