2012-03-12

Property bubble has burst, prices will fall 50%, where will domestic demand come from?

Chinese are asking: where will domestic demand come from? Exports are down, investment is slowing and inflation continues to eat away at consumers' income. Speculation is rampant throughout the economy:
All of white collar workers' income comes from their homes and gold. These cannot be quickly turned into cash.
The falling real estate market will make short work of the "mortgage equity withdrawal" that funds consumption.

The solutions offered in the editorial are mostly non-starters. The author calls for an end to highway tolls and continued subsidies for energy use, but both of those will preserve distortions in the economy. The third suggestion, opening the financial, healthcare and other sectors of the economy, would have a positive impact, but good luck seeing that happen in the short-run.

This article concludes with the following:
Stop playing with bubble economics. The use of currency devaluation to promote economic growth in Europe, the United States and other countries in recent years was to fight deflation. If we follow suit, we won't just have a recession, but a collapse.


牛刀:楼市泡沫破灭后 很多楼盘都将跌去50% (The property market bubble burst, many properties will fall 50%)

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