Paul Krugman: China making many bubbles

[GoFlyKiteNow]

What do you think of the Chinese stimulus package?

We are not sure how much of it is real. There has been a surge in public investment, but some of that appears to be credit, which is being used just for speculation. Some of the increase in demand for raw materials seems to have been more speculative build-up, but in inventories, there is really an increase in production.

There may be some even real estate bubbles in Asia resurfacing, which is frightening. So, people who were terribly burnt on the US real estate market are saying: Well, but this is Chinese real estate and it can’t have the same problems, but of course, it can.

So, is China really stoking a bubble here?

I think it is blowing some bubbles. If I was going to buy one unfortunate phrase from Alan Greenspan, I think, it’s right that it’s froth. There’s not one big bubble but there are probably many more bubbles out there.

 

[annexa]

No wonder so many friends tell me China mei mei skin very smooth. All got bubble bath!

 

[TeeKee]

it's kinda of scary when 1.3 billions make a run on their banks....LOL...

but then you have to get control of the media and release the info to the public to act...

do you think that's possible? LOL..

 

[Lee Hsien Tau]

China mei mei skin very smooth due to oestrogen and not bubbles.

Dun believe you take: Your tits itch a bit and expand, your hair drop some, and your skin feels like rubber.

No wonder so many friends tell me China mei mei skin very smooth. All got bubble bath!

 

[Lee Hsien Tau]

That time Ho Jinx will be losing without more regrets again.:oIo::oIo:

it's kinda of scary when 1.3 billions make a run on their banks....LOL...

but then you have to get control to the media and release the info to the public to act...

do you think that's possible? LOL..

 

[TeeKee]

That time Ho Jinx will be losing without more regrets again.:oIo::oIo:

the grand finale before she finally calls it quit?

the people are bleeding you know...

 

[longbow]

I agree with you, there is a bubble. However if you look at any of the large economies with stimulus packages you will see a bubble.

Just look at the US stock market, it is in bubble territory. In a recession, where no one is spending, Gov is spender of last resort. However in this case, US is spending on borrowed money and chalking up a huge deficit but it has a blue chip credit rating so ok. The Chinese are lucky as they have the money to spend. They are spending $50B this year alone to upgrade its rail services, putting in a high speed rail (the US is only spending $9B). Economist often talk about productivity of a worker. Just imagine the boost to productivity being generated just from a high speed rail infra.

India is also trying to stimulate its own economy and in the process creating a large deficit but unfortunately that is at the expense of its debt rating and I am pretty such there is a stock market bubble there.

In short all stimulus packages create bubbles but hopefully some of the $$ is wisely invested.

What do you think of the Chinese stimulus package?

We are not sure how much of it is real. There has been a surge in public investment, but some of that appears to be credit, which is being used just for speculation. Some of the increase in demand for raw materials seems to have been more speculative build-up, but in inventories, there is really an increase in production.

There may be some even real estate bubbles in Asia resurfacing, which is frightening. So, people who were terribly burnt on the US real estate market are saying: Well, but this is Chinese real estate and it can’t have the same problems, but of course, it can.

So, is China really stoking a bubble here?

I think it is blowing some bubbles. If I was going to buy one unfortunate phrase from Alan Greenspan, I think, it’s right that it’s froth. There’s not one big bubble but there are probably many more bubbles out there.

 

[shelltox]

We have our own bubbles in the condos in tanah merah and ang mo kio whereby the psf is 1000 and yet those free hole in upp bt timah is going for 800 psf and those in west coast also.

 

[GoFlyKiteNow]

You cannot compare the economic situations of USA and China on the same plane.

The USA is a technology /innovation leader, it has been so for decades and will continue to be so. The past decade, China's economy was driven by uncontrolled leveraged liquidity of the USA, which allowed China to export and have an export based economy. If there was no US and western nation market, then China would not have had a high growth rate in the first place.

Now, China has no place to export as before. It has excessive production capacity that remain idle. And its internal consumption can eat away its reserves very fast.

So, most of the stimulus money is now finding itself channeled into a stock market and property bubble. Not to stir the economy. Because the economy is suffering from production over capacity and idle factories. There is no need for money to go into building factories and infrastructure.

What China leaders fear most is the threat of social instability. With no export markets, the leaders are scared of allowing the local population from eating the reserves built up over the years.

But the bottom line is: there will never be another boom time in the USA like it happened before..that fuelled massive production and export efforts in China and neither is China in a psoition to be a technology and innovation leader to drive the global economy.