'..Bubbles do indeed always burst. And when it reaches the scope that a government can’t allow it to happen, one should best be prepared for an eventual bust of devastating proportions.'<blockquote>'
January 30 – Bloomberg (William Pesek): “Among the many reasons to dismiss President Xi Jinping's pledges to transform China's growth model, Gan Li may offer the best: an epic housing bubble that can't be allowed to pop. Gan, a professor at Southwestern University of Finance and Economics in Chengdu, Sichuan… recently crunched some disturbing numbers on the level and distribution of household income and wealth. After examining survey results from 28,000 households and 100,000 individuals, Gan believes that roughly 65% of China’s household wealth is sitting in real estate. An astounding 90% of households in nation of more than 1.3 billion people already owns homes. In the first half 2012, he found, about 42% of demand for properties came from buyers who already owned at least one. Many of these homes and apartments… were bought in the midst of one of history's biggest real estate booms and bubbles. ‘The Chinese housing market is clearly oversupplied,’ Gan told Tom Orlik… ‘Existing housing stock is sufficient for every household to own one home, and we are supplying about 15 million new units a year. The housing bubble has to burst. No one knows when.’ When it does, the damage to household wealth will reverberate across the second-biggest economy, devastate consumption and increase risks of social unrest. In other words, it’s something the Communist Party can’t allow to happen.”
China remains a major wildcard. “The housing bubble has to burst.” “…It’s something the Communist Party can’t allow to happen.” Well, Bubbles do indeed always burst. And when it reaches the scope that a government can’t allow it to happen, one should best be prepared for an eventual bust of devastating proportions.
Here at home, Bernanke is leaving Yellen and the FOMC in a very tough spot. The course of Federal Reserve policymaking is in a state of high uncertainty; U.S. markets are unsound; and global financial and economic systems are highly unstable. Of course, Bernanke is not fully to blame. Yet he has been the leading proponent – the intellectual mastermind – of contemporary inflationism that is today seemingly at a critical crossroads.'
- Doug Noland,
End of an Era, January 31, 2014</blockquote>
Context<blockquote>
'..Austrian theory is absolutely essential to successfully navigate the treacherous macro investment landscape..'(US, Europe, Japan, India, China) - '..through structural reforms .. Four percent growth could return.'</blockquote>