ZERO HEDGE reports
For those who wrongly believe that the biggest real estate bubble in the world is in Manhattan, the following may come as a surprise: according to Dylan Grice, in central Hong Kong, a 400 sq. foot property recently sold for HK$14MM, or about $1.8 million: an insane $4,500 per square foot. And that’s just the beginning. Yet, as we have started to speculate recently, is this precisely the goal of Ben Bernanke ” to create pockets of silly inflation within China so that the country is eventually forced to unpeg the CNY? If so, this is a huge gamble, as the bulk of the country still has far more slack than America ever can. And while China, and the bulk of its wealthy citizens, continue to pretend there is no bubble (created by the same free credit mechanism that results in the 2008 near-death of the US economy), has, as Dylan muses, China “already lost control? And if so, who’s to say what will happen if the asset inflation goes into reverse? Maybe when the authorities engineer the slowdown they desire and tell investors it’s safe to buy again, those investors? won’t want to buy. In which case a hard landing shouldn’t be beyond the realms of imagination.” Grice then proceeds to explain the obvious, namely that the fall out of the inevitable collapse of the Chinese bubble will be unprecedented, as not only the EM world, but the developed economies have all hitched their fates upon the successful continuation of the Chinese bubble ” the same bubble Bernanke has to unwind to get the much desired CNY reflation. Grice says “Go to Ireland and ask them how they feel about bubbles. They’ll tell you a bubble is a curse, not a blessing.” Of course, Ireland is about to be bailed out. Who, however, will be able to bail out China when the overheating economy gets it trillions in loan supports taken out? That one not even Chairman Ben will be able to rescue”¦
In his must read piece which once again explains why the Emerging Market bubble is the greatest threat to the entire world, a theme which little by little is getting ever more traction, Grice first looks at a post-bubble economy. That of Japan.
This is why the comparison with Hong Kong could not be more shocking (and more deja vu-ish). Here is how Grice views the former British colony:
Why are China’s residents ” traditionally so careful (growing up under a communist regime will do that to you) ” throwing all caution to the wind? Here is one possible reason.
Here Grice once again returns to his recent meme that it is in fact China’s fault for not letting its currency appreciate, and in doing so not only is it reaping the benefits of having a monetary policy that mimics that of the Fed, but an FX regime which allows it to extract far more benefits from the globalized system. The only Achiles Heel ” inflation. And that is what Grice believes will bring the whole theater down.
Which of course brings up the old staple of decoupling, which ironically is most relied upon as a driving force of growth, just before it is proven to be a lie (see 2007).
And yet, very little happens. And here is the kicker. Grice speculates that unlike the Fed which at least pretend to be ahead of a bubble (although we know now this is only a myth), could China’s regulators (PBoC et al) in fact realize that it has already lost control? If so, the repercussions are tremendous, as the entire world is now driving at 60 miles headed straight into a brick wall and nobody is even attempting to be behind the wheel.
The risk: a complete collapse of everything, and the biggest deflationary collapse in history, which is precisely why the Chairman’s last response at D-Day will be to print an infinite amount of money to save whatever Keynesian remains are left.
How much time is left?
One thing is certain: the end, as fatalistic as it appears, is coming, and judging by today’s token 50 bps RRR hike, may be closer than expected.
See the original post:
In Hong Kong $1.8 Million Gets You 400 Sq. Feet, And Other Observations On The Biggest Bubble Ever, From Dylan Grice
Tagged with: bankruptcy, china, ECB, Economy