The nation’s 13.6 trillion yuan ($2 trillion) of new loans in the past 17 months, bigger than the economies of South Korea, Taiwan and Hong Kong combined, is “unprecedented in 400 years of economic history,” said London-based hedge fund manager Hugh Hendry, co-founder of Eclectica Asset Management, which manages $420 million.
Recession-Plagued Nation Demands New Bubble to Invest In.
My view is that markets are still in denial about the structural wreckage of the credit bubble. There are two more boils to lance: China’s investment bubble; and Europe’s banking cover-up. I fear that only then can we clear the rubble and, very slowly, start a fresh cycle.
To be sure, France doesn’t face a U.S.-style mortgage crisis. French banks are generally conservative lenders, nearly all home loans are fixed-rate, and foreclosures are rare. But the housing market had clearly overheated, with prices rising 210% from 1995 to 2008. That’s not quite on a par with the 270% rise in Spain during the same period – but it’s more than the 190% growth posted in the U.S.
It always surprises me how newspapers are able to unknowingly mark the top of any bubble with top stories talking about fortunes to be made, staggering growth and bright future.
It happened with oil at $150 last july and now again with Dubai.
Here’s what New York Magazine said less than three months ago, right at the top: Escape to Dubai.
Here’s the sad reality coming up now: Laid-off foreigners flee as Dubai spirals down.
The Economist has an article on The beauty of bubbles, arguing that even asset bubbles popping leave behind lasting value.
Examples are the Florida Real Estate bubble in 1920, the railway bubble in 1840, the telecom bubble in 1990 or the more recent real estate bubble in UK and Dubai.
My favorite quote is from an IPO prospectus during the South Sea bubble of 1720, where the company described itself as:
a company for carrying out an undertaking of great advantage, but nobody to know what it is
Sounds a lot like a Special Purpose Acquisition Company (SPAC) of modern days …
