"The bursting of U.S. housing and mortgage market bubbles has suddenly been replaced by emerging markets inflating…
… Suttle said the Fed ease replayed a now almost routine response to western banking stress and looked set to perpetuate a cycle of market bubbles that moved from Asia in the mid-1990s to technology at the end of the decade and housing post-2001…
…The fear is that when money starts to leak from developed to developing markets it supercharges already-elevated assets and stokes inflationary and systemic problems down the road.”
From The Observer:
“In its Financial Stability Review, the Bank of England has conducted a masterly dissection of the shockwaves that have rippled out from the American sub-prime mortgage market. It has also laid bare the risks: commercial property is in jeopardy, as are share prices, the US dollar and heavily indebted individuals.”
“Like all manias of this kind, the Great China Stock Bubble is rooted in economic realities--the rise of China as a great economic power…
…But like all bubbles, this one comes with a large dose of artificiality and imbalances.
First, as an export-driven economy, much of China's growth is based on an artificially depressed currency. The Chinese government has kept a firm grip on the Renminbi, so that it's appreciated a mere 9% against the U.S. dollar over the last two years--while the Euro has risen about twice as much against the greenback.
Second, to keep the growth machine humming, the government has kept a lid on interest rates…”
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