China: Economic Threat?, Yakezie Round Up, Uncommon Money News
| August 10, 2010 | Posted by Roshawn Watson under Uncategorized |
By: Roshawn Watson
Housing is VERY expensive in China. In fact, it is so expensive that several analysts are calling it a housing bubble. Perhaps you are asking why should I care? Well, consider that any problem in the housing sector, because it is so subsidized with loans, ultimately shows up in the banking sector. The banking sectors affects A LOT of other economic areas. Remember, this recently happened in the U.S. & Europe.
In Beijing, homes are selling for 27 times income. Thus, if you earn $50,000/year, you are trying to purchase $1.35 million home.Of course, you can see the problem.
Banks are owned by the government, so there are some controls. However, things are getting REAL dicey. Chinese regulators have recently asked banks to conduct a stress tests to gauge to effect of a 50-60% drop in home prices. That’s about double what the worse market in the US suffered during the worse of our housing crunch. Additionally, there are believed to be many speculators in the Chinese housing market. For example, a couple hundred thousand apartments that are own registered no electricity usage, suggesting that the homes are just not occupied.
Perhaps the overall economy may continue to outperform analysts estimates, but we will have to see. It is time to rethink the global exposure of your portfolio.
Question:What do you think the greatest threat to our economy is?
Now, it’s time to do the weekly Uncommon Money News and Yakezie Round Up.
Uncommon Money News and Yakezie Round Up
In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!
Festival of Frugality #241: A Midsummer’s Night Dream Edition hosted at Yes, I am Cheap, Ditch The Boss‘s Financial Independence Compilation.
Both carnival linked to Hey Broke People, Stop Overpaying For College!
I was also extremely grateful that a few articles were picked up in round ups.
- WiseBread’s Best Money Tips: Escaping The Mundane linked to Are the Rich Walking Away from Million Dollar Mortgages?
- Barbara Friedberg‘s More Summer Reading Guide included Hey Broke People, Stop Overpaying For College!
- Squirrelers‘ Updates and Favorites linked to Economists Blame ME for the Slow Recovery
- Nasdaq’s Comminty cited Will The Dow Really Drop By 90%? in a post entitled Could Be Facing Deflation; How to Cope
- Joe Plemon’s (Personal Finance By The Book) Back to School Roundup linked to Hey Broke People, Stop Overpaying For College!
- Kevin at Invest It Wisely linked to Economists Blame ME for the Slow Recovery in his Weekend Reading: Me and My Money
Surprisingly, I inspired one fabulous post and a round up title at some awesome PF sites!
Robert’s (DIY Investor) Coping with Emotions While Investing was inspired by a comment I made about keeping your emotions in check during the roller coaster us investors have been riding
The title of Joe Taxpayer’s Watson Round Up was inspired by yours truly (LOL) for last week’s Economists Blame ME for the Slow Recovery
Posts of the Week
Coping with Emotions While Investing
Business
Health Inspectors Shut Down Little Girl’s Lemonade Stand
Warren Buffett’s Billionaire Donors Club: By the Numbers
Bank customers soon will see higher fees and no free checking
Economy
Degreed And Jobless, For-Profit College Graduate Turns To Stripping
Entertainment Money News
The Other Guys Beats Inception
Athletes turned entrepreneurs take business world by storm
Personal Finance (Yakezie and PF blogger Friends)
40 ways to save on almost anything
3 Amazing Career Tips (Barbara Friedberg) Can quitting make you a winner?
You Can Afford That Baby (Joe Plemon) 10 Money Saving Tips
Small Cap Stocks: High Return and Violatility (Squirrelers) Do you need small cap exposure?
How Mutual Funds Rip You Off* (Invest It Wisely) Fees and Charges Decimate Returns
Blogher 10 (Bucksome Boomer) Read about her adventures at Blog Her
Coping with Emotions While Investing* (DIY Investor) – Absolute must read for investors
Watson Round Up ( Joe Taxpayer) – Lists some absolutely fabulous reads plus mine!
Hi Shawn, That China info is really fascinating; It's got to make you wonder the impact of 15% annual growth is over the long term. Obviously, the housing inflation is one byproduct of the tremendous economic growth. WRT to your question, our economy is in an unusual state. I'm not sure what the biggest threat is, inflation? deflation? unemployment? rising taxes? I better stop here, I'm making myself depressed!
My recent post REDUCE STRESS Get Rid of Dysfunctional Money Behaviors – Part 4
Just like in the US economy, we have to wonder how much of that annualized growth was based on speculative appreciation. Such growth can quickly evaporate, as we have unfortunately seen.
Our economy is certainly on an unclear path. While there are signs of recovery, the recovery is anemic. Any of the things that you mention could be the tipping point. Regards, Shawn
Shawn,
Thanks for telling us about the crazy housing market in China. The same government making ridiculous housing loans is the one who buys our (United States) government bonds that I am certain we will never be able to repay. I realize that China has a stake in the American dollar (because we import so many goods to them), but their fiscal policies don't seem too wise to me. But then again, I am just a simple blogger, not an economist.
About our biggest economic threat…I believe the unsustainable national debt will be our undoing. We could print more money to pay it, but that would produce hyperinflation. Or we could simply not pay it and other nations would realize that we are broke and quit investing in American products, which would devalue the dollar (high supply and low demand). I had better quit..I, like, bfinance, am getting depressed.
My recent post Create Your “No” Policies Before You Need Them
Hey Joe,
The Chinese government alters their currency so much, it hard to know what is really going on with their limited disclosure.
Debt, that's a really big one! I guess with $13 trillion in debt and no sign of slowing down, we could really be in for a ride. If only we stop looking to government to solve our problems, the perhaps the government would stop going into debt in efforts to be our provider.
Regards,
Shawn
China is still pegging to the dollar and engaging in mercantilist policies, and many people invest in homes because the stock markets are not so well developed in China. Housing is something that everyone understands, and since many people have become rich off of real estate in the past, people still see it as a solid investment.
My recent post Punished by Akismet- Am I a Spammer What Do I Do
Hey Kevin,
Regulators in China passed laws that made it more difficult to speculate in the stock market because they were concerned about a stock bubble. Fast forward, and the speculators have moved on to real estate just like you said.
Housing should be very solid, but anyone can become overleveraged, which is the current concern. When will we ever learn?
Our biggest threat is our national debt. I read an article that described our collective, national approach to debt as one big ponzi scheme. There will be a price to pay, and it may not be pleasant. Let's hope things take a better turn, through some good decisions going forward, for our sake.
My recent post The 600-000 Dog
I definitely think you and Joe are onto something with this ridiculous debt load that we have being a threat. Although I have never heard of it referred to as a ponzi scheme, I certainly understand the analogy. That's good stuff squirrlers.
I do hope we will make a turn towards fiscal responsibility. As alluded to previously, I think we need a philosophical change on the role of government in our society. Thanks for your contribution to the discussion.