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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: CalculatedRisk who wrote (68590)8/22/2006 12:31:25 PM
From: bond_bubble  Read Replies (1) of 110194
 
The house prices have crashed about 50% in Australia:
smh.com.au

Yet, Australians are paying high price for Gas and the inflation is still highly positive (4+, i.e non-gasoline are also high in price)!! OfCOurse, Nouriel Roubini might think Australia is an exception. He thinks falling house price will pull down inflation. I think he is living in a fantasy world. Lot of the people are thinking US is the centre of world growth and so once US economy slows, inflation will stop rising. As Andy Xie quoted in his latest article, if the export market slows for China, the excess liquidity will continue to be absorbed by fixed investment in China (fixed invest. is currently bigger than export market)!! i.e ChinDia fixed investment marginal growth will easily make up for the marginal fall in imports by USA. At this point, I think, as Doug Noland said, only a systemic risk (i.e US defaulting on all the mortage bond held by ASians/world) can reverse inflation. Deflation will be CHOSEN. Australia is a clear evidence that interest rates rise, house prices crash and still you have inflation!! This is why, Central Banks choose credit deflation (i.e they do not print money at lower rates inspite of economic stress).
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