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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (109655)	2/19/2011 10:48:53 PM
From: GST	5 Recommendations Read Replies (1) \| Respond to of 110194

Hi Russ -- I don't see why the natural progression away from cheap migrant labor would have much to do with the bursting of the real estate bubble in China. The move away from migrant workers is smart and timely for China -- it shows they know what they are doing and moving forward economically. For us, the impact will be higher prices -- but then we lived in a lala land where people thought we should be worried about 'deflation' -- in my view an ignorant point of view if ever there was one. Now we have the spectre of a property bubble borne of excess money supply in both China and the US, and the grotesque current account deficit of the USA. This where I see a world of hurt emerging. I see no way to finance the current account deficit in future years -- it will be a nightmare of a falling dollar, higher rates and soaring inflation in a stagnant economy. US should be bracing for a storm of inflation and a dearth of cheap credit, cheap oil and cheap labor to cushion the impact. Will this tank Chinese real estate? I do not know. We it tank Chinese banking? I do not know. But if I had to bet on who will make it through the coming storm, I would observe that the US is already listing badly to port and taking on water in a way that nobody should be lulled into thinking is sustainable. On the Chinese side, I see a complex adjustment away from a cheap labor export model and towards a slightly more inward model with slower growth -- not sure that I would want to call the outcome of that transition just yet.