Financial News

[Balta1701]

The Post calls Bubble on China.

With property prices soaring in key cities, many investors and bankers worry that China has the next great real estate bubble waiting to be popped.

 

The Chinese government is worried, too. On Sunday, the nation's cabinet, citing "excessively rising house prices" in some cities, said it will monitor capital flows to "stop overseas speculative funds from jeopardizing China's property market." It also said that any Chinese family buying a second home must make a down payment of at least 40 percent.

 

For investors, many of the usual bubble warning signs are flashing. Fueled by low interest rates, prices in Shanghai and Beijing doubled in less than four years, then doubled again. Most Chinese home buyers expect that today's high prices will climb even higher tomorrow, so they are stretching to pay prices at the edge of their means or beyond. Brokers say it is common for buyers to falsely inflate income statements for bank loans.

 

Some economists and bankers fear that they have read this script before. In Japan at the end of the 1980s and in the United States in 2008, residential real estate bubbles ended in big crashes, battered banks and slow recoveries. With China acting as a key engine of global growth, a bursting of the Chinese real estate bubble could be a pop heard round the world.

 

"It's definitely a bubble," said Beijing real estate broker Xu Xiangdong, a 24-year-old former nightclub cashier. "But it won't break because there is lots of support beneath the bubble because buying power is really strong."

 

Many economists say there are good reasons for such optimism. Rapid economic growth, rising family incomes, continued migration to the cities, pent-up demand for housing, and a banking system much less exposed to residential mortgages than banks in the United States or Japan could protect China, they say, from a real estate meltdown for years to come.

 

If not, then development firms and Chinese banks might teeter and construction could slow down, tossing millions of Chinese people out of work. A real estate bust might also shake confidence here just when the world is looking to Chinese consumers to start spending more to bring global trade into better balance.

[kapkomet]

If China sneezes, the rest of the world gets really sick. Or something.

[southsider2k5]

The Post calls Bubble on China.

 

Pfft. I was way out in front of that. As I said before it all depends on the dollar.

[Balta1701]

If China sneezes, the rest of the world gets really sick. Or something.

It's sort of a provocative point. Basically in my lifetime, can you name any economic sector that has undergone massive growth which hasn't been followed by the bursting of a bubble in that sector? Internet, banking, housing, even foreign countries such as SE Asia, energy/commodities, etc. Isn't the expectation now that China grows at 8% a year? Isn't that typically exactly what a bubble looks like?

[southsider2k5]

It's sort of a provocative point. Basically in my lifetime, can you name any economic sector that has undergone massive growth which hasn't been followed by the bursting of a bubble in that sector? Internet, banking, housing, even foreign countries such as SE Asia, energy/commodities, etc. Isn't the expectation now that China grows at 8% a year? Isn't that typically exactly what a bubble looks like?

 

It sure is. And the longer it is artificially propped up, the worst the burst is.

[Balta1701]

It sure is. And the longer it is artificially propped up, the worst the burst is.

Even a small bust in China could be quite awful for the world, because everyone seems to believe there'll be a huge political feedback against the Party

[southsider2k5]

Even a small bust in China could be quite awful for the world, because everyone seems to believe there'll be a huge political feedback against the Party

 

I made the prediction earlier that we would be looking at something worse than the Soviet Union, I stand by that.

[Cknolls]

It's sort of a provocative point. Basically in my lifetime, can you name any economic sector that has undergone massive growth which hasn't been followed by the bursting of a bubble in that sector? Internet, banking, housing, even foreign countries such as SE Asia, energy/commodities, etc. Isn't the expectation now that China grows at 8% a year? Isn't that typically exactly what a bubble looks like?

 

Gov't .

[Cknolls]

I made the prediction earlier that we would be looking at something worse than the Soviet Union, I stand by that.

 

 

^^^^^^. It's not just their property, its the yuan, the way thet count GDP, etc...

[Balta1701]

That is the sound of billions of dollars circling the drain...

 

http://abcnews.go.com/Business/wireStory?id=9527995

Link

Associated Press ran a "stimulus watch" piece in which it discusses a test that seemed designed to show that the stimulus failed. According to the article, the test involved comparing the changes in unemployment rates in counties that received the most amount of stimulus spending for road construction with those that received the least. The study found no differences in the movements in unemployment in these counties.

 

In fact, it would be surprising if the tests found anything else. The road spending in the stimulus in 2009 amounted to $20 billion, about one fifteenth of the total stimulus. Assuming that this spending had a multiplier effect of 1.5, this means that it would have generated $30 billion of additional growth. That is equal to 0.2 percent of GDP. If its effect on employment was comparable to its impact on GDP, we would expect that a county with the average spending would see its employment rate increase by 0.2 percent or approximately 0.12 percentage points of the civilian population. There would be a comparable decline in its unemployment rate. This would be undetectable in any measure of county level unemployment, since random sources of fluctuation would dwarf this change, making it undetectable.

 

In principle, counties that had two or three times this amount of stimulus would have a proportionately larger effect. However, the timing of the appropriation would not coincide with the spending. Some counties that received large appropriations in 2009 may not actually begin much spending on projects until 2010. Unless the study effectively controlled for spending rates, rather than just reporting appropriations, it would not be testing the relationship between stimulus spending and unemployment. (The multiplier effect would also take time to work through.)

 

The other major problem with this approach is that many counties across the country are quite small. If they received large amounts of stimulus spending relative to their size, much of the employment would spill over to neighboring counties. In such cases, even if a substantial amount of employment was generated relative to the county's size, the impact on unemployment could be felt as much in neighboring counties as in the county that received the stimulus.

 

Examining unemployment rates by county virtually guaranteed that the study would find no effect of the stimulus. It is almost inconceivable that it would have found a measurable decline in the unemployment rate. A more serious study would have looked at the changes in payroll employment by county and, in particular, employment in construction.

[jasonxctf]

WASHINGTON (AP) -- The Federal Reserve made a record profit of $46.1 billion last year, reflecting money made off its extraordinary efforts to rescue the country from the worst economic and financial crisis since the 1930s, the central bank announced Tuesday.

 

The windfall gets turned over to the Treasury Department.

 

It marks the biggest profit on record dating back to 1914 when the Fed was created. The previous record profit -- of $34.6 billion -- was registered in 2007. In 2008, the Fed reported a profit of $31.7 billion.

 

The Fed says the bigger profit was primarily due to increased income from the securities it held last year.

 

Such income went up as the Fed's holdings of securities mushroomed.

 

The Fed launched several securities-buying programs last year to help revive the economy. Its goal is to drive down rates on mortgages and other consumer debt.

 

Under one program that ended last year, the Fed snapped up $300 billion worth of government debt. Under another program, the Fed is on track to buy $1.25 trillion in mortgage securities from Fannie Mae and Freddie Mac, and an additional $175 billion in debt issued by the mortgage giants. Those programs have boosted the value of securities held by the Fed.

 

The Fed faces a risk, however. The Fed could lose money if the central bank had to sell those securities and their prices were to fall. The Fed might need to sell the securities to sop up some of the unprecendented amount of money pumped into the economy during the crisis.

 

The Fed is funded from the interest earned on it vast portfolio of securities. It is not funded by Congress.

 

After covering its expenses, the Fed gives what is left over to the Treasury Department.

[Balta1701]

I think in this case, the Fed is reporting "Income" in the same way that G.S. and many others are. It gets recorded as paper income, but it's not exactly sustainable and it only counts as income because the Fed itself is propping up the prices of the things it owns.

[NorthSideSox72]

I think in this case, the Fed is reporting "Income" in the same way that G.S. and many others are. It gets recorded as paper income, but it's not exactly sustainable and it only counts as income because the Fed itself is propping up the prices of the things it owns.

Its not sustainable, you are right there. But it wasn't meant to be. And you are wrong on the propped prices, because that's not income. Its unrealized gain, which is an increase in asset value. Not the same.

 

[southsider2k5]

Link

 

I was waiting for you to attack this article. At the end of the day, this whole thing just proved one thing. You can't measure jobs saved. Thanks for that.

[Balta1701]

I was waiting for you to attack this article. At the end of the day, this whole thing just proved one thing. You can't measure jobs saved. Thanks for that.

Um, you directly contradict the article's final statement.

Examining unemployment rates by county virtually guaranteed that the study would find no effect of the stimulus. It is almost inconceivable that it would have found a measurable decline in the unemployment rate. A more serious study would have looked at the changes in payroll employment by county and, in particular, employment in construction.

Stating that a simple study seemingly not done intelligently failed appropriately measure something does not mean that the measurement is impossible.

[Cknolls]

Why are the airwaves silent about the $6 million bonuses paid out to the current heads of Fannie and Freddie? ......CASH!!!!

 

 

 

 

[jasonxctf]

Why are the airwaves silent about the $6 million bonuses paid out to the current heads of Fannie and Freddie? ......CASH!!!!

 

because all things considered, $6 million is chump change.

 

Hell, Peavy will get that for 10 starts this year.

[kapkomet]

I was waiting for you to attack this article. At the end of the day, this whole thing just proved one thing. You can't measure jobs saved. Thanks for that.

 

Bwwwwaaaaaaaaaahahahahahahahaaaaaa....

 

You can't count jobs created, Obama adminstration finally admits

[Balta1701]

Bwwwwaaaaaaaaaahahahahahahahaaaaaa....

 

You can't count jobs created, Obama adminstration finally admits

Republican Party platform item #47: from now on, the meaning of the word "Count" is considered identical to the word "Calculate".

[kapkomet]

Republican Party platform item #47: from now on, the meaning of the word "Count" is considered identical to the word "Calculate".

 

 

Whatever, Mr. Semantics. It means the same thing in regards to this, but that's fine, your post illustrates that the Democrats can't be wrong and the GOP is always wrong. We get it. Just like Tex's post in the other thread. Poor victims.

[Balta1701]

Whatever, Mr. Semantics. It means the same thing in regards to this, but that's fine, your post illustrates that the Democrats can't be wrong and the GOP is always wrong. We get it. Just like Tex's post in the other thread. Poor victims.

I never said they were calculating it correctly. Your side continues to assert that it's impossible to gain any information about it, or that we should ignore any means of calculation based on whether or not you like it, not whether or not there's anything interesting or useful about the math.

[Balta1701]

Just to note one more time...the response I gave to that article was to give issues with the underlying math. Your side's response has not been to either defend the original math or to challenge the math I presented...it's just to cry about how evil those Democratic attacks are. Of course they are! When you decide that you don't have to defend your case at all because everyone's against you so you don't have to think things through....well, we've tried that last decade, and it didn't work too well.

[kapkomet]

I never said they were calculating it correctly. Your side continues to assert that it's impossible to gain any information about it, or that we should ignore any means of calculation based on whether or not you like it, not whether or not there's anything interesting or useful about the math.

 

 

Yea, because it's true. You CANNOT calculate it. But they kept spreading it around like some glorified meaningful number, and you all want to spout off how the stimulus is doing its job, when it's not. The Democrats constantly create this strawman argument about how they are going to "fix jobs" and present some BS number to say, "see, we're fixing it" or "it would have been SOOOOOOOO much worse"... when they admit that it's all BS... where's the retraction? Where's the jobs? "Our side" has called BS on this from day one and now the White House "quietly" rejects the whole notion. Yea... ok.

[southsider2k5]

I never said they were calculating it correctly. Your side continues to assert that it's impossible to gain any information about it, or that we should ignore any means of calculation based on whether or not you like it, not whether or not there's anything interesting or useful about the math.

 

Accurate information. Which Obama agrees with. You can make up any numbers you like, which is exactly what is happening. Its hard to argue with something that is made up on the spot.

[Balta1701]

Yea, because it's true. You CANNOT calculate it. But they kept spreading it around like some glorified meaningful number, and you all want to spout off how the stimulus is doing its job, when it's not. The Democrats constantly create this strawman argument about how they are going to "fix jobs" and present some BS number to say, "see, we're fixing it" or "it would have been SOOOOOOOO much worse"... when they admit that it's all BS... where's the retraction? Where's the jobs? "Our side" has called BS on this from day one and now the White House "quietly" rejects the whole notion. Yea... ok.

First of all, it's a fun game your side gets to play. Water down the stimulus to be less effective by getting 60% of it as tax cuts, and then express how appalled you are that it wasn't as effective as it could have been.

 

Then at the same time, the economy at least stops its free-fall and settles into a hover, the pace of job loss slows dramatically, interest rates DO NOT rise like they would if the government was doing too much borrowing, and yet you insist that the stimulus somehow is doing nothing.

 

You may not like them, and there's certainly going to be debate about which model is correct, but to bury your head in the sand and shout "LALALA I can't hear you" every time someone shows math that has been done by economists for years is just embarrassing. But I guess that's how your side can come up with the idea that the correct response to this collapse is some combination of tax cuts and a balanced budget amendment.