Why The Fate Of The World Economy Is In The Hands Of China’s Housing Bubble

A couple of research reports released overnight by Deutsche Bank and Bank of America, respectively, come to a sobering conclusion: the fate of the global economy may be in the hands of the Chinese housing bubble. As a reminder, China is a serial bubble inflator courtesy of a closed (capital account) economy, and nearly $30 trillion in bank deposits which slosh from one asset class to another, be it the stock market, bitcoin, commodities, farm animals or – most often – housing.
As all China watchers knows, and as DB confirms, the root cause of this bubble is “excessively loose monetary policy set to achieve growth above its potential.” Furthermore, while the most recent housing bubble, the third in a row, appears to have recently popped as annual home price growth declined in January for the first time after 19 months of continuous acceleration, the question is how hard will Beijing push to prevent the same hard landing that took place in late 2014 when the bursting of the second housing bubble led to substantial slowdown in China, and sent rippled effects around the globe.

This post was published at Zero Hedge on Mar 17, 2017.