With the Olympics winding up, it is about time for the bill for the events to come due. This usually results in the host country looking at a huge mountain of new debt. The Olympics actually triggered an economic crisis in Greece and Brazil this century. Considering that, I wonder if it will be the final tipping point to send China down their inevitable debt spiral.
For those who don't know, China is looking at a massive housing bubble that is much bigger than the one in 2008. 70-80% of Chinese wealth is tied up in housing, which means a crash will be catastrophic. They also have a huge energy problem that includes separate issues around cost, supply and demand.
To cap that off, Communist economies have one bad option to deal with inflation which is price control. Either they are going to raise prices which will mean Chinese workers can't afford the goods they are making, or they can cap prices which will lead to massive shortages. The Soviet Union ran into this problem in the late 60's through the 70's and they never recovered. It is the main reason the country collapsed in the 80's.
I've been following the housing issue for a while, and it is one of the craziest things I have ever seen. They are literally sitting on enough apartments to house nearly a billion people. Whole cities were built out of nothing but speculation. However, as the country modernized and developed a larger middle class, birth rates slowed and the cost of housing out-paced wages, so now there is a dual problem of housing being unaffordable and there is too much inventory. The country is sitting on entire ghost towns that were recently built, incredibly modern and no one living there. Most likely, no one ever will.
For those who are interested in looking into this, the poster child is a company called Evergrande. Largest Real Estate company in the world that is sitting on a crazy amount of debt. When they fall a ton of other companies and banks are going to go with them. China is currently forcing other companies to buy up Evergrande's bad debt, but that is just spreading the problem and making more companies vulnerable.
I am just curious what anyone might think this will mean for the US. Will this be an opportunity for the US to remove China as their main rival and shift manufacturing back to the US or to some other more US friendly nation, or are we in too deep and when China falls it is going to wreck us as well.
For those who are interested, here is a brief overview of the Real Estate problem.
For those who don't know, China is looking at a massive housing bubble that is much bigger than the one in 2008. 70-80% of Chinese wealth is tied up in housing, which means a crash will be catastrophic. They also have a huge energy problem that includes separate issues around cost, supply and demand.
To cap that off, Communist economies have one bad option to deal with inflation which is price control. Either they are going to raise prices which will mean Chinese workers can't afford the goods they are making, or they can cap prices which will lead to massive shortages. The Soviet Union ran into this problem in the late 60's through the 70's and they never recovered. It is the main reason the country collapsed in the 80's.
I've been following the housing issue for a while, and it is one of the craziest things I have ever seen. They are literally sitting on enough apartments to house nearly a billion people. Whole cities were built out of nothing but speculation. However, as the country modernized and developed a larger middle class, birth rates slowed and the cost of housing out-paced wages, so now there is a dual problem of housing being unaffordable and there is too much inventory. The country is sitting on entire ghost towns that were recently built, incredibly modern and no one living there. Most likely, no one ever will.
For those who are interested in looking into this, the poster child is a company called Evergrande. Largest Real Estate company in the world that is sitting on a crazy amount of debt. When they fall a ton of other companies and banks are going to go with them. China is currently forcing other companies to buy up Evergrande's bad debt, but that is just spreading the problem and making more companies vulnerable.
I am just curious what anyone might think this will mean for the US. Will this be an opportunity for the US to remove China as their main rival and shift manufacturing back to the US or to some other more US friendly nation, or are we in too deep and when China falls it is going to wreck us as well.
For those who are interested, here is a brief overview of the Real Estate problem.
