According to the official data, China’s GDP has tripled since 2000, with annual growth rates ranging from 8 to 13 percent, reaching a level of $4.9 trillion in 2009. While some investors are reluctant to believe those numbers, one thing is for sure: China produced and saved while America consumed and borrowed. In 2009, the Chinese government approved a $586 billion stimulus package, equivalent to 14 percentage points of GDP. Meanwhile, the central bank has been buying dollars to prevent the yuan strengthening and to support the exports, driving foreign-exchange reserves to a world-record $2.4 trillion. Working against a market-driven system, the communist regime has exercised its command-and-control power over the banking system by fixing both the deposit and lending rates. Moreover, many experts believe that the Chinese authorities are mainly responsible for the current real-estate bubble. Continue reading ‘The Chinese Communist Bubble’
Tag Archive for 'Asset Bubble'
Despite hitting the 12-year low in March 2009 at 666 points, S&P500 index managed to outperform gold’s annual return. Even though, the precious metal has been one of the hottest investment topics in 2009, the S&P 500 finished the year up 26% versus 25% for gold. As of December 31 2009, gold price closed at $1,095, rising for an unprecedented ninth year in a row after traders and central banks joined investors who turned to gold for price performance and protection. In 2009, gold price advanced about $220, a sum eclipsed in recent history only by 1979′s $286 surge. On a percentage basis gold rose 25 percent from its 2008 close, short of 2007′s 31 percent rise. Continue reading ‘Golden Fever’
This year, the conventional wisdom within the financial community is that the booming Chinese economy is going to pull the global economy out of recession. While the world is fighting The Great Recession, this unparallel economic system – a weird mix of communism and capitalism, records an annual GDP growth of 8.9 percent in the third quarter. During a trip to Beijing, Treasury Secretary Tim Geithner said that “China will need a very substantial shift from external to domestic demand, from an investment and export-intensive growth to growth led by consumption”. Allow me to show some skepticism when dealing with the Chinese economic miracle. Continue reading ‘China – A Financial Time Bomb?’
The Black Gold Rush
The Asian crisis of 1997, the failure of Long Term Capital Management and Russia’s debt default in 1998 send the crude oil price under the $10 a barrel. Since the beginning of the century, the global demand grew by 3.9% per year, while oil supply struggled to keep pace with demand. There were few major changes in the global oil market (i.e., non-OPEC supply growth slowed, OPEC’s spare capacity shrank, and OECD inventories fell) that pushed the oil price at $100 a barrel, in January 2008. Amazingly, at the beginning of July 2008, oil reached a record high of $147 a barrel. During 2008, the price of energy rose nearly 50%, than it collapsed by 74% during the fourth quarter. Trying to elucidate the meteoric trajectory, traders, analysts, and media talking heads came up with an endless chain of esoteric explanations. Continue reading ‘The Black Gold Rush’