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  • From: Don Bowen <don.bowen AT earthlink.net>
  • To: homestead AT lists.ibiblio.org
  • Subject: [Homestead] Of housing bubbles and China.
  • Date: Mon, 30 May 2005 20:55:56 -0700

The recent Paul Krugman column had an interesting twist on the housing bubble. He is not sure of it himself but some are saying that Greenspan encouraged the housing bubble to keep the economy going after the stock bubble burst. The housing bubble was to go only as long as needed until the economy picked up but the bubble continues to grow beyond expectations while the economy is still limping. Signs of the bubble bursting are starting to show in very high priced markets in California and Florida.

The column last week had another interesting twist in that China is in some ways responsible for the low interest rates. Much of our debt is being picked up by China largely with what is in effect our trade surplus with China. This surplus cash is holding interest rates down in the face of a steadily increasing prime rate. If China were to hold back on its bond purchases the bubble would burst and maybe take down the whole economy. One figure I recently heard is that 50% of the jobs in California are related to the housing industry.

Don Bowen Awl Knotted Up

My travel journal
http://www.braingarage.com/Dons/Travels/journal/Journal.html

My present location is the star on the map in the link below
http://www.mapquest.com/maps/map.adp?latlongtype=decimal&latitude=33.506083&longitude=-117.099019





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