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Generational Dynamics Web Log for 7-Jul-2010
7-Jul-10 News -- Rogoff: China's property market near 'collapse'

Web Log - July, 2010

7-Jul-10 News -- Rogoff: China's property market near 'collapse'

Why is the Gulf cleanup taking so long?

Kenneth Rogoff: China property market is beginning to collapse

Harvard University professor and former IMF chief economist Kenneth Rogoff has told Bloomberg news that China's property market is beginning a "collapse" that will hit the nation's banking system.

His statement comes as global investment banking firm Standard Chartered Plc forecasts a drop in real estate prices as much as 30% in big cities, by the end of the year. According to the article, several economists have lowered their gross domestic product forecasts for China.

This news comes as the Shanghai composite index fell 6.7% last week, to the lowest close since March of last year, according to Bloomberg.

These are just more examples of the apparent worldwide decline in economies around the world that we've been reporting on. The decline began in May, as we wrote in "7-Jun-10 News -- Globally, May was a month of ominous events," and one economic indicator after another has been going downward. We appear to be headed once again to a worldwide freeze in trade and transportation, just as happened at the end of 2008.

Incidentally, the NY Times had a lengthy piece on Kenneth Rogoff and his collaborator, Carmen M. Reinhart. The two of them have studied and catalogued economic crises and collapse for the last 800 years.

More evidence of the worldwide slowdown is that manufacturing slowed around the world in June, according to the Wall Street Journal, which published this graphic:

Global manufacturing slowdown in June <font face=Arial size=-2>(Source: WSJ)</font>

Global manufacturing slowdown in June (Source: WSJ)

Ambrose Evans-Pritchard, writing in the Telegraph, says that, "With the US trapped in depression, this really is starting to feel like 1932." In the article, he quotes on statistic after another to show that we're headed in the wrong depression.

From the point of view of Generational Dynamics, the financial crisis has barely begun, here or in China. Analysts are hoping that a 30% plunge in real estate prices in China will have little effect on the economy, but they always say things like that. A 30% plunge is enormous, and will have an extremely deflationary effect on China and, in fact, the world.

As I've said many times, from the point of view of Generational Dynamics, the situation hasn't changed. The stock market has been historically overpriced by substantial amounts since 1995, and by the Law of Mean Reversion, will have to fall sharply and stay down there for a comparable length of time (15 years). This is a mathematical certainty. (See "How to compute the 'real value' of the stock market.")

Why is the Gulf cleanup taking so long?

I'm very puzzled by this. President Obama's opposition have been accusing him of putting politics ahead of the cleanup. In particular, I keep hearing them say that George Bush waived the Jones Act after Katrina, while Obama still haven't waived the Jones Act. Waiving the Jones act would allow many skimmers from foreign countries to remove the oil before it reaches shore. I hear that Obama is refusing to waive it because of opposition by labor unions. I'm still waiting to hear a satisfactory explanation from the White House.

One thing is for sure: If the Republicans win back either the Senate or the House in the fall, then expect lengthy hearings next year, grilling Obama Administration officials for being incompetent.

One foreign skimmer is being tested right now. A massive Korean super-tanker has been modified to skim oil from the surface in the Gulf. Once deployed, the ship would suck up more than 20 million gallons of oil perday.

Here's an interesting Associated Press video describing the super-tanker, which has been named "A Whale":

Additional links

South Korea and the U.S. are planning massive joint military exercises in the West Sea of Korea, once the U.N. Security council comes to a decision in response to North Korea's sinking of the South Korean Navy warship Cheonan. The Chinese and the North Koreans are objecting. Chosun

The Dalai Lama celebrated his 75'th birthday on Tuesday, but the Chinese claim that they aren't keeping track of it. Reuters

Kashmir violence is escalating, as police opened fire on demonstrators in different parts of Srinagar, the heart of Indian-controlled Kashmir. Four civilians were killed, and 70 others injured. India is considering deploying the army. The Hindu

Queen Elizabeth, the world's longest reigning monarch, addressed the United Nations General Assembly on Tuesday, for the first time since 1957. "I have . . . witnessed great change, much of it for the better, particularly in science and technology, and in social attitudes," she said. "Remarkably, many of these sweeping advances have come about not because of governments, committee resolutions, or central directives -- although all these have played a part -- but instead because millions of people around the world have wanted them. For the United Nations, these subtle yet significant changes in people's approach to leadership and power might have foreshadowed failure and demise." Sounds like she's familiar with Generational Dynamics. Washington Post

Computer software has deciphered the ancient language of Ugaritic. The technology might be used to improve translation of modern languages. MIT

Are your appliances spying on you? Ordinary household appliances, from the microwave oven to the television set, are sometimes "smart" appliances that can send information about you to central databases. The House is working on legislation that would protect the privacy of appliance owners. Fierce Government IT

(Comments: For reader comments, questions and discussion, see the 7-Jul-10 News -- Rogoff: China's property market near 'collapse' thread of the Generational Dynamics forum. Comments may be posted anonymously.) (7-Jul-2010) Permanent Link
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Generational Dynamics Web Log for 7-Jul-2010 7-Jul-10 News -- Rogoff: China's property market near 'collapse'

Kenneth Rogoff: China property market is beginning to collapse

Why is the Gulf cleanup taking so long?

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Generational Dynamics Web Log for 7-Jul-2010
7-Jul-10 News -- Rogoff: China's property market near 'collapse'