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buffalonate (53.69)

December 2011



Euro Pact Is Purely A Marketing Ploy.

December 12, 2011 – Comments (3)

The markets recently celebrated Europe's latest attempt to solve the debt crisis.  This caused a couple days of relief until people realized that the pact didn't go nearly far enough to solve the problem.  Basically the pact says that each country in the European Union has to keep its deficit under 3% of gdp.  To provide perspective for us it would mean we couldn't go over a $450 billion annual deficit.  That is a decent start to austerity but it doesn't go nearly far enough to end their crisis.  The pact also wouldn't even be enacted for 3 months.  The agreement also pushes up the timeline of the permanent bailout fund by a year.  The problem is that Italy and Spain have huge amounts of debt that will need to be sold in the next few months and that bailout fund will not be available to help yet.  That tells me that the next few months will get really ugly because there is not enough money available at the IMF or the EFSF to provide all the loans these two countries will need.  [more]



Chinese Real Estate Bubble Finally Crashes

December 07, 2011 – Comments (7)

I have been reading about the Chinese real estate bubble for at least a year now.  Time Magazine has had a couple of articles showing completely empty newly constructed cities.  They also explained how investing in real estate had become the national past time.  People invested all of their money in new real estate investments and it appears crap has finally hit the fan.  All of their money is tied up in apartments that they can't sell.  For 3 months in a row real estate prices have fallen.  They are now down more than 20% in the last 3 months.  Real estate prices had tripled in the last few years so it was just a matter of time before the bubble deflated.  Here is a video from Reuters explaining the problem.  The Chinese govt's answer to every problem is to build more stuff so it should be interesting to see how they respond to this crisis.  [more]

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