The Phaserl


Chinese Government Frets Out Loud About Property Bubble Taking Down the Economy

from Wolf Street:

China’s economic miracle is addicted to credit, no matter what the source, that was plowed into the ground to build no matter what, houses, high-speed rail lines, forests of skyscrapers, massive industrial overcapacity, entire ghost cities….

These activities created millions of jobs and propelled GDP forward at a phenomenal pace, even if it turned out that no one would ever need that plant, live in that unfinished apartment, move to a ghost city, or shop at the deserted mall. And there might never be enough passengers to allow one or the other high-speed rail line to service the debt that was incurred to fund it.

What’s left behind is a still growing and partially hidden mountain of debt – and the threat that this contrived economic activity, this malinvestment, funded by unsustainable credit growth can’t be, well, sustained forever. That moment when it can’t be sustained any longer, when the house of cards comes tumbling down, has become a threat so serious that the government is fretting about it out loud in the Chinese media.

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1 comment to Chinese Government Frets Out Loud About Property Bubble Taking Down the Economy

  • Johan

    These ghost citys weren’t built to propel GDP but is an investment of the future. Building today while’s it’s cheap because once the world market collapses things won’t be as cheap.

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