Quote:
Originally Posted by mce
Fact: much of the early to mid-term rise in US property markets was due to foreign (read: Chinese) investors
Fact: China's economy is slowing and China's government is cracking down on capital flight
This is the result
Do see the US housing market crashing soon? |
the housing market in US is already cooling down since february 2018.
but this time it is not a consequence of shit papers - it is a consequence of a unnaturally pumped up economy in a time when no pump up was necessary.
pumping up a market is always done with loans. that consumers takes this loans a low interest rate is required.
when this loans are spend, the economy will increase because of a higher demand on goods and a higher demand will lead to a higher production and more jobs.
sounds easy but the in the nature of this strategy a part of the following increase have to be used to pay those loans back.
if this is not the case, people have to loan more to keep up their life standard and with every new loan a part of the reached prosperity is going to pay back and pay interest.
a simple example would be that someone who makes 100 k per year get another 100 k loan every year with a 2% interest.
even when this guy have now 200 k in his hand his original income decreased from 100 k to 98 k because of the interest.
but he also have to pay back the loan with, letīs say 20.000. that means: after he spend this 100 k loan his buying power is decreasing from 100 to 78 k.
to get even back to the standard before the loand he have to loan 22 k and pays back only 20 k.
after doing this 20 year or so - the same person with an income of 100 k will have loans of 500 k what reduces his personal income to 90 k. he is overloaded with loans and will soon be unable to increase the loans when his personal limit is reached.
in such a situation the economy will decrease because the personal spendings of this guy
will not be the same as before because his budget is already 10% down to before because of the interest.
as soon as the economy suffers he might lose his job. but even if not the market will become worse for investors. they are usually the ones who give their money to banks
and banks give the loans. as soon as this investor wants his money back the banks canīt give more loans and the crisis is here.
if you look deeply in the numbers of the reagonomics of trump, you will find out that the rise of the debt is 120% from the rise of the economy.
with other words: only 83,33 % of this money flew back into the economy and 17,66% of this lend money disappeared. but on longer term the prosperity of our 100 k guy is lower than before.
now replace this 100 k guy with the US government and you see the problem.
trump pushed money in the economy when it was time to pay back.
and that again means that there is no fast solution to get out of the next crisis because
in the last one it was possible to lower interest from 8 % to zero. now this lever effect is only 2,5 to zero (and if the FED would do what trump wants even less).
on top of that trump has weakened the power and economy of the biggest US foreign creditor. so he has diligently sawn off the branch of the tree on which the american economy sits.
so if you ask if the will be a crisis: yes - and not only housing.
car industry is already affected more than the housing market. and if you search a bit around here this is what i was predicting already 6 month after trump went to oval office.
the rules of economy are fixed rules. nobody can break them and who thinks he can is a dumb.