Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Credit Crisis Bailouts Continue; China Takes Aggressive Action on Economy

Economics / China Economy Oct 28, 2008 - 03:26 PM GMT

By: Money_and_Markets

Economics Best Financial Markets Analysis ArticleTony Sagami writes: Alan Greenspan and Ben Bernanke will go down in history as two of the most incompetent Federal Reserve chairmen our country has ever had. Like Mr. Magoo, they blindly drove the stock market and then the real estate market into some of the biggest bubbles our world has ever seen.


Now, however, they are dead right about just how bad the situation has gotten. So you should believe every word of warning that is coming out of their mouths. And let me tell you, these are some of the most dire warnings you will ever hear from a central banker.

Last week, Greenspan told Congress:

“Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment.”

He also called the credit crisis a “once in a century credit tsunami” and said “[it is] much broader than anything I could have imagined.”

Meanwhile, Federal Reserve Chairman Ben Bernanke told the House Budget Committee that he expects the economy to stay weak for a long time and urged Congress to consider a new stimulus package. His words:

“With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate.”

House Speaker Nancy Pelosi loved the idea and pledged her support to spend up to another $150 billion saying:

“I call on President Bush and congressional Republicans to once again heed Chairman Bernanke's advice and as they did in January, work with Democrats in Congress to enact a targeted, timely and fiscally responsible economic recovery and job creation package.”

That is on top of the previous $170 billion plan, which gave out approximately $600 per person in a household.

Nancy Pelosi is in favor of yet another stimulus package.
Nancy Pelosi is in favor of yet another stimulus package.

And don't forget about the $700 billion bailout … $85 billion rescue of AIG … and $25 billion Chrysler corporate care package, either.

Our politicians aren't the only ones throwing billions at the problem:

  • South Korea has given out $100 billion.
  • Russia has spent $120 billion.
  • Germany has earmarked $65 billion.
  • And the United Kingdom has pledged $50 billion so far.

Those are just some of the governments throwing massive amounts of money at failing institutions.

China, however, hasn't spent a dime bailing out its banks. Instead, it is ensuring future economic growth!

Chinese banks own a very minor amount of our toxic mortgage bonds.

It's not because the Chinese are more brilliant than the rest of the world. It's because the government severely limited how much money Chinese banks and corporations could invest in non-Chinese securities.

Because of those policies, China doesn't have to worry as much about its banks. Instead, it can focus on keeping its economy chugging along.

Heck, the country is taking very aggressive actions to keep its economy from being affected by what is happening in the U.S. Take a look:

China will lower down payments and cut interest rates on mortgages starting next month. Effective November 1, the down payment requirement for those buying their first home will be lowered from 30% to 20%. Potential home buyers will also be able to get mortgage rates that are 70% of the country's key benchmark rate rather than the current 85%.

It also eliminated the transaction tax and value-added tax on home sales. That's another step to keep real estate markets moving. And sure enough, Chinese real estate stocks jumped on the news. China Vanke, China's largest real estate developer, gained 4.4%, China Overseas Land jumped 8.1%, and Poly Real Estate Group rose 6.4%.

China will refund value-added tax paid by exporters of labor-intensive industries like textiles, clothing, furniture, electronics, plastics, and toys from 13% to 14%. In all, 3,486 types of products — about one-quarter of exports — will be covered.

It pledged to increase spending of big bucks infrastructure projects like roads, airports, nuclear power plants and hydro power stations.

And remember, unlike our economy, which is quickly sinking into a recession, China is still growing at a pace that makes the rest of the world jealous.

Much of Chinas growth is coming from domestic demand.
Much of China's growth is coming from domestic demand.

The National Bureau of Statistics reported that China's gross domestic product expanded 9.9% in the first nine months of 2008!

Much of that economic strength was from strong domestic demand and from Asian neighbors, too.

Retail sales in China rose 23.2% in September, and by 22% in the first three quarters of the year. Trade with India has increased by 54.9% so far this year.

Yet despite those extremely strong fundamentals, the Chinese stock market has been punished for the credit problems in our country!

Fair or not, Chinese stocks are down.

While I didn't think that China (and the rest of Asia) could go completely unscathed while the U.S. market tanked, I did believe that its strong economy would limit the damage.

Investors all over the globe, however, are simply selling their Asian holdings regardless of the underlying fundamentals.

In short, Chinese stocks are being treated like U.S. stocks. So what should you do?

If you're a long-term investor and can stomach the volatility, I suggest holding on because Chinese stocks will recover and ultimately move much higher.

As I just explained, the Chinese economy remains strong and the Chinese government is taking the right steps to keep things rolling.

It may, however, be a very rough ride so be prepared.

And if you're more of an active short-term trader, you'll have plenty of opportunity to sell on rallies and buy on dips. For the immediate future, I think that will be the best way to make money in this challenging market.

Best wishes,

Tony

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules