Monday, April 04, 2005

Doomsday Scenario From MarketWatch: How Oil, Housing, and China Could all Crash

From MarketWatch: Rate hikes may create 'perfect storm': How oil, housing, and China could all crash

"As Europe flounders in its self-inflicted bowl of economic soup, and Japan muddles along, China continues to outpace them all, fed by still relatively low interest rates, and international capital searching for growth.
But, even that, will come to an end, at some point, especially if the Federal Reserve raises interest rates further. It's difficult to predict when that magic rate will be hit. But, for those who believe that China's economy addicted to cheap money, the withdrawal syndrome will be painful when it happens."

"According to Intelligence service Chinese "debt is extremely vulnerable to interest rate hikes. As rates rise, that debt will become impossible to maintain, and China will face the beginnings of a financial crisis. Given the makeup of the Chinese financial system, such a development is unavoidable. The only questions regarding the crisis to come are time frame and severity."

"Assuming that the Chinese economy hits what is an inevitable bump in the road, that would mean that somewhere later this year, perhaps in July or August, the traditional time for financial markets to start stumbling and churning, we could be in for another Asian meltdown, as in 1997's Thai Bhat debacle.
That could mean that by October, the usual bad month in the markets, things could be fully underway."

Read more

China Net Investor: I personally don't like doomsday scenarios. ;-)


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