Shifting debt doesn’t solve problems says Michael Pettis. Someone has to take the loss.
With a major property bust underway, China will not be a global leader in growth.
This article was originally published by Mish Talk.
Bailouts will not help explains Michael Pettis at China Financial Markets.
Shifting Debt Doesn’t Solve Problems
Payback in the US
Payback in the US for extreme property valuations will come in the form of much lower growth going forward.
Existing-Home Sales Fall 5.9 Percent, Down Sixth Consecutive Month
Yesterday, I noted Existing-Home Sales Fall 5.9 Percent, Down Sixth Consecutive Month.
Key Existing-Home Sales Points
The details are instructive.
There were 125 consecutive months of year-over-year increases, the longest-running streak on record.
Case Shiller Home Prices
Housing Starts Drop 9.6 Percent, Now Below Pre-Pandemic Level, Led By Single Family
Also note Housing Starts Drop 9.6 Percent, Now Below Pre-Pandemic Level, Led By Single Family.
Home prices will either crash or bleed slowly for a long time. A crash would be better.
Because the longer prices stay high, the weaker the housing market will be.
This is a problem of the Fed’s making.
Free money from Congress exacerbated the problem, but absurdly low interest rates by the Fed for over a decade created the housing bubble.
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