2/9
This would lead to more frustrations and worries among home buyers. “If this trend continues," he concludes, "that could create a vicious cycle for the whole industry.”
That's because "a revolt among homebuyers could worsen consumer confidence in the market, making people...
This would lead to more frustrations and worries among home buyers. “If this trend continues," he concludes, "that could create a vicious cycle for the whole industry.”
That's because "a revolt among homebuyers could worsen consumer confidence in the market, making people...
3/9
...even less likely to purchase homes, deepening the housing downturn."
One of the points I have been making for years is the intense pro-cyclicality of a growth model that relies so heavily on infrastructure and property investment to generate growth.
...even less likely to purchase homes, deepening the housing downturn."
One of the points I have been making for years is the intense pro-cyclicality of a growth model that relies so heavily on infrastructure and property investment to generate growth.
4/9
What that means is that after a period of virtuous cycles, in which high growth expectations justify high levels of investment, and high levels of investment create high growth expectations, we can flip violently and easily into a vicious cycle.
What that means is that after a period of virtuous cycles, in which high growth expectations justify high levels of investment, and high levels of investment create high growth expectations, we can flip violently and easily into a vicious cycle.
5/9
When this happens falling growth expectations cause sharp drops in activity and in confidence, which in turn cause growth to fall even more.
The problem is that during the boom phase its very hard for analysts to believe things can turn around so sharply.
When this happens falling growth expectations cause sharp drops in activity and in confidence, which in turn cause growth to fall even more.
The problem is that during the boom phase its very hard for analysts to believe things can turn around so sharply.
6/9
That's why it is important to understand the role of inverted (i.e. self-reinforcing) balance-sheet structures in the economy. Economists rarely distinguish between the underlying growth in the economy and the excess growth generated by the structure of the balance sheet.
That's why it is important to understand the role of inverted (i.e. self-reinforcing) balance-sheet structures in the economy. Economists rarely distinguish between the underlying growth in the economy and the excess growth generated by the structure of the balance sheet.
7/9
As a result they overstate the quality of economic activity during the boom periods, and then are subsequently shocked by the speed of deterioration.
As a result they overstate the quality of economic activity during the boom periods, and then are subsequently shocked by the speed of deterioration.
8/9
That's why so many former China bulls now argue that China's current slowdown is the result of a massive and unpredictable shift in Chinese policymaking. If Beijing would only return to its old ways of "market-friendly reforms", they say, Chinese growth rates will recover.
That's why so many former China bulls now argue that China's current slowdown is the result of a massive and unpredictable shift in Chinese policymaking. If Beijing would only return to its old ways of "market-friendly reforms", they say, Chinese growth rates will recover.
9/9
They are wrong. China's slowdown is the almost automatic result of problems that have been building up for over a decade, and at a very minimum it will take a huge shift towards radically new policies to prevent growth from slowing much, much more.
They are wrong. China's slowdown is the almost automatic result of problems that have been building up for over a decade, and at a very minimum it will take a huge shift towards radically new policies to prevent growth from slowing much, much more.
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