its global capitalism . they will bring even more investment bubbles here eventually . Did China Just Crush The US Housing Market? | Zero Hedge A few days ago we finally closed the door on any argument who the marginal buyer in the US luxury housing segment was - the answer: Chinese oligarchs, scrambling to launder their hot domestic money abroad (as we predicted first two years ago) and now that Switzerland is no longer a safe offshore venue where one can park cash, they picked US luxury housing as the best money laundering alternative. As Hong Kongs SCMP reports, A day after Bank of China (BOC) was accused by Chinas state broadcaster of breaking foreign exchange rules by helping people take money out of the country, it has emerged a second state bank has also been offering the service. And the biggest irony is that Citic is ultimately controlled by none other than the State Council or China itself. In other words, while China was prohibiting the outflow of hot money with one hand, with the other it was providing the very services it had previously forbidden!. one answer could be in addition to making money and laundering ittt . But why would the PBOC agree to quietly bless this activity which it has, at least openly, blasted vocally in the past? Simple - to keep inflation in check. Recall that China is a country which creates nearly $4 trillion in bank deposits every year. Also recall that back in 2011 China nearly chocked when inflation briefly soared out of control, leading to sporadic Arab Spring type riots in various cities. And since China simply can not reduce the pace of its loan creation at the macro level without crushing the economy, what it needs is to find outlets - legal or otherwise - that permit the outflow of funds. So what happens next? Assuming there is the anticipated resulting backlash and crackdown on Chinese banks, which will finally enforce the $50K/year outflow limitation, this could well be the worst possible news not only for Chinese inflation, which suddenly - no longer having a convenient outlet for the unprecedented liquidity formed in the country every month - is set to soar, but also for the ultra-luxury housing in the US. Because without the Chinese bid in a market in which the Chinese are the biggest marginal buyer scooping up real estate across the land, sight unseen, and paid for in laundered cash (which the NAR blissfully does not need to know about due to its AML exemptions), watch as suddenly the 4th dead cat bounce in US housing since the Lehman failure rediscovers just how painful gravity really is. zerohedge/news/2014-07-10/did-china-just-crush-us-housing-market
Posted on: Fri, 11 Jul 2014 13:50:30 +0000
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