Bubblicious

by Cato  8/6/14

Let’s see. Manufacturing falls off the table while a real estate bubble inflates. Both in Europe, yes … but where, oh where, have we seen this combination before. Let. Me. Think.

German factory orders plummeted. Contracts fell by 3.2% in June from the previous month, the biggest fall since September 2011, due to low euro zone demand and persistent geopolitical risks.

The UK property market took off again. House prices rose 10.2% in the three months to July, according to data from British mortgage lender Halifax—the fastest annual rise since the financial crisis.


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6 Responses to Bubblicious

  1. Timothy Lane says:

    The Beltway response to the Bubble and Recession was to make all sorts of reforms that increased government control (and the importance of the largest financial firms, with their strong entanglement with the government), but did nothing to prevent a repeat. And the Fed’s desperate effort to stave off stagnation becoming recession is potentially creating a new bubble.

    • Brad Nelson Brad Nelson says:

      I think you’ve just stated in one paragraph what those at NRO wouldn’t likely do in three pages, Timothy. I think you got to the heart of it.

    • Kung Fu Zu Kung Fu Zu says:

      And this bubble is potentially worse than that of 2007-8. Bad risks which were not written down as well as new risks are concentrated in fewer, larger institutions which are, in some ways, extensions of the government. At the very least, it is close to explicit that the government will rescue such institutions should it be necessary.

      The Euro problem is in addition to problems we have in the US. European manufacturing has been sluggish for a couple of years. This downturn in German manufacturing is worrying as Germany is the largest and strongest economy in the E.U. and has been pretty much recession proof when compared with the rest of the continent.

      As regards the housing prices in the U.K., Britain is something special in the E.U. With London being the financial powerhouse that it is, foreign money and wealthy foreigners have flocked to London and its suburbs. Furthermore, given the difficulty in gaining building permits across the U.K., there is an artificial shortage of housing across the country.

  2. Glenn Fairman says:

    “Fasten your seatbelts, it’s going to be a bumpy night.”

  3. Kung Fu Zu Kung Fu Zu says:

    Let me also say that I believe another reason the coming bust could be so damaging is that the US treasury and Fed have expanded their powers globally. This started after the 2007-8 crisis, but was sped up with the numerous law suits brought against European banks for “abetting tax evasion” by Americans, and other “crimes”. Further power was grabbed with the Dodd-Frank law.

    The US is effectively trying to nationalize much of the international banking system using the strength of the US dollar and the American legal system. Transfers for funds are closely watched as US law and bi-lateral agreements with the US and countries such as Switzerland call for this. International bankers are afraid to do much of anything as if “dirty” money slips through their purview, they can be fired or worse.

    The upshot of this is the BRICKS are now developing a counter US dollar group which will develop its own reserve currency and avoid using the US dollar for trade between the member countries.

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