China and USA…Two Alerting Perspectives…. by each for each…Residential Housing Bubble in China & Country Rating Downgrade for USA…and where will our Sensex head in the second half of 2010 ?

China and USA…different political idealogies that makes for strange bedfellows….China deliberately keeps it’s Yuan low to benefit from exports to USA…get’s paid in US Dollars which it reinvests substantially in US Government Treasuries !..nearly US $ 900 billion of the US $ 2.3 Trillion Fx Reserves of China are invested in these Treasuries

USA was threatening to declare China manipulator of Currency…China agreed to revalue it’s Yuan upward a wee bit recently and also has just declared their continuing faith in the US Dollar and US Treasuries !

That’s some Consolation between the two on the surface….but the undercurrents run deep

Here are two Alerts….you can put it this way….one by China for USA and the other by USA for China! 

  • Is China facing a Housing Bubble ?…the Western Countries seem to think so
  • A Chinese Credit Rating Agency has just downgraded USA from  ‘AAA’ to  ‘AA’ Country Rating

Is China facing a Housing Bubble ?

Have a Look at the above Graph that matches the Value of Residential Housing against the Country’s GDP for USA,Japan,Hong Kong and China

In 1989,Japan shows a peak level of 3.8  and since shrunk to 2….Japan has been facing Economic Woes for the past two decades now…..China has reached an alerting level of 3.5 and if historic precedent is to be believed for this parameter,the Fall is inevitable….China is heading for a Real Estate Bubble soon

A Chinese Credit Rating Agency has just downgraded USA from  ‘AAA’ to  ‘AA’ Country Rating

Two months ago in May 2010 ago I had blogged on how the top Credit Rating Agency S & P yet continued USA’s Rating at ‘AAA’ 

S & P’s Sovereign Rating of USA remains at Top ‘AAA’….Amusing!

Friday, May 21st, 2010

Now China’s leading Credit Rating Company,Dagong Global Credit Rating Co has downgraded USA from ‘AAA’ to ‘AA’

The World’s Top Three Credit Rating Agencies…all based in the West….S & P,Moodys and Fitch….. have come in for  some scathing attacks…and justifiably too…they have lost considerable credibility in the past few years for their failures to spot and alert proactively  and, even more stupidly, reactively on Lehman’s Collapse,the Sub Prime Dangers,the Greece Problem among others….seems these rating agencies are a cartel with vested interests and agenda….when a Problem is so apparent even to a Commoner,it becomes difficult to believe that these Top Agencies run by Top People out of Top Colleges and Institutions and with Top Pedigree Degrees and Positions are really Dumb,Stupid and Incompetent or even Complacent!…..so the conclusion is that the ‘High Ratings’ maintained for Corporates and Countries by these Western Agencies is a deliberate Game plan not to break the Hand that’s feeding you…combined probably with a Political agenda too !…..Bloody Shame ! read more

USSR broke up physically in 1991…USA is breaking up economically now

It’s Uncanny really !

Two super Powers,USSR and USA being brought to their knees….the former suffering,both, physical and economic disintegration and the latter in the midst of it’s worst economic crisis…self inflicted,I daresay.

Breaking up of USSR in 1991

Vladimir Lenin founded the Union of Soviet Socialist Republics or USSR for short in 1918.It was born to die ! It collapsed into the Commonwealth of Independent States in 1991…The Soviet Communist Regime Lifespan lasted less than 75 years and died in the same Twentieth Century…The breakup was aggravated,provoked and prompted by the fast plunging economy and several area disputes between many republics that were leading to armed conflicts

Breaking up of USA in 2009

It’s July 4,2009 today and  USA celebrates it’s Independence Day…..Nothing really much to celebrate though,as  It’s first Afro American President has inherited a disastrous Economy…it’s States are fast disintegrating fiscally…..will each Independently fall !?….California is bankrupt.It is USA’s most populous state with 38 million people and a GDP of US $ 1.8 Trillion,twice that of India alone…as it’s celebrity Governor,Arnold Schwarzenegger pleads Our Wallet is empty.Our Bank is closed.And our Credit is dried up “

Expect California State Bonds to be downgraded to junk status…..It’s going to send Stocks crashing in USA ….Danger of other States and Counties living this Californian Nightmare too is very real

Unemployment figures in USA ,that were just released, show a further 467000 rendered jobless in June 2009 ….taking the Unemployment rate to 9.5%,the worst in over 26 years..the figures shoots over 15% if you consider the part time and discouraged workers

We have had 52 US Banks failing this year more than twice in number already from the 25 that collapsed in 2008 and we had three sinking in 2007.As of last quarter end the Federal Deposit Insurance Corp (FDIC) had 305 Banks on it’s troubled List with US $ 220 Billion in assets

Increasing Unemployment is leading to acceleration in Defaults to Banks…this compounded with Banks exposure to high risk Investments like CDOs is a double whammy…Banks have lend and they have invested and both Assets are in default mode with severe recovery problems

It is feared that Employment statistics will only improve and stabilise by 2012…only then will we begin to see a revival in the Real Estate market in USA as Citizens will have monies to invest in Houses…The Asset Bubble that developed in Real Estate is largely to blame for the near collapse of USA’s Financial System….High Unemployment is a hurdle to any Revival in the Real Estate Sector…It is estimated that in USA, the earliest that we’ll get to see Real Estate at prices of 2007 again,will be in 2017…five years after Employment is expected to stabilise  read more