Most economists and financial writers agree that the US has the strongest economy among the developed nations, even though we’re only growing at about 2%. Despite the slow growth, most don’t believe we are facing a recession anytime soon. However, most economists and financial writers also agree that a serious external shock could quickly throw the US economy into a recession and take most of the rest of the world with it.
The question is, what kind of a shock might it be? Some point to Greece, others to Brazil, both of which have flirted with bankruptcy. Others worry about a hard landing for China’s economy, which some fear would be enough to throw the US economy into a recession.
Yet there is another totally different risk in China that most Americans know nothing about. It’s the bubble in Chinese real estate. Chinese citizens are up to their eyeballs in real estate and almost nothing else. Prices have skyrocketed in recent years into what some are calling a giant bubble.
If that bubble bursts and home prices plummet, millions of Chinese would see their net worth evaporate.
This problem is much larger and potentially more devastating than most economists and forecasters realize. My clients and readers need to know about this, so that’s what we will talk about today. But before we do, let’s take a look at the latest economic news out of China from last Friday.