•Call for Rapid Recovery Is Bubble All Its Own: William Pesek

Discussion in 'Wall St. News' started by ByLoSellHi, Jul 28, 2009.

  1. Call for Rapid Recovery Is Bubble All Its Own: William Pesek
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    Commentary by William Pesek

    July 27 (Bloomberg) --
    Hats off to officials in Seoul.

    South Korea’s ability to expand at the fastest pace in almost six years is some of the best news Asia has had in a long while. It’s a sign that even with the $14 trillion U.S. economy in chaos, Asia is beating the odds and holding its own.

    For now, at least. The region can’t be complacent for two reasons. One, increased spending and low interest rates are fine for the moment, yet they don’t replace a return of global demand. Two, loose policies may be doing more to fuel bubbles that merely provide the illusion of economic recovery, leaving Asia even more vulnerable to further problems in markets.

    The 2.3 percent growth Korea generated in the second quarter dovetails with optimism that East Asia’s rebound from the global crisis may be “V-shaped,” not U-shaped or W-shaped. The Asian Development Bank said just that in a report last week. It recommended that central bankers retain expansionary monetary policies even as risks to recovery dissipate.

    That’s just what worries me, and China is a case in point.

    Mark Matthews, Asia-Pacific strategist at Fox-Pitt Kelton in Hong Kong, isn’t exaggerating when he calls China “a bubble in the making.” His concern is that massive stimulus efforts are “being misallocated into equities, something the authorities cannot be happy to see.”