What is the world going to do with Chinese savings? From the millennium the answer seemed simple, stick ’em in US bonds. But that then led to overly low interest rates for the business cycle and a gargantuan property and construction bubble across the developed world.
After the GFC it seemed OK again, this time as Chinese savings were deployed at home but, again, the flood of capital was so torrential that another huge bubble formed, this time in China construction.
As that began to fade, the dam of yield-obsessed savings broke over shares and blew another classic bubble that is still deflating, as well as flooding into far flung developed city property markets, in which multiple bubbles have formed.
