FROM THE GLOBAL FINANCIAL TSUNAMI TO THE PROPERTY BUBBLES IN ASIA: THE NEED FOR A NEW DISCIPLINE ON MACROECONOMIC MANAGEMENT

This book discusses the formation of the current huge property bubbles in many Asian economies and the high likelihood of another Asian financial crisis due to the eventual bursting of these property bubbles. In particular, it explains

• How the Quantitative Easing (QE) programs in the US and other major economies helped the global economy avoid a great depression during the Global Financial Tsunami;
• How the QE programs contributed to the formation of huge property bubbles in many Asian economies;
• The pricing power and hoarding power of Asian developers due to the market structure problem and the indicator effect (from new property prices to resale property prices) in Asian housing markets;
• The role of the market structure problem and indicator effect in the formation of the current property bubbles in many Asian economies;
• The important characteristics of the seeding stage, the development stage and the final stage of an asset bubble;
• How the understanding of these characteristics could help policy makers to pre-empt an asset bubble in the seeding stage, and effectively curb the asset bubble at the development stage;
• The theoretical framework in this book would be extremely useful to investment decisions by property, shares and other asset investors;
• The high likelihood of an eventual bursting of the gigantic property bubbles in Hong Kong, India or another highly risky Asian economy, which would in turn trigger another Asian financial crisis;
• The underlying causes of the housing problems (especially high real housing prices) in Asia, and the recommended long-term solution.

In view of the huge costs due to the macroeconomic policy mistakes in many developing economies and some advanced economies, this book recommends the development of a new economic discipline on macroeconomic management and rigorous selection procedures of key economic and monetary officials. If properly done, these would help pre-empt financial crises, currency crises and asset bubbles. While the focus of the book is on macroeconomic management, it also provides important lessons on share and property investments. Thus, economists, policy makers, central bank officials, institutional and individual investors, business and finance professionals, economics students and academia in other disciplines will find the book useful.

Readership: Undergraduates and academics in macroeconomics, business economists, finance professionals, monetary and housing authorities in Asia, corporate investment departments, individual investors, analysts and people who are interested in economic policies and Asian economies.

This book first provides a concise review on the global financial tsunami and the European debt crisis, and draws important lessons for future macroeconomic policy management. It then explains why the quantitative easing in the US and the unique characteristics of the Asian property markets have contributed to the formation of property bubbles in some Asian economies. It also explains there could be further enlargements of the property bubbles, formation of stock market bubbles and huge exchange rate cycles in some Asian economies in the forthcoming years. Thereafter, it discusses the possibility of an eventual bursting of asset bubbles and currency attacks in Hong Kong, India, Taiwan, Singapore, Malaysia or another Asian economy, and highlights that the bursting of asset bubbles or currency attacks in any one of these economies could trigger a crisis in this region through the contagion effect. After pointing out that the implied crisis could be as severe as the Asian financial crisis in 1997-98, it discusses short-term curbing policies that could mitigate or pre-empt the potential crisis and long-term policies that could rectify the severe long-term problems in these Asian property markets. Finally and most importantly, based on the detailed discussion in the first eight chapters, the final chapter draws a large number of important lessons for macroeconomic management against asset bubbles and crises, housing policies in these Asian economies, and investments in the stock and property markets.