China: A Real Real Estate Bubble?

The Atlantic has some analysis on the Chinese housing market on Friday. It contains a bad piece of news: That the Chinese banks are now financing consumer home purchase mortgages, in adddition to the more traditional financing of housing developments.

This means that, after the Chinese bubble pops, the visible credit market (aka banks) will lose a lot of money, constraining the money supply. This is in addition to the shadow credit market I talked of last week. So there is going to be a full recession, as opposed to a stagnation.