China's Bubble About to Pop

A week before the 1929 market crash, which led to the deepest global depression in modern history, Irving Fisher, one of the most famous American economists at the time, said US stock markets were at a permanently elevated plateau. In the 1980s, political elites, pundits and financial market participants all thought Japan had figured out a new and superior “managed market system.” Both booms were illusory, fueled by easy money credit bubbles, and both predictably ended in bust.

The China story is following the same pattern, with the seeds of economic crisis being sown by an easy money credit-fueled investment boom facilitated by the People's Bank of China, the central bank, which has set a target of a 17 percent year-on-year increase in broad money supply in 2010, according to a March 7 story by the Xinhua news agency.