dorsal/arxiv
View Schema2000-2003 Real Estate Bubble in the UK but not in the USA
| Authors | W. -X. Zhou, D. Sornette |
|---|---|
| Categories | |
| ArXiv ID | physics/0303028 |
| URL | https://arxiv.org/abs/physics/0303028 |
| DOI | 10.1016/S0378-4371(03)00600-9 |
| Journal | Physica A 329 (2003) 249-263 |
Abstract
In the aftermath of the burst of the ``new economy'' bubble in 2000, the Federal Reserve aggressively reduced short-term rates yields in less than two years from 6.5% to 1.25% in an attempt to coax forth a stronger recovery of the US economy. But, there is growing apprehension that this is creating a new bubble in real estate, as strong housing demand is fuelled by historically low mortgage rates. Are we going from Charybdis to Scylla? This question is all the more excruciating at a time when many other indicators suggest a significant deflationary risk. Using economic data, Federal Reserve Chairman A. Greenspan and Governor D.L. Kohn dismissed recently this possibility. Using the theory of critical phenomena resulting from positive feedbacks in markets, we confirm this view point for the US but find that mayhem may be in store for the UK: we unearth the unmistakable signatures (log-periodicity and power law super-exponential acceleration) of a strong unsustainable bubble there, which could burst before the end of the year 2003.
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"abstract": "In the aftermath of the burst of the ``new economy\u0027\u0027 bubble in 2000, the\nFederal Reserve aggressively reduced short-term rates yields in less than two\nyears from 6.5% to 1.25% in an attempt to coax forth a stronger recovery of the\nUS economy. But, there is growing apprehension that this is creating a new\nbubble in real estate, as strong housing demand is fuelled by historically low\nmortgage rates. Are we going from Charybdis to Scylla? This question is all the\nmore excruciating at a time when many other indicators suggest a significant\ndeflationary risk. Using economic data, Federal Reserve Chairman A. Greenspan\nand Governor D.L. Kohn dismissed recently this possibility. Using the theory of\ncritical phenomena resulting from positive feedbacks in markets, we confirm\nthis view point for the US but find that mayhem may be in store for the UK: we\nunearth the unmistakable signatures (log-periodicity and power law\nsuper-exponential acceleration) of a strong unsustainable bubble there, which\ncould burst before the end of the year 2003.",
"arxiv_id": "physics/0303028",
"authors": [
"W. -X. Zhou",
"D. Sornette"
],
"categories": [
"physics.soc-ph",
"cond-mat.soft",
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"physics.gen-ph",
"q-fin.GN"
],
"doi": "10.1016/S0378-4371(03)00600-9",
"journal_ref": "Physica A 329 (2003) 249-263",
"title": "2000-2003 Real Estate Bubble in the UK but not in the USA",
"url": "https://arxiv.org/abs/physics/0303028"
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