Bubbles Reinflating, World Bank Warns

Asian asset prices soaring as recovery takes hold
By Rob Quinn,  Newser Staff
Posted Nov 4, 2009 3:32 AM CST
Assets prices are rapidly reinflating in Asia, with one apartment on the Peak in Hong Kong recently selling for $57 million.   (AP Photo/Vincent Yu)

(Newser) – Efforts to boost economic recovery are having the dangerous side effect of creating new bubbles in property, stock, and currency markets, the World Bank warned yesterday. Commodity prices are also surging, with gold hitting a record price yesterday. The effect is most pronounced in Asia, where recovery has come soonest, with real estate markets in Hong Kong quickly becoming divorced from the laws of supply and demand.

Policymakers are scrambling to try and stop emerging inflation through regulation and other means, the Wall Street Journal reports, although experts warn that true bubbles are as hard to spot as they are to prevent. Low interest rates in the US are the cause of much of the asset-buying frenzy in Asia, one economist says, with investors borrowing US dollars to acquire shares and property in economies that are growing faster.