Recession Causes, Impact Simulation Monetary, Fiscal  Policy Impact on Global CPI inflation:
 Proactive Structural Dynamic Simulation and Double Dip Recession: Causes, Onset, Spread, Recovery,
 Early Warning of Financial Crisis:
with Applications to US Housing Bubble Burst Sub-Prime Mortgage Default Crisis Early Warning


Warren Huang    OSA  Intl   Operations Analysis  San Francisco, Ca., USA

Website :http://www.osawh.com/ /  http://www.osaglobalstrategicmanagement.com/  email: wh3928@yahoo.com
 Fenglan Zhang,  Zhejiang University, , China  joycezhang001@yahoo.com.cn,  
                                           

                                                                                    Abstract

This paper demonstrated Huang’s 30 years pioneering proactive, structural macro, financial, industrial econometrics, economic boom and bust recession cycles, equities, bond, commodities, housing assets prices bubbles bursts Operations Simulation Analysis (OSA) with applications to tracking last 20 years equities, commodities pricing bubbles, conventional housing bubble bursts, sub-prime default crisis, structural finance mortgage bond, CDO pricing valuations and credit crunch early warning, avoided trillion dollars market loss, loan defaults due to probability, statistical based CAPM asset pricing, betting on the wrong side to investment.

Thousands simulators integrating monetary policy, asset price bubbles impact on inflation, macro, financial , industrial economic fundamentals into proactive structural dynamic high frequency ( short term daily ) and low frequency (long term )quantitative expert systems and E-Spline GARCH time series with Granger co-integration causes and consequences econometrics analysis models have been developed, implemented.
These models tracking forecast, predicted years, month ahead of last 30 years US, Asian, European, Russian central banks monetary, economic, fiscal policy impact on macroeconomic boom and bust recession cycles,  Identifying and Resolving Financial Crises,  inflation, daily interest rates, currency, financial market assets prices valuation mechanism and the causes, onset, spread, rescue, intervention impact and costs to economic boom and bust recession cycles ,financial instability systemic risks, mortgage default crisis early warning predicted with average error below 2 %, correlation constant greater than 0.92..
These proactive structural dynamic simulators have been built on last 30 years global central banking, macro, financial, industrial economic information knowledge base and implemented for  identify, and resolving, prevention of financial crisis , supporting: strategic decisions providing the what, why, how and timing of

     - Distinguishing between individual problems and systemic crises, crisis rescue early warning

     - Theory and evidence on the resolution of banking, finance, mortgage firms

     - Identifying policies that lead to contagion or correlated risk    

Huang accurately predict on 1998 ECB conference warning Russian currency crisis, Asian  financial crisis, LTCM betting

on the wrong side of junk bonk yield and 1999 on China Peoples Bank, US Fed, ECB, Asian central bank governors

conferences on 2000 rate hikes, IT bubble burst and warning on 2003 Euro-events Asian/China finance, capital market

conferences Singapore, Shanghai that US, China rate hikes fighting  housing bubbles till 2007, and June 2007, Peking

University International Financial Engineering Risk Management conference, warning top investment banking, mortgage

bond CDO executives on US housing prices slump, economic recession, bear market correction ( with banking finance shares down 50 %) through 2008 resulted mortgage default and structural finance billion dollar loss 
Huang directed Zhang to extend these OSA simulators to Nobel laureate  R. Engle’s Spline GARCH and co-integrate

into Granger causes and casualty analysis of . US, China inflation and mortgage default and national and regional housing

prices, global stock indices and associated corporate accounting scandals are related to deterministic exponential spline,

combination of macro , monetary economic and asset prices time series dynamics .

 Keyword :US/China,  Economic recession cycles,  Housing , Equities bubbles burst,  identify resolving crisis, Operations Simulations Analysis, proactive structural CAPM  macro-financial instability  Basel II credit, market risks ,  Structural finance, CDO mortgage default.  policy contagion crisis rescue
Submitted to Research Conference  " Identifying and Resolving Financial Crises "April 17-18, 2008 Jointly organized by Federal Reserve Bank of Cleveland and FDIC's Center for Financial Research
 Do not miss this proactive structural macroeconomic inflation simulation and strategic investment, trillion dollar hedging strategy workshops series by OSA  proactive solution pioneer  Dr.Warren  Huang
Millions of global /China central banks, finance, investment management teams bring their management/s operating problems into our strategic fund allocation and  wealth management workshops. take home billion dollar proactive structural solution, avoided trillion dollar housing, stock market loss due to betting on the wrong side of interest rates and bull/bear market trend, ready to implement 
　

 

2008 China credit tightening/US housing prices bubbles burst impact on  economic, capital markets  asset pricing, IPO, financing and asset allocation , risk diversification strategy
                              DO not miss  Trillion Dollar Recession Hedge by

Dr. Warren Huang will be risk management panelist and    full day master class workshop lecturer for  Terrapinn China Fund World

 2008  conference, Shanghai  Pudong Shangri-La hotel, March 6 offer Proactive structural China/global  asset pricing, 2008 credit tightening, recession impact on BRIC,Optimal  1x0/x0  long-short hedging, asset  allocation strategy 

　

Dr. Warren Huang accurately warned  on Wall Street Journal Market beat Blog Sept.19, 2007 that US housing price slump continue into summer
 2008 drag economy into inflationary recession and US, gear market recession , oil go to 100, despite Fed  rate cuts

He also warned top QFII management on Peking Univ June 2007 International Financial Engineering Conference that China overheated

housing, stock market wealth gain resulted inflation over 8.7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity,

housing, stock markets follow US housing price slump, recession, bear market correction, with Shanghai A testing 3000-3500- 4000 till summer 2008

Comment by Warren Huang on Wall Street Journal Market Beat Blog - May 7, 2008 at 2:49 pma

I warned since last Sept on this blog  that it is premature to speculated, merger any housing mortgage company, as housing price slump contine into summer 2008. I indicated CFC offer at 7 is overvalued,, it may
follow housing price plunged below 4.
It is premature too to announce that the worst of credit crisis is behind us. You may claim that he worst of sub-prime crisis is behind us,
But the housing price slump continue into summer, will spread into prime mortgage and credit cards, we may repeat Bear Stearn hedge fund
failure on betting on  the wrong side of interest rate again, As I predicted 10 year bond yield will break 4 % Fed will swing into rate hike cycle to fight inflation soon.
facing 1980 double dip inflationary recession With slumping housing price and consumer confidence, soaring oil price and job cuts,
How can any one speculato on housing, banking issues declare credit crisis is over!
details on www.osawh.com/Fedcrisab.htm  www.osawh.com/macro.html www.osawh.com/mortdefa.htm

Fed is pleasing every one in the Wall Street and global capital and housing markets by offering surprise half point cut, even Greenspan in 2001 dare not to

do it when the oil price was only 19 dollar and gold price below 400.Dow Jones shot up 350 points heading for record 14000 again , certainly will boost the housing

prices ( July housing price  already up 5 %),and It cut mortgage rate and lending cost by half point. bail out the sub-prime rate reset cost, will  temporarily cut

 mortgage default rate ( according to my housing prices and default rate model) but it will led to dollar plunge  to new low 1.40 , it will hit 1.50 sometime next year,

 Oil price already celebrating the rate cut, by shooting to 82.4 all time  high and heading for 85-100, gold already 735, shooting for 850  soybean heading for 1100

 wheat to 870., eventually will  spread into core inflation.

As Fed job only focus on inflation ( core inflation rate exclude energy and food price) and unemployment it ignore housing, stocks, commodities asset prices bubbles.

But sooner or later, the current stocks prices will not be sustainable, start to  plunge, it will drag the housing prices, and led to more default, the burst of next housing

bubble,  drag economic into  recession till 2008 summer ,can not be solved by any rate cuts Greenspan was much luckier than Benanke, he could go ahead with full

 steam rate cut, but we will be facing inflationary recession bear market correction ahead
     detail can be found on www.osawh.com/riskm.html    Comment by Warren Huang  Wall Street Journal Market Beat Blog September 18, 2007 at 5:55 pm

Dot miss Challenges and Investment opportunities, risks in 2008 China/US housing prices bubbles burst impact on
inflationary recession , stocks, fund, commodities markets outlook

   

Dr. Warren Huang accurately warned  on Wall Street Journal Market beat Blog Sept.19, 2007 that US housing price slump continue into summer 2008 drag economy into inflationary recession and US, gear market recession , oil go to 100, despite Fed  rate cuts
He also warned top QFII management on Peking Univ June 2007 International Financial Engineering Conference that China overheated housing, stock market wealth gain resulted inflation over 7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity, Housing, stock markets follow US housing price slump, recession, bear market correction, with Shanghai A testing 3500- 4000 till summer 2008

Dr. Warren Huang will be risk management panelist and  full day master class workshop lecturer for  Terrapinn China Fund World
 2008  conference, Shanghai  Pudong Shangri-La hotel, March 6 offer Proactive structural China/global asset pricing,
 2008 credit tightening, recession impact on BRIC,Optimal  1x0/x0  long-short hedging, asset allocation strategy 

Fed is pleasing every one in the Wall Street and global capital and housing markets by offering surprise half

point cut, even Greenspan in 2001 dare not to do it when the oil price was only 19 dollar and gold price below 400.

Dow Jones shot up 350 points heading for record 14000 again , certainly will boost the housing prices ( July housing price already up 5 %),and It cut mortgage rate

and lending cost by half point. bail out the sub-prime rate reset cost, will temporarily cut mortgage default rate ( according to my housing prices and default rate

model) but it will led to dollar plunge to new low 1.40 , it will hit 1.50 sometime next year, Oil price already celebrating the rate cut, by shooting to 82.4 all time high and

heading for 85-100, gold already 735, shooting for 850  soybean heading for 1100  wheat to 870., eventually will spread into core inflation. As Fed job only focus on

inflation ( core inflation rate exclude energy and food price) and unemployment it ignore housing, stocks, commodities asset prices bubbles.

but sooner or later, the current stocks prices will not be sustainable, start to plunge, it will drag the housing prices, and led to more default, the burst of next housing

bubble,  drag economic into recession till 2008 summer ,can not be solved by any rate cuts Greenspan was much luckier than Benanke, he could go ahead with full

steam rate cut, but we will be facing inflationary recession ahead

detail can be found on www.osawh.com/riskm.html Comment by Warren Huang - September 18, 2007 at 5:55 pm
Challenges and Investment opportunities, risks in 2008 China/US housing prices bubbles burst impact on
inflationary recession  
Dr. Warren Huang Wall Street Journal Real Time Economic Blog. Jan 2, 2008

One should look into higher energy price translated into its downstream 5000 products, services , this include energy bill, 30- 70 % of factory raw materials and energy costs, transportation cost, that will escalated into core inflation and manufacturing cost and wages, cutting into consumre and business spending. The worst is yet to complicated the consumer spending is the housing price slump will cut into home owner more than 3 trillion wealth, and consumer equities value and spending eventually drag into decline.
detail can be found on www.osawh.com/Fedcrisab.htm
Comment by Warren Huang - January 2, 2008 at 4:05 pm


other links :
Proactive global central banks monetary policy  www.osawh.com/centmaf.html
Proactive Structural Mortgage Default Simulation www.soawh.com/mortdefa.htm
Challenges and Investment opportunities, risks in 2008 China/US housing prices bubbles burst impact on
 inflationary slowdown, stocks, fund, commodities markets outlook
 Dr. Warren Huang will be the full day master class workshop lecturer for Terrapinn Fund World China 2008  conference, Shanghai  Pudong Shangri-La hotel, March 6 offer Proactive structural China/global asset pricing,  2008 credit tightening, recession impact on BRIC,Optimal  1x0/x0  long-short hedging, asset allocation strategy 2008

 Reservation, for Shanghai, Beijing, Hong Kong, Taipei, San Francisco  in-house workshop    wh3928@yahoo.com