Proactive Structural Simulation : Impact of Inflation on Global Asset Prices Bubbles     Burst, Recession, Financial Market Crisis, Contagion,
Instability Early Warning
Warren Huang    OSA  Intl   Operations Analysis  San Francisco, Ca., USA

Website :www.osawh.com /  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 global  macro, financial, industrial econometrics integration ,simulation,  tracking economic boom and bust recession cycles, equities, 
bond, oil, commodities, housing assets prices bubbles bursts resulted credit, financial crisis, recession contagion,  instability early warning Operations Simulation Analysis (OSA).

Huang directed  Zhang Performed E-Spline GARCH with Granger co-integration causes and consequences analysis.. Macro-financial, industrial econometrics analysis models have been developed, implemented 
for China /US, Taiwan international integration of  financial markets muli-class asset  pricing, risk valuation in asset allocation .. 

These models tracking forecast, provide early warning years, month ahead of last 30 years US, Asian, European, Russian central banks monetary, economic, fiscal policy impact on macroeconomic inflation, GDP 
and its impact on, financial economic, interest rates, currency,  industrial sectors housing, commodities, oil ,equities, bond assets, industrial sectors demand, prices , corporate performance, stock prices bubbles 
boom and bust , recession mechanism , Identifying the real causes for last 20 years credit, financial, crisis resulted recession global contagion predicted with average error below 2 %, correlation constant greater than 0.96

These proactive, structural simulators have been implemented for providing the what, why, how and timing of  global strategic financial crisis causes,  onset, contagion early warning  decision analysis  

Huang warned current US and global credit financial crisis, recession  on Asian/China Finance, Capital Market Conference in Singapore, Shanghai, Beijing to 1000 Asian/Global investment bank, QFII executive Nov. 2003, 
indicated US and global excessive rate cuts, resulted soaring housing, stock, commodities asset prices bubbles, caused inflation,  and  predicted 2004 global rate hikes,   insufficient inflation and asset prices bubble control
 through 2007 resulted skyrocketing housing price bubble burst in US subprime crisis , spread to credit, financial crisis.

   The real causes of current mortgage, credit, financial crisis and recession are due to poor financial, monetary policy decision modeling in inflation, asset pricing and  risks valuation mechanism, MBS, CDO , 
the burst of super housing, commodities asset price bubbles caused by 7 year excessive easy credit policy . .

Huang warned again to June 2007 , Beijing, University international financial risk management top global investment bankers, and Aug, on  Wall Street Journal Economic, Market Beat blog and March 5, 2008 
Pudong, China Fund World 2008 to  global top investment banking,  mutual  fund managers that Inflation will be soared to 6 % and drive up crude oil prices to 145 , repeating 2003, inflation up from 1.3 to 3.2 % 
2003-2004, drive oil prices from 19 to 34Global Housing price bubble burst, prices plunge 30 % into 2009, drag  global economy into recession and stocks
 bond, oil,  commodities, metals ,Derivative Asset Prices Bubbles Burst with 50 %-70 % bear market correction , 70-90 % mortgage, banking, finance correction, enter deep recession by year end 2008. despite 
global central banks rate cuts and US 700 billion  and ECB 2.3 trillion bail out plan.

Keyword :US/China/Global, Economic recession cycles, housing , equities bubbles burst, financial instability  Operations Simulations Analysis, proactive structural CAPM ,  micro, macro- financial integration  financial instability
  Basel II credit, market risks , monetary policy   CDO mortgage default.  policy contagion  

* Present Address : Investment Consultant, China Merchant Bank Securities, Shanghai, China
Submitted to 8th ANNUAL DARDEN INTERNATIONAL FINANCE CONFERENCE