September 12, 2010
The China Bubble
When it comes to China everyone who is even slighly familiar with their financial problems is waiting for the first shoe to drop.
Imagine that your local city and county controlled all land rights, and the only ownership a private builder or developer could secure was a long-term lease. Now imagine that 40% of the city and county's revenues come from the lease fees paid by developers. Next, imagine a giant real estate bubble has priced most residents out of the market, and that the local governments are reaping huge gains as the development rights and leases they sell are skyrocketing.Our problems in America stem from the opposite impulse. Getting low income people into houses. But the fundamental impulse is the same: government can distort markets in ways that will benefit the country. No it can't.
Here is another parallel to the current economic problems in the US.
"With access to almost unlimited no-cost credit from the state-controlled banking system," he wrote, "these behemoths have abused their financial clout and plunged headlong into the real estate market, snapping up high-priced land and investing in high-end residential housing units that now sit empty across the country."Yes it does. Here in the US we can name names. Fannie Mae. Freddie Mac. Barney Frank. Chris Dodd. And don't forget Senator ∅bama.
And then there is this effort by China to meet energy saving targets.
BEIJING (AP) - Chinese steel mills and mobile phone factories are being idled and thousands of homes in one area are doing without electricity as local governments order power cuts to meet energy-saving targets set by Beijing.Curbing the production of plant food (AKA greenhouse gases) is an economy killer. Fortunately we live in a free country where Present ∅bama has promised to make the price of electrical energy skyrocket. Different method. Same result.
When the US has problems similar to the problems of a country run by Communist Dictators you know we are in a world of hurt. For the same reason. Central planning is an economy killer. We do have an advantage though. We can vote the bums out.
See you in November.
Cross Posted at Power and Control
posted by Simon on 09.12.10 at 04:05 AM
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