[quote=CA renter]That was a very fascinating — and depressing — video, OCR. People have been discussing China’s ghost cities on housing bubble blogs for quite a few years, and I had read that they had slowed/stopped building these cities and that people had begun to move into them over the past few years. From this clip, it looks like that’s not the case.
It’s surreal to see how investment has been so grossly misallocated around the world. We have an oversupply on so many levels, yet we are continually told that we need more debt and more expansion.
I’ve been watching commodity prices over the years and found the price of copper to be rather telling.
We desperately needed to deleverage after the dot.com bubble, and again after the housing bubble, but the central bank(s) didn’t allow that to happen. When it finally implodes, it could get ugly. IMHO, 2008 was just a preview of what can happen. Currency markets could get interesting going forward.[/quote]
Thanks CAR, that is quite an interesting graph.
The way I look at it, China is overwhelmingly export dependent, specifically to the US and EU. After the global melt down, they were slowing down as well. But to keep pace with their predicted 7% GDP growth, they started their own money printing endeavor.
The way China is structured, Every city and province are given a predicted GDP growth rate that they will need to meet. If a governor or mayor doesn’t meet that target, there goes his political career. So somehow, every municipality meets that magical 7% predicted growth rate. The best way to achieve this of course is to build. And if there’s no money then you simply borrow. Once the buildings are constructed, then they need to be purchased by flippers, who also need borrowed money.
Someone mentioned the Chinese gov will somehow get people into these buildings. That would only happen after a complete financial meltdown and the state simply takes over ownership of entire ghost towns wholesale.
Maybe that’s their plan all along?!!! After all, they planned to use cheap and dirty coal, fully aware of the environmental catastrophe in stored. But figuring they’ll be rich enough to clean it up and rich enough to use renewables moving forward. Substitute cheap and dirty coal for cheap and dirty credit, and it all makes sense.
