Ponzi Scheme in Peking

[Guest Tony n Terrific]

China's economy is humming along in high gear, thanks to a fast-growing pile of dicey debt. Such booms tend to end badly.

Take a close look, however, and you may come away thinking China resembles nothing so much as Japan shortly before its stock and property markets melted down two decades ago. A speculative frenzy of borrowing and bidding up is at work. If and when prices crash, there will be hell to pay.

 

 

 

 

http://www.freerepublic.com/focus/f-news/2410229/posts

[dnoblett]

OK, you quoted the article, so what is your take on this?

[tsap seui]

I hadn't realized China was borrowing to fuel this recent growth, or are they lending to themselves to accomplish this growth?

 

The only indicator I have of things in China is prices...their prices on food, goods, services and housing are sky-rocketing out of any reason and food and goods are way more than our prices, comparatively. If it wasn't for the shakey strength of the USD's exchange rate I would never think of living in China any longer than March of 2011.

 

In Australia in 2000 and 2001, homes there doubled in 6 months, I had job offers in both New Zealand and Australia but I kept watching what was happining with prices and flying in to do my work, then in 2003 said to hell with it, I'll just fly down to paradise to visit, no need to go broke trying to immigrate there and pay double for a home.

 

I hope the Chinese leaders aren't moving into the same "Fantasy World" our leaders have built...we'll ALL BE SCREWED.

 

I'm happy we own our home in China and aren't making any payments, if the bottom drops out, we'll be in the same boat as everyone else as far as worth on our house, without having to make payments on something worth half of what we paid for it. I've seen enough of that in America.

 

Good luck them, and us.

 

tsap seui

[Bert]

I've been following this closely for a while, since we may be purchasing a place in China. The government is limiting foreign investment. You can't convert more than $50,000 in a year to RMB, but there are ways around it.

 

It's scary, but then again, if you compare housing prices in Shanghai to New York, they're not that bad. You can rent at bargain prices. Rent has nothing to do with the costs of the apartment. We rented a nice place in Shanghai for 3,100 RMB a month. The apartments sell for 1.4 million RMB. People--ordinary people--are buying and renting out for what they can because they know the prices will continue to go up. As new apartments go up, speculators buy them. They might rent out an unfinished apartment to two or three families. They are just waiting for the opportunity to sell. The second hand market is always more expensive than buying from the builder. It could all come crashing down. It won't be just the fat cats that get hurt, if it happens. There are a lot of ordinary people that play the game. My wife's best friend has 3 apartments in Shanghai. She has done well. She teaches at a college at makes around 3,300 RMB a month, I am told. Her husband teaches at the same place and makes much more, but, even if he makes twice a much, they will be in a pickle if they can't ride out the storm.

 

Here's a couple excerpts from a recent article that shows the arrogance of some of the Chinese leaders.

 

Top 10 Darndest Things Officials Said in 2009

 

"Wang Aimin, mayor of Langfang of Hebei province, issued a slogan to attract investment to the real estate industry."

 

'He said, "Real estate is a good industry to invest in and we will offset all the losses of the developers who come to invest - by providing free land as compensation."'

 

============

 

After luxury houses were built in a region intended for affordable housing in Zhengzhou, Henan province, journalists interviewed local official Lu Jun, on June 17th.

 

"You are a mouthpiece for the party (CPC) or the people?" he asked.

 

Lu's remark shocked the journalist and the public. It implied that the ruling party has interests at odds with those of the people.

 

Lu was suspended from his post and remains at home.

[tsap seui]

I've been following this closely for a while, since we may be purchasing a place in China. The government is limiting foreign investment. You can't convert more than $50,000 in a year to RMB, but there are ways around it.

 

It's scary, but then again, if you compare housing prices in Shanghai to New York, they're not that bad. You can rent at bargain prices. Rent has nothing to do with the costs of the apartment. We rented a nice place in Shanghai for 3,100 RMB a month. The apartments sell for 1.4 million RMB. People--ordinary people--are buying and renting out for what they can because they know the prices will continue to go up. As new apartments go up, speculators buy them. They might rent out an unfinished apartment to two or three families. They are just waiting for the opportunity to sell. The second hand market is always more expensive than buying from the builder. It could all come crashing down. It won't be just the fat cats that get hurt, if it happens. There are a lot of ordinary people that play the game. My wife's best friend has 3 apartments in Shanghai. She has done well. She teaches at a college at makes around 3,300 RMB a month, I am told. Her husband teaches at the same place and makes much more, but, even if he makes twice a much, they will be in a pickle if they can't ride out the storm.

 

 

Good Gawd Almighty!!!! Someone buys an apartment for 1.4 million, rents it out for 3,100 a month, all in the hopes that it'll sell for more than 1.4 million on the secondary market at a later date....meanwhile developers keep building away with prices that always stay under current secondary market prices???

 

And that is called an "investment"? It sounds more like Homer Simpson got sold a get rich quick scheme.

 

Looks like the folks in the big shittys of ol' Chinertucky are playing a very dangerous numbers game. Talk about Pollyanna....I'm shocked.

 

I can see me going to my bank and saying,

"Hey Moneybags, I've got a great deal on a 1.4 million dollar apartment, now here's the deal, you lend me the money, I'll rent it out for 3,100 a month and who knows in a few years I might be able to sell it for a profit!!!"

 

Moneybags: "Damn, tsap, you is shore a savvy investor, they got anymore of them deals?"

 

tsap seui: "Why shore Moneybags, they sellin' 'em like hotcakes and building many more...we's gonna git filthy rich bubba!!!"

 

If they hope to keep selling cheap consumer goods to the US as fuel for their growth, them ol' leaders of China better keep on sending us container ships full of cash and hope we don't find newer ways to lose it quicker than we already are.

 

By the way, aren't we about due for another economic stimulous package....mebbe a $1,000 per person this time....Our guy can call their guy and tell him, "Hey bubba, we're gonna stimulate our economy again so we can fool our people and make it look like everything is okay, how about sending us two more container ships full of money? Shucks, you ol' boys will sell more cheap consumer goods and look like everything is okay and our folks will relax, fill our stores, and the world will think everything is okay...wink, wink, wink, hardee har har."

 

Although there are many more economic factors going on you would think the Chinese leaders never thought that the same America shiesters that took the jobs from their fellow Americans and gave them to the Chinese wouldn't give a damn about taking those jobs from the Chinese as soon as their prices go up a few cents and move out in the middle of the night to Laos or Vietnam, etc.

 

I like what you said Ben, you sure showed me what a deck of cards the Chinese economy must be built on if they "invest" like your example.

 

tsap seui

[chengdu4me]

The market here in Chengdu has gone up. The new market has gone up so much that the used market, by comparison, is now a very good deal. Last month, 3 times more used homes were sold than new homes. (My SIL is a real estate salesperson)

 

There are incentives right now to buy a home. These incentives have an expiration date and people are buying to beat the clock. On the other hand, everyone selling is raising their prices to make sure they get the lions share of that incentive away from the buyer. On paper, it looks like a great deal to the buyer, but the bottom line is that prices have been jacked up to take that advantage away.

 

The same type of incentive is being given to car buyers. I see loads of new cars on the road everyday.

 

The government is doing everything it can reasonably do to spur domestic consumerism. You can see the "stimulus" projects all over town. Renmin Nan Lu has just completed a major makeover with beautiful street lights, new bike lane dividers and full grown spruce trees lining the boulevard. It stretches for about two miles and now the second phase is starting on Renmin Mid Lu. The subway project is in full swing and there are about 30 other construction/beautification/safety projects going on.

 

Hu says spend, they spend..Hu says build, they build....Obama says spend and the money disappears, Obama says build and they ask..with what money?

[a2784]

...On the other hand, everyone selling is raising their prices to make sure they get the lions share of that incentive away from the buyer. On paper, it looks like a great deal to the buyer, but the bottom line is that prices have been jacked up to take that advantage away...

Works just like it does here.

I agree. My take on what I see here is that while the leaders continue to talk about not following the USA policies that caused the economic crisis (since to them they always report the entire world's economic problems are all the result of Wall Stree and USA) they are actually following them almost "step for step".

 

In order to increase domestic consumption and keep the economy growing at the re-hot 6-10% rate they are letting credit loose much more freely than in the past to individuals. I also still cannot understand how people making 3-5,000 RMB/month are buying apartments for 1.4MM - 2.0MM RMB.

 

As Tsap said the prices of everything have increased significantly too. From Jan 2007 to now I have noticed a big jump in many things.

 

Lastly I still wonder were all these chinese men in the Hisense or other high scale shopping centers get the money to buy the real LV Bags, etc for $1,000-5,000 USD all the while still having money left over to use the "credit" they brought with their wive to run to the KTV and hook up with a few good ones.

[Guest Tony n Terrific]

OK, you quoted the article, so what is your take on this?

Any time you borrow money the rule is know thyself. Don't fall into he trap of the bank that knows what I can pay back to them. The reason we are in the financial problems we have now in the US is because easy credit was made available to unqualified people. Need a loan? Do you have a job? Yes I have been working at Walmart for 3 months and I make $8 bucks an hour. I also have a partime job at the Cut and Shoot Tavern to help out a little. My lovely wife is contributing to the family income due to her obesity is drawing SSI as well. Mr. Banker we are going to buy a home on a slab foundation because the steps are just too hard for her to climb. I also promise not too have my Doberman/ Chow dog come with me. I promise to take my truck off blocks and put tires on it and buy new license plates for it when we move into our new home. I am also dedicated to America in learning how to speak English at St. Jude's Church for the hopeless causes.

Bank: Good you qualify for a $1,000 month payement with deferered payment plan for 6 months. No money down as well. You can live the American dream now. At least for a few months.

Edited December 24, 2009 by Tony n Terrific (see edit history)