Yes Virginia...It's a Bubble...

[GRG55]

Re: Yes Virginia...It's a Bubble...

Hmmmm, it would only take a couple of people about a week to knock on enough doors to get a good statistical sample and find out if this is true or not.

Do you think they would make it through the week before being encouraged to either leave the country or being allocated a cell in detention?

[Rajiv]

Re: Yes Virginia...It's a Bubble...

Another gem from Israel's Financial Expert - China’s Shark Loan Ponzi Finance- As Ponzi Schemes Collapse the Chinese Government Fears Civil Unrest

From The Secret Engine Behind China’s Housing Bubble- The Ponzi Shark Loan Finance

This is how this Ponzi scheme works:

Local governmental officials that are demanded from the government to produce double digit GDP growth numbers give real estate developers permits to build housing projects in return for bribes. They also get bribes in return for allowing the shark loan companies to operate under their jurisdiction. Some of them are active partners in shark loan businesses. For example, a party secretary of legal affairs, that controls the public security bureau, which is a court and prosecutor division of government in Yanking city, in She Kiang province tired to run abroad using a passport in 2009 after he found out he can’t repay 60million Yuan. Every scheme has a ring leader whose job is to collect money from all the participants in the ponzi scheme. When some of these ponzi schemes blow up, the party leaders always get bailed out first, and some even ask local business owners to lend them money, and then bail out their own personal fund. After that the ring leader turns himself in and gets protection from the local government.

Most of the funds that are collected in this classic ponzi finance go to local land purchases and real estate development. Part of the funds are used in order to pay back the rolling loan. The short term interest rate in this black market is very high and ranges between 20%-150% annual rate. The sources of the ponzi funds are diverse, as ordinary citizens, banks with corrupted bank officials, and state enterprises play the game.


This month, another Shark Loan Ponzi Scheme Collapsed in Huang Qiao Town In Jiangshu Province

China daily economic news reported:


Huang Qiao Town which is located in Taixing County, Jiang Shu Province is known as “No 1 town in North Jiangshu” According to the article, a few months back, expensive cars were roaming over the streets. But now after the collapse of a giant ponzi scheme supported by 9 so called “Mark Organizations” (local name for shark loan ponzi schemes), many cloth shops, and barber shops (in China, many so called barber shops are in fact brothels) are closed, and the expensive cars are gone. Town residents are posting their shops and cars for sale to pay back shark loans.

The collapse of this ponzi scheme at the town level, is a sign that even the bottom part of the hierarchy of the Chinese society was exposed to these schemes. This exposes the pervasivness and seriousness of the shark loan problem. more and more locals participated in this get rich quick frenzy since normal business profits and wages simply are not enough to make ends meat .

The collapse was triggered by the actions of one of the female ring leaders that turned herself in after she found out she can’t afford to pay the high interest rate anymore.

Though all the “ Mark Organizations’ are run by independent ring leaders, their funds are connected . As a result, after the exposure of her failure, 9 ring leaders are now under police custody. The locals even have a song for this shark loan frenzy:

People die for money

While birds die for food

They cracked down on the loan sharks

And now tens of thousands are in panic.

According to reports, 80 percent of families in Huang Qiao were involved, and major ring leaders include government officials and their relatives, housewives, teachers, shop owners, home decorators, and barber shop owners (a nickname for brothel owners)

Some interesting anecdotes regarding this scheme:

1. As Local houses were all sold out, the ring leaders went to Shanghai, Nanjing, and Jiangyin to “flip flop” real estate(Buy and sell real estate in less than 1 month in order to make a quick profit)

2 One ring leaders has 19 real estate projects all over china, with a total value of 20 million

3 Expensive cars roaming the streets, owned by ring leaders and newly rich kids.

4 Gold purchases by ring leaders

5 local Gambling, drugs, prostitution flourish.

6. The bidding procedure for “Mark Organization meeting”:

“Mark Organization Meeting” is basically an auction. During the meeting, the participating bidders will compete by promising high interest rates. The final winner is the man who offers the highest interest rate. He then will use the collected funds to speculate in the real estate market, or lend the money to real estate developers, home buyers and basically anyone in need for a loan. If everything works out, the locals get their money back with the promised interest…

This is a link to an audio of a recording made of such an auction.


You can read more (with the use of google translate) at this link of a local Huang Qiao Internet chat room that has a ponzi scheme topic. Please notice that news coverage is strictly controlled and censored, so not everything that is quoted in this article will appear in the forum.
You can read even more at this Huang Qiao Local forum. Many posts have been deleted, but even from what is left there is evidence of local riots and gathering, demanding government help.

From this thread, that was written in Feb 2010, it is clear that some residents were worried for a while. It asks the government to crack down on the loan sharks, but apparently no action was taken. To understand how pervasive these shark loan schemes are in Huang Qiao, please read this local internet BBS forum poll, were 44 reported that they participated in the ponzi schemes by themselves. The pool mentioned that only those who directly participated in the “ Mark Organization Meeting” by themselves shall say yes, if only relative and family member participate, they shall count as no.


Big Danger of Civil Unrest

The first sign was a murder in “Tai Xing” ( Huangqiao is a town of Tai Xing city, the murder’s home town). Apperantly, the owner of the Kindergarden were massacre occoured participated in a ponzi scheme.
The locals in this province are outraged and they are trying to organize protests and riots against the government and the ring leaders of the ponzi schemes. Many posts in the forums are attempts by locals to organize demonstrations. Since the internet is heavily censored in China, many victims of the schemes are posting these letters on every street corner in the town. They demand that the government will take action, and that the ring leaders will be put in jail. They of course demand their money back as well…
The ring leaders are trying to calm things downs, by handing out letters to local residents and posting them on street corners.

Bellow you can see the letters that were written by the residents and the ring leaders.

The local government fears civil unrest, and has posted this warning on every street corner.

A translation of the letter:

To the residents of Huang Qiao

Currently, the collapse of the fund chain has become a hot topic of all over town. A small minority of people with the intention of trying to disturb social stability, are stirring up the water, and are using the governments name to start rumors in order achieve personal benefits. In order to clarify the truth, the town government issues this open letter:

1. Huang Qiao Shark Loan ( Mark Organization Meeting” ) is a private matter, it is illegal, and the interest is not protected by law

2. People who participate need to expect to lose money.

3. All Mark Organization Meetings will be closed and all the debts will be settled peacefully, by negotiation, in order to minimize the loss.

4. The police will get involved in certain Mark Organization meeting, when the ring leaders are reluctant to pay

5. The public security agency will harshly punish those who are trying to stir up social unrest, spread rumors, cause “muddy water”, and make trouble for the government and social stability.



To get updates on China’s Shark Loan Ponzi Finance please FOLLOW US.

For more articles on the subject please visit China Shark Loan.

[jk]

Re: Yes Virginia...It's a Bubble...

i wonder if there are any data about more transparent but related markets, like vancouver or australia.

[Rajiv]

Re: Yes Virginia...It's a Bubble...

China Shows How To Do A Stress Test: Tells Banks To Imagine 60% Property Collapse

you think the European stress tests were too weak, you'll probably appreciate what China is doing with its banks.

Bloomberg:

China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 60 percent in the hardest-hit markets, a person with knowledge of the matter said.

Banks were instructed to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, the person said, declining to be identified because the regulator’s requirement hasn’t been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent.

Beyond the strenuous conditions, there's another aspect of this that's interesting, and that's the effect that there wouldn't appear to be an imminent crisis that necessitates some showy event. Regulators quietly told the banks obviously (otherwise it wouldn't just be coming out now), and it seems they really want to know what the results would show, rather than have a result that they can hold up as evidence of "transparency."

That's not to say there aren't concerns about Chinese banks -- there are. But the government actually would like to measure that problem, rather than paper over it.

[GRG55]

Re: Yes Virginia...It's a Bubble...

China's perplexing property boom

It is notoriously difficult to get a handle on China’s property market – the bears talk about imploding ponzi schemes, while the bulls cite the pace of urbanization and the comparatively low amount of leverage most Chinese have on their properties.

More worrying, say the analysts, is the amount of potentially duff loans that have been dished out to China’s local governments which threaten to weaken China’s banking system, which is scrambling to recapitalize at the moment.

I came across a particularly spectacular example of local government largesse last week when I was in Linyi, a city of 10m people in Shandong province which is a massive wholesaling centre and was playing host to China’s Red Games...

[GRG55]

Re: Yes Virginia...It's a Bubble...

Here's Andy...

Highlights mine.

QE: The Numberless Oblivion

By Andy Xie 10.10.22 17:13

"If you print a trillion, I'll print a trillion" – and other instances of behavior leading the world toward high inflation and political instability


The world seems full of smoke ahead of a world currency war. The weapon of choice is quantitative easing, a.k.a. QE. If you print a trillion, I'll print a trillion. Of course, he and she will too. No change in exchange rates after a trillion? Let's do it again, QE2. If you listen to people like Geithner, the end of the world is quite near. Rich people everywhere are buying gold for a little peace of mind, not just the Chinese. They are literally trucking it by the ton or two home. When currency values vanish in a QE melee, at least the rich have the gold to stay rich.

If you listen to American pundits, politicians or government officials, it's all China's fault. China is far from perfect. Its currency policy certainly isn't. But it is not the cause for the world's ills. The U.S. is by far the biggest source of uncertainty and the initiator of the QE war. Its elite created the biggest financial bubble since 1929, even removing regulations designed to prevent it, and left the U.S. economy in shambles after its burst. The same people want to find a quick cure to hold onto their power.

Unfortunately, there is no quick cure.

The U.S. has cut interest rates to zero and run up the budget deficit to 10 percent of GDP. It's a shock-and-awe Keneysian policy. But, after a few quarters of strong growth, the economy is turning down again, and the unemployment remains close to 10 percent. And this figure would be much higher, close to 20 percent like Spain's, if it included the underemployed and those who have stopped looking for work.

The stimulus has failed.

How should one interpret the result? If you were Paul Krugman, you would say it wasn't enough. Of course, if 20 percent of GDP in budget deficit and another round of QE still don't work, he would say not enough again. You can never prove Krugman wrong. Such a smart fellow.

The second interpretation is that it takes time for the economy to heal. No economy recovers so quickly after a bubble that big. During this prolonged and massive bubble, resources have become so misallocated that it takes time for regeneration. In particular, when the labor market is misallocated, it just can't correct itself quickly.

Hence, when an economy is in a misallocated state, a stimulus kicks up growth through its own power but can't get the multiplier effect for the economy to sustain growth beyond.

The third interpretation is that it's China's fault. Yes, China's exports to the U.S. rose sharply during its stimulus-inspired pickup, i.e., the stimulus partly went to China. But, whose fault is it? Apple makes all the iPhones in China, because it costs under US$ 20 each, even after the massive wage increase for Chinese workers. Apple's gross margins are 30 times the processing cost that goes to China. Maybe Apple is an extreme example. But, the fact is that China's exports to the US are American goods that retail for 3-4 times of the factory-gate prices. American companies want to make the goods in China to satisfy the stimulus-inspired demand.

People like Geithner would argue that China should raise the currency to force American companies to move production back to the U.S. I suppose that that is how the whole yuan appreciation idea may work. But, at what exchange rate would the American companies want to do it? American wages are ten times China's. Should China increase its currency value ten times?

Of course, the American pundits wouldn't put it that way. They would talk about China's trade or current account surplus and the rising forex reserves, the prima facie evidence of currency manipulation. I don't want to deny that the rising forex reserves are a problem that China must tackle with. But, it is a separate issue from the US economy.

The solution isn't yuan appreciation either.

Everybody knows China has a massive savings rate of around half of its GDP. It's a simple equation that the current account surplus is equal to savings minus investment. If the current account surplus is a problem, it is either insufficient investment or excessive frugality. China's investment is over 40 percent of GDP. Even casual observers would find China's investment too much. Are Chinese people too frugal? The household income is probably under 40 percent of GDP. How could they be the source of the gigantic savings?


The problem is China's political economy. The government sector raises money through taxes, fees, monopoly franchises and high property prices. The property sales were 14 percent of GDP. If the price is normalized, i.e., halved, the household sector would have 7 percent of GDP more. The household savings rate is roughly one third. That would boost domestic demand by nearly 5 percent, wiping away the whole current account surplus.

China's education and healthcare systems are quite scary to the people. They are very creative at squeezing the household sector. The teachers need gifts on holidays. There are lots of holidays. Hospitals eye patients on how much money they can be squeezed out of and provide services accordingly. China's household sector is squeezed, punched upon and kicked at everyday. For the masses it is a joke that they have too much money to fund the current account surplus.

China's current account surplus is mainly due to its political economy. The gray income is vast, possibly 10 percent of GDP. Such money normally goes offshore. But, because the dollar is weak and China's property market is sizzling, the money stays in China and goes disproportionately into the property market. Unless the gray income is reduced through anti-corruption campaigns, the current account surplus won't go away.

The current account surplus is half of the forex reserve story. The other half is hot money. Overseas Chinese are the main source. Chinese property and the dollar are their most important foreign assets. As the dollar weakens, they have poured money into China, especially into the property market. Hedge funds and other speculators have also poured money in through buying offshore Chinese assets. Hot money into emerging economies is always a bubble. I can't recall an exception. This one will prove the same.

I think China's currency is overvalued. China's money supply has exploded in the past decade, rising from 12 to 70 trillion yuan. No currency has not experienced depreciation after a such a prolonged bout of money growth. China's industry has risen tremendously to justify part of the growth. But, a massive amount is in the overvalued property market. When it normalizes, the money flows out and the currency depreciation pressure happens. We should see this within two years.

What is right isn't important for now. What is politically expedient is. Americans want a quick cure for its economic difficulties. It wants to devalue the dollar to achieve it. If it could force China to increase its currency value, then the yen, euro, and all the others would go up in tandem. The U.S., one fourth of the global economy, could export out of its problem.

The problem is that all the others won't follow this program. China could not move up its currency value too much. Otherwise, it would trigger hot money outflows, a total collapse of its property market and the banking system with it. China is between a rock and a hard place. It is trying to achieve a soft landing of its property market by incremental tightening steps while the currency appreciation expectation keeps the hot money from leaving. The combination may support a multi-year gradual adjustment, giving the banking system time to raise capital.

Japan isn't in a position to appreciate the yen much. Its industries have lost competitiveness to Germany's or even the U.S.'s. Its industries haven't had a global hit product for years. Germany and the U.S.'s auto industries are gaining over Japan's. It's hard to see how the yen could go up a lot. The BoJ is vulnerable to political pressure. It doesn't have a good track record. If it lets the yen to destroy Toyota, Honda, etc., it's hard to see how it could remain independent. Hence, it will resort to QE to hold down the yen.


The euro is surging by default. The ECB seems to still be talking like the Bundesbank. But, its position can't last through the next sovereign debt crisis. When the euro is high, some economy, not Germany or France, will get into a crisis mode. It may join the QE crowd too.

The UK doesn't need persuasion to embrace QE. It is like a big Hong Kong, all about stir-frying stocks and properties. When the bubble bursts, it doesn't have much else to do. Devaluing the currency seems to be the only way out.

Korea is small but always tries to join the big leagues. It is big in automobile, electronics and petrochemicals. Its government doesn't need convincing to watch over the exchange rate. Recently, it has been "investigating" financial institutions for undesirable practices in the currency market.

The mild Brazil is fired up too. Over the past decade, it allowed the market to double its currency value. Brazilian people are grateful for the low inflation as a result. But its growth rate is quite low, not good enough for a developing economy, leaving alone the vaunted status of one of the BRICs.

It seems that nobody wants to appreciate. Most major economies will do something to keep their currencies down. That is checkmate for the U.S. Without devaluation benefits on rising exports, QE just leads to inflation, first through rising oil prices. The American people are suffering from declining housing prices and high unemployment. If the gasoline price doubles from here, the country may not be stable. How would the elite react? Probably more of the same.

The world is heading towards high inflation and political instability. Another global crisis is a matter of time. The first sign would be a collapsing treasury market. The Fed is controlling the yield curve through its QE program. It would be irrational for other investors to play the game. The only reason to stay in is that the Fed won't let the market fall. But, the underlying value is evaporating with rising money supply and the inflationary consequences. When all the investors realize this, they will all run for the exits. The Fed won't be able to stop the stampede. If it prints enough money to take over the whole market, people with freshly minted dollars would surely want to convert the money into other assets. The dollar would collapse too.

The world seems on course to another crisis in 2012.

The same people who caused the last crisis are still in charge. They'll get us into another. Iceland is taking its ex-prime minister to court for causing the banking crisis. Worse fates await the people who are causing the next crisis. China used to chop off the heads of its failing ministers at the capital's vegetable market. Maybe we should bring back the practice and globalize it.

[jk]

Re: Yes Virginia...It's a Bubble...

i think i would have highlighted this sentence:

Without devaluation benefits on rising exports, QE just leads to inflation, first through rising oil prices.

[GRG55]

Re: Yes Virginia...It's a Bubble...

I read your post earlier jk, and noted the 2012 date reference, which is consistent with Xie's various interviews and writings for the past couple of months at least.


However, I listened to the roughly nine minute Bloomberg HK interview [available on AOL Video here] and he does say that property developers could "get trapped" this year. Summary of the interview:

• Liquidity still plentiful so China will still see reasonable growth in 2010, but perhaps not as quick as last year;
• Domestic investment is overheating, particularly in property, despite the fact that the overall economy with its large export sector cannot grow very fast [due to employment situation in the USA];
• Monetary policy needs to be tightened before the domestic investment bubble gets out of hand;
• In the wake of the US Budget and deficit announcement yesterday, expects US Treasury yields should rise significantly this year. Expects that China will continue to buy US Treasuries, but will need a higher yield to buy the same or more "There is a price for everything";
• Situation in China driven mainly by the property market and local government investment, both of which were "blown up" by excessive bank lending. Chinese government now in a dilemma as cutting back lending too fast will halt this growth, but doing nothing will create a bigger bubble and inevitable crash;
• Xie estimates that new property sales in China in 2009 rose to 14% of GDP, which he called "unprecedented", rental yields are 2% to 3% and described the amount of sold but vacant property as "humongous". Said "There is a bubble and property prices may be 100% overvalued";
• Property bubble in China differs from the bubbles in the USA and Japan as it involves new property, not existing property. Possibly half of local government revenues come from property sales and this is why land sales at record prices continue as revenue raising activity despite efforts by Beijing to cool things off.
• Lending conditions for buyers of second and third flats have been tightened considerably. This market is dominated by speculators. Difficult to see this demand continuing this year. Developers paying record prices could get trapped this year. After 7 years of rising prices [up 10 to 20 times depending on location] developers believe that land prices only go up, and that may not be the case this year, and some could "lose big money";
• Thinks the resource sector story will be much more long lasting than other stories, like the "economic recovery story" or the "property story". China has a "huge resource shortage" and "huge foreign exchange reserves" so a significant amount of money will be put into the resource sector. "It's not just a 2010 story...it will last for the next few years. This is the only story I have faith in"

Others are starting to pick up on Andy Xie's themes, and even though Evans-Pritchard says this is a"new twist" some like Jim Chanos have been warning about this for some time...

China's credit bubble on borrowed time as inflation bites

The Royal Bank of Scotland has advised clients to take out protection against the risk of a sovereign default by China as one of its top trade trades for 2011. This is a new twist.

By Ambrose Evans-Pritchard 6:43PM GMT 05 Dec 2010

It warns that the Communist Party will have to puncture the credit bubble before inflation reaches levels that threaten social stability. This in turn may open a can of worms.


"Many see China’s monetary tightening as a pre-emptive tap on the brakes, a warning shot across the proverbial economic bows. We see it as a potentially more malevolent reactive day of reckoning," said Tim Ash, the bank’s emerging markets chief.


Officially, inflation was 4.4pc in October, and may reach 5pc in November, but it is to hard find anybody in China who believes it is that low. Vegetables have risen 20pc in a month...

...Diana Choyleva from Lombard Street Research said the money supply rose at a 40pc rate in 2009 and the first half of 2010 as Beijing stoked an epic credit boom to keep uber-growth alive, but the costs of this policy now outweigh the benefits.

The economy is entering the ugly quadrant of cycle – stagflation – where credit-pumping leaks into speculation and price spirals, even as growth slows. Citigroup’s Minggao Shen said it now takes a rise of ¥1.84 in the M2 money supply to generate just one yuan of GDP growth, up from ¥1.30 earlier this decade.

The froth is going into property...

...Prices are 22 times disposable income in Beijing, and 18 times in Shenzen, compared to eight in Tokyo. The US bubble peaked at 6.4 and has since dropped 4.7. The price-to-rent ratio in China’s eastern cities has risen by over 200pc since 2004.

The IMF said land sales make up 30pc of local government revenue in Beijing. This has echoes of Ireland where "fair weather" property taxes disguised the erosion of state finances...

...It is sobering that even a slight cooling of China’s credit growth led to economic contraction in Malaysia and Thailand in the third quarter, and sharp slowdowns across Asia. Japan’s economy will almost certainly contract this quarter.

Albert Edwards from Societe General said the OECD’s leading indicators are signalling a "downturn" for Asia’s big five (Japan, Korea, China, India, and Indonesia). The China indicator composed by Beijing’s National Bureau of Statistics has fallen almost as far as it did at the onset of the 2008 crash.

"I remain convinced we are witnessing a bubble of epic proportions which will burst – catching investors as unawares as the bursting of the Asian bubbles of the mid-1990s. Ignore these indicators at your peril," he said...

[Prazak]

Re: Yes Virginia...It's a Bubble...

Yeah, not a "new twist" in the least to those who've been paying attention, unless the new twist is that these predictions were being made by banks (RBS and Societe Generale) who were themselves so recently nearly swept down into the vortex of a collapsing bubble.

[GRG55]

Re: Yes Virginia...It's a Bubble...

Chanos Says China's Real Estate Boom Continues `Unabated' Even With Curbs

By Bloomberg News - Dec 17, 2010 12:39 AM MT


China’s property boom continues “unabated” and has even picked up since the government enacted policies to cool speculation, said Jim Chanos, the hedge-fund manager who predicted the market may crash as early as 2010.

Home prices in 70 Chinese cities climbed 7.7 percent in November from a year earlier, even after the government suspended mortgages for third-home purchases and pledged to introduce a property tax. Sales volume jumped 14.5 percent.

“A lot of regulations in China, they are designed to be skirted,” Chanos said in an interview with Carol Massar and Matt Miller on Bloomberg Television’s Street Smart program. “The boom has continued to be unabated. It’s actually even picked up a little bit recently towards the end of year.”

Chanos repeated his view that China is on a “treadmill to hell” because of the country’s reliance on property development for economic growth...

...Chanos, who was one of the first investors to foresee the 2001 collapse of Houston-based energy company Enron Corp., said some Chinese developers are getting more leveraged and are taking more money from international investors, providing opportunities for hedge funds. He didn’t name specific stocks.

“They all look very interesting from a short-sellers perspective,” said Chanos, founder of Kynikos Associates LP. “The western investor is the one who’s going to end up holding the real estate bag here.”...

Let's hope it's not the "western taxpayer", bailing out their banks who once again lent foolishly for speculation...

[GRG55]

Re: Yes Virginia...It's a Bubble...

What bubble?

January 19, 2010

Residents of big Chinese cities are worried about bubbles. It's easy to see why: Shanghai mortgages rose 1,600% in 2009 from 2008 to US$15.58 billion, while residential property prices in the city shot up 68% from 2008 to US$4,571 per square meter. The rapid growth has prompted moves to curb speculation, including – in Shanghai at least – tightening of tax and financing policies on second-home purchases.


Such high rates of growth are of course unsustainable, but it remains too early to talk of bubbles nationwide. Yes, Wang Shi, chairman of developer Vanke, warned that property markets in Beijing, Shanghai and Guangzhou were frothy, but there is more to China than first-tier cities...

"It's different this time" with Chinese characteristics. Headline sounded encouraging...until I read the fine print. Clearasil anybody?

Vantone sees tougher 2011 for China developers

SHANGHAI/BEIJING | Tue Dec 14, 2010 11:50pm EST

...Feng Lun, Chairman of Beijing-based Vantone Group, said he expects stubbornly high real estate prices to remain a top policy focus of the central government over the next two to three years.

But Feng believes the government may have taken the issue of high property prices too seriously, calling it a "puberty problem" akin to a teenager overreacting to acne...

..."This is just pimples triggered by puberty. It's not an illness that you need to go the hospital to see a doctor," Feng said of the country's property price fever.

He also dismissed talk that the Chinese property sector is a huge bubble waiting to burst.

"Nobody, either Western or Chinese economists, has ever gotten China's property market right in the past," he said.

"This is not a market economy and this is not a planned economy. We have created this thing that is neither a horse nor a mule. I don't think it's correct to see it from a such a simplistic point of view," he added, referring to the bubble theory championed by some analysts and foreign investors.

[Fiat Currency]

Re: Yes Virginia...It's a Bubble...

Let's hope it's not the "western taxpayer", bailing out their banks who once again lent foolishly for speculation...

Sorry to disappoint you but all fiat money eventually returns from whence it came. That's just the way it works.
Cat Chasing Tail.gif

[GRG55]

Re: Yes Virginia...It's a Bubble...

Sorry to disappoint you but all fiat money eventually returns from whence it came. That's just the way it works.

You have good company...I'm sure that's the basis for TurboTax Timmy's repeated assertions that the US Taxpayers will "get all their money back". :-)

[GRG55]

Re: Yes Virginia...It's a Bubble...

A picture may be worth a thousand words. Here's 14 interesting pictures...

[ht to Tim Iacono at The Mess That Greenspan Made]

A few more pictures, courtesy of the Daily Mail:

The ghost towns of China: Amazing satellite images show cities meant to be home to millions lying deserted

By Daily Mail Reporter

Last updated at 10:53 AM on 18th December 2010

These amazing satellite images show sprawling cities built in remote parts of China that have been left completely abandoned, sometimes years after their construction.

Elaborate public buildings and open spaces are completely unused, with the exception of a few government vehicles near communist authority offices.

Some estimates put the number of empty homes at as many as 64 million, with up to 20 new cities being built every year in the country's vast swathes of free land.

The photographs have emerged as a Chinese government think tank warns that the country's real estate bubble is getting worse, with property prices in major cities overvalued by as much as 70 per cent...

[BiscayneSunrise]

Re: Yes Virginia...It's a Bubble...

It looks like frightening misallocation of resources. I understand the Chinese want to populate and modernize the hinterlands. But it looks like a case of grand central planning gone all wrong. Of course, as with any misallocation of resource, legitimate needs will go wanting.