China drives another nail into the coffin of the $ !

[jpetr48]

Re: China drives another nail into the coffin of the $ !

I put the above in all caps b/c if you are right about China EJ, I cannot stress enough that one MUST GET ANY ASSETS ABOVE THE $250K DEPOSIT LIMIT OUT OF THE WESTERN FINANCIAL SYSTEM.


Seems like perhaps impossible is about to happen again...(1st a nationwide housing bubble bursting, now a global currency system reset.)

Thank you for this article. Custodian banks may be one option as they dont have exposure to derivatives and other trading activities as wall street banks mentioned
http://en.wikipedia.org/wiki/Custodian_bank

[porter]

Re: China drives another nail into the coffin of the $ !

For our next article we have investigated a counter-development to the dollar demand crash story that we call: "Cash Property Purchase Frenzy of China's High Net Worth Class: Getting out of Dodge."

Seems that the average Chinese of means and above has for the last two years or so been buying a tangible asset safe house, so to speak, for their wealth mostly in the U.S. but also in other countries with strong rule of property rights law. They are purchasing property 100% cash and placing title in a safe deposit box. The event that they are hedging, so they tell us, is the eventual fall of The Great Wall of Money (our term, not theirs) followed by capital controls imposed by the CCP and CCP confiscation of wealth of the wealthy in order to reflate the domestic economy. If one is expecting such a crisis, the time to get one's money out of the country is when one can.

When do they think this may occur? Apparently at any time.

Why are they also paying cash for properties in China? 60 minutes did a great piece on the ghost towns being developed that are fully sold out but vacant. The reason is because the new middle class is now allowed to purchase property and this is where they are putting their money. Does this mean that they aren't really all that worried about confiscation?

[touchring]

Re: China drives another nail into the coffin of the $ !

Why are they also paying cash for properties in China? 60 minutes did a great piece on the ghost towns being developed that are fully sold out but vacant. The reason is because the new middle class is now allowed to purchase property and this is where they are putting their money. Does this mean that they aren't really all that worried about confiscation?

I don't think China will confiscate their property. But a very high property tax, be it vacant or occupied is only a matter of time. Of course, if the owner can't pay the tax, it will be confiscated.

[touchring]

Re: China drives another nail into the coffin of the $ !

Watch what the big guys are doing - GS, Germany, China, Russia, EU...they either have or are buying massive quantities of physical gold bullion. Even the Chinese citizens that you reference EJ understand what money is infinitely better than the average American. So they are exchanging it for hard assets en masse...

I'm not sure how many people here are aware that ownership of gold by commoners was restricted and even illegal in China during the dynasty period. Gold is almost not owned by commoners.

[aaron]

Re: China drives another nail into the coffin of the $ !

For our next article we have investigated a counter-development to the dollar demand crash story that we call: "Cash Property Purchase Frenzy of China's High Net Worth Class: Getting out of Dodge."

Seems that the average Chinese of means and above has for the last two years or so been buying a tangible asset safe house, so to speak, for their wealth mostly in the U.S. but also in other countries with strong rule of property rights law. They are purchasing property 100% cash and placing title in a safe deposit box. The event that they are hedging, so they tell us, is the eventual fall of The Great Wall of Money (our term, not theirs) followed by capital controls imposed by the CCP and CCP confiscation of wealth of the wealthy in order to reflate the domestic economy. If one is expecting such a crisis, the time to get one's money out of the country is when one can.

When do they think this may occur? Apparently at any time.

I have seen a lot of this first hand, however, is it really that much in the grand scheme of things? I read somewhere that there were $62 billion in real estate sales to foreigners. If the Chinese are responsible for half that, then is 31 billion in cash really that much of a dent in our economy? Likely, most of that money is being used to pay back a foreclose or short sale loan. Very little, in my small world, goes towards new home purchases. They want to make money. They like to buy cheap, but are willing to wait 10 years (by my calcs) before they really turn a profit. It is an asset that will not depreciate like currency (at least that is their thinking).

This really goes along with what I saw on my trip. Chinese cities are a terrible, terrible place to live. You would not want to raise your family there if you could avoid it. And, apparently the Chinese themselves agree.

It certainly made me appreciate the environment here. I suspect it is an asset we will start to profit more from as time goes on. The world is getting shittier. This is a nice place if you have some dollars to spend. And yes, it is a nice place to buy your SHTF place.

Are sales increasing? (I feel like I am living in Chinatown now. I say Yes!)
Will it make up for the lack of domestic demand?

Could it be the start of POOM?

[c1ue]

Re: China drives another nail into the coffin of the $ !

Apple has announced intentions of manufacturing Macs in the USA although the company doing the manufacturing work could be Taiwanese (either Foxconn or Flextronics).

http://allthingsd.com/20130522/apple...uilt-in-texas/

“We’re investing $100 million to build a Mac product line here in the U.S.,” Cook said. “The product will be assembled in Texas, include components made in Illinois and Florida, and rely on equipment produced in Kentucky and Michigan.”

From what I see - it isn't Apple that's going to be operating this facility.

Also, this facility is likely a strategic move by Foxconn or some similar entity in case import restrictions are imposed - much the same reason behind many of the Japanese and German production lines in the US.

Once again, it isn't any form of US competitiveness that is at play - it is US regulatory effects, anticipated or precautionary, that is driving this.

[c1ue]

Re: China drives another nail into the coffin of the $ !

hat tip to Jesse's CrossRoads Cafe

Here's some tangible info on just how much progress has been made by China with the yuan, where the yen is in relation, and the US $/euro in world trade:

http://ajw.asahi.com/article/economy...AJ201309040040

According to the Society for Worldwide Interbank Financial Telecommunication, the ratio of yuan used in global trade settlement rose to 0.87 percent in June, up from 0.24 percent two years earlier.

The percentage rose to 11th place in the world from 16th place a year ago, although it is still lower than 2.7 percent for yen. The dollar and euro accounted for 36 percent each.

To contrast, the share of the US, EU, and China economies in relation to overall world economy: (I used nominal GDP from the IMF on wiki)

US: 21.9%
EU: 23.2%
China: 11.5%
Japan: 8.3%

EDIT: Here's WTO trade info

http://www.wto.org/english/news_e/pres10_e/pr598_e.htm

	Export	%world	Import	%world
US	1057	8.70%	1604	12.95%
EU	4567	37.60%	4714	38.06%
China	1202	9.90%	1006	8.12%
Japan	581	4.78%	551	4.45%
World	12147	100.00%	12385	100.00%

[thriftyandboringinohio]

Re: China drives another nail into the coffin of the $ !

...this facility is likely a strategic move by Foxconn or some similar entity in case import restrictions are imposed - much the same reason behind many of the Japanese and German production lines in the US. ...

Regardless of motive, those Japanese and German transplants have been pretty good in my view.
Friends and neighbors of mine have good jobs at the Honda plants in central Ohio, some for 30 years now.
The Acura TL that I drive was assembled 22 miles from my house.

A little of this sort of goodwill local manufacturing by AAPL is most welcome.

[EJ]

Re: China drives another nail into the coffin of the $ !

I have seen a lot of this first hand, however, is it really that much in the grand scheme of things? I read somewhere that there were $62 billion in real estate sales to foreigners. If the Chinese are responsible for half that, then is 31 billion in cash really that much of a dent in our economy? Likely, most of that money is being used to pay back a foreclose or short sale loan. Very little, in my small world, goes towards new home purchases. They want to make money. They like to buy cheap, but are willing to wait 10 years (by my calcs) before they really turn a profit. It is an asset that will not depreciate like currency (at least that is their thinking).

This really goes along with what I saw on my trip. Chinese cities are a terrible, terrible place to live. You would not want to raise your family there if you could avoid it. And, apparently the Chinese themselves agree.

It certainly made me appreciate the environment here. I suspect it is an asset we will start to profit more from as time goes on. The world is getting shittier. This is a nice place if you have some dollars to spend. And yes, it is a nice place to buy your SHTF place.

Are sales increasing? (I feel like I am living in Chinatown now. I say Yes!)
Will it make up for the lack of domestic demand?

Could it be the start of POOM?

Not easy to get a handle on the trend statistically. It appears that the number of cash transactions for housing is only now recovering to a pre-housing bubble level of 10K units per month.

On a relative basis, cash transactions as a portion of housing starts was only higher in the late 1980s.

Houses Sold by Type of Financing, Cash Purchase divided by All-Transactions House Price Index for the United States

We are collecting circumstantial evidence from friends who deal in very high end homes in the range of $10M and up and some as high as $65M that are being purchased in cash by Chinese investors. They are typically brokered by U.S. citizens who came to the U.S. from China 20 years ago or more, were educated here and maintained family and business relationships back in China. Remember that wealth disparities in China are extreme. The reports we read about the "middle class" in China buying property there is not the trend I am referring to. It is the high net worth and ultra-high net worth Chinese who are endeavoring to invest hundreds of millions outside the country. Finding statistics behind the trend to safely generalize the empirical evidence is proving difficult as we have yet to locate data that are broken down by national origin.

[vt]

Re: China drives another nail into the coffin of the $ !

Yes, but what percentage of these all cash transactions are being made by new retirees downsizing, and taking large equity from bigger homes they sell to buy homes elsewhere for cash. I know firsthand from a number of friends and associates that are doing this as they retire.

Unfortunately there are a number of baby boomers that still have way too much debt, low 401k balances, and little savings.

[ER59]

Re: China drives another nail into the coffin of the $ !

"China's per capita income, at about $7,200, is around five and a half times less than the American figure. Yet at a Starbucks in Beijing, a grande latte goes for about $4.80—or a dollar more than what it costs in the United States."
http://www.theatlantic.com/china/archive/2013/09/why-is-starbucks-so-expensive-in-china/279394/

[touchring]

Re: China drives another nail into the coffin of the $ !

"China's per capita income, at about $7,200, is around five and a half times less than the American figure. Yet at a Starbucks in Beijing, a grande latte goes for about $4.80—or a dollar more than what it costs in the United States."
http://www.theatlantic.com/china/archive/2013/09/why-is-starbucks-so-expensive-in-china/279394/

You can't use China's per capita income. The per capita in Beijing maybe as much as $25,000 a year. The rich poor income gap in China is huge.

[c1ue]

Re: China drives another nail into the coffin of the $ !

Regardless of motive, those Japanese and German transplants have been pretty good in my view.
Friends and neighbors of mine have good jobs at the Honda plants in central Ohio, some for 30 years now.
The Acura TL that I drive was assembled 22 miles from my house.

A little of this sort of goodwill local manufacturing by AAPL is most welcome.

Was I implying that regulatory induced domestic investment and/or employment is a bad thing? Certainly not my intention.

The thing is - regulatory induced domestic investment/employment isn't "free trade"...

[nedtheguy]

Re: China drives another nail into the coffin of the $ !

redacted

[touchring]

Re: China drives another nail into the coffin of the $ !

You'll find LOTS of property buying by Chinese investors in Australia. Here's the latest data point: http://www.macrobusiness.com.au/2013...dney-property/ Australia's property is still overvalued and I can't believe that foreign investors would still be pouring money into property here, but if you lose 20-30% of your property value I guess that's still better than having your local government taking ALL of your money. Your scenario definitely makes sense in that respect.

Especially when the source of that money cannot be legally verified. Remember the smiling Chinese official who was caught wearing luxury watches and cannot account for his wealth? A good way to hide that wealth than to purchase a property in another country and place it under your child's name.

http://news.nationalpost.com/2013/09...40k-in-bribes/