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Archive for July 2011

Debt Ceiling debate not the real point

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from The Daily Bell
Posted July 28, 2011

Debt-limit debate wearing on Americans … As an Aug. 2 deadline draws closer and Washington’s political brinkmanship only intensifies, Americans are discussing the potential consequences of failing to raise the debt ceiling, which authorizes the federal government’s borrowing to meet expenses that tax collections aren’t sufficient to cover. … The president and the Republican speaker of the House, John Boehner of Ohio, both have appealed to the public and accused the other side of refusing to come to a deal. – USA Today

Dominant Social Theme:
We must all pull together to get through this. Let the wise men lead.

Free-Market Analysis:
The debate over the debt ceiling is anything but trivial for the powers-that-be. Political pundits on both sides of the dialectic, along with their media confidants, would like us to believe that there is a real reason for us all to be concerned over the “acceptable level” of debt. Don’t worry about the fact that America is already the largest debtor nation in the world. Don’t worry that the Fed handed out more than $16 TRILLION in bailouts … just a couple of trillion more and all will be well.

Well, we have another take on the matter. It seems to us that to debate whether or not further “credit” should be extended is to miss the point. The real point is the fraudulent base on which the Federal Reserve System is built – in other words, the US dollar itself – and how it is eroding living standards and individual freedom.

We wrote about this just the other day in an article titled, GAO: Fed Issued $US16 Trillion During 2008 Crisis!

For nearly 100 years now, the money elite have had their way with the American people and citizens of most other nations who’ve been harnessed in the dollar noose due to its oil-imposed reserve status. And as central banks (creators) and commercial banks (distributors) were hoisted upon unknowing populations – dumbed down via a broad, yet tightly controlled international media network – the process of wealth redistribution was firmly entrenched.

Nowhere has this poisonous system been more effective at draining the lifeblood (productivity) from a nation, than in the United States. The US Constitution has been turned into an artifact of ridicule; the rights of an individual have taken a backseat to the “rights” of the State. And what a State it is.

We all now face a global catastrophe, we are told, if the US legislators cannot agree on the need to raise the debt ceiling. We are told that the world will stop turning and all will face a horrible new future.

On Monday night, during his Presidential address to the nation, Barack Obama warned, “We can’t allow the American people to become collateral damage to Washington’s political warfare.”

Really Mr. Obama? And just how rosy is the current picture for most who are willing to face reality? Are Americans not already collateral damage?

Today, in America and the West in general, it is virtually impossible for people to get by without both spouses working – often more than one job each. The family unit has been sabotaged and instead of communal bonds bringing families closer together we have a dog-eat-dog society where even close family members are stepping over each other to survive. All the while, people are working HALF their lives to pay money into a system based on a fraudulent premise: That someone out there can do a better job of taking care of you, than you. And naturally, Mr. Obama believes he, and the system of regulatory democracy he leads, can do that.

So why do people sit back and watch this “accident in motion” rather than just realize that the whole gig is up and it is time to face the music? Everyone is complicit in this – the people themselves who blindly gave up their individuality for false security, and the subversive group of monetary elite focused on consolidating their globalist agenda and generaly enslaving the “lower order.” Of course, the former group has been losing for a long time now, but perhaps it is now the latter group who will face some rather uncomfortable times ahead.

However, as long as the greater majority refuses to have the courage to take responsibility for their own destinies, then there will continue to be those who will use fear-based dominant social themes to consolidate power.

To extend further debt to a disfuntionally bankrupt system will do nothing more than delay the inevitable. It will not fix the unfixable. People are waking up, thanks to the Internet Reformation, and taking human action – one person at a time. This is the bell of liberty that is tolling and it is ringing louder and louder as more and more choose to face reality.

Just look at the powerful increase in purchasing power (value) of gold and silver over the past several years to get a pretty good idea as to how rapidly the fiat money scam is unwinding. And this trend is NOT likely to change anytime soon. How can it? Why would it? We still have the majority of people debating in what “form” the debt ceiling package should exist. The majority, well, they just don’t get the point – at least not yet. So the struggle will continue, the debt ceiling will go up, and the dying dollar will continue to devalue.

Conclusion:
The Internet Reformation is leading all who wish to see the truth. And for them, the debt ceiling debate means rather little and neither do Obama’s fear-based threats. As Dr. Machan says in his editorial today, Americans just need to say NO.

“You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out.” – Andrew Jackson

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A thousand pictures is worth one word

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by Jeff Clark, Big Gold
Posted July 15, 2011

IN SPITE OF CONSTANT HEADLINES ABOUT DEBTS AND DEFICITS, most Americans don’t really believe the U.S. dollar will collapse. From knowledgeable investors who study the markets to those seemingly too busy to worry about such things, most dismiss the idea of the dollar actually going to zero.

History has a message for us: No fiat currency has lasted forever. Eventually, they all fail.

BMG BullionBars recently published a poster featuring pictures of numerous currencies that have gone bust. Some got there quickly, while others took a century or more. Regardless of how long it took, though, the seductive temptations allowed under a fiat monetary system eventually caught up with these governments, and their currencies went poof!

As you scroll through the 23 banknotes (fiat currencies) below, you’ll see some long-ago casualties. What’s shocking, though, is how many have occurred in our lifetime. You might count how many currencies have failed since you’ve been born. You might suspect this happened only to third world countries. You’d be wrong. There was no discrimination as to the size or perceived stability of a nation’s economy; if the leaders abused their currency, the country paid the price.

So what’s the one word for the “thousand pictures” below? Worthless.

Yugoslavia – 10 billion dinar, 1993

Zaire – 5 million zaires, 1992

Venezuela – 10,000 bolívares, 2002

Ukraine – 10,000 karbovantsiv, 1995

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500 Million debt-serfs: the European Union is a neo-feudal Kleptocracy

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by Charles Hugh Smith
Posted July 22, 2011 on Of Two Minds

The banks of Europe are the new Feudal Manors and Masters. All Europeans now serve them as debt-serfs in one way or another.

IF WE KNOCK DOWN ALL THE FLIMSY SCREENS OF ARTIFICE AND OBSCURING COMPLEXITY, what we see in Europe is a continent of debt-serfs, indentured to the banks under the whip of the European Union and its secular religion, the euro. I know this isn’t the pretty picture presented by the EU Overlords, of a prosperity built not just on debt, but on resolving the problem of debt with more debt, but it is the reality behind the eurozone’s phony facade of economic “freedom.”

What else can we call the stark domination of the big banks other than Neo-Feudalism? In one way or another, every one of the 27-member nations’ citizens are indentured to the big international banks at risk in Europe, most of which are based in Europe.

Amidst the confusing overlay of voices and agendas, there is really only one agenda item: save the big European banks. Everything else is just mechanics. The banks are the new feudal manor houses, the bankers are the new feudal lords, and the politicians of the EU and its influential member nations are the servile vassals who enforce the “rule of law” on the serfs.

Here is the fundamental fact: there are trillions of euros of debt which can never be paid back. In a non-feudal system, one in which the banks were not the Masters, then this fact would be recognized and acted upon: something like 50% of the debt would be written off in one fell swoop, all the banks whose assets had just been wiped out would be declared insolvent and liquidated, the remaining debt would be sized to the economic surplus of each debtor nation, and a new, decentralized banking sector of dozens of strictly limited, smaller banks would be established.

To the degree that is “impossible,” Europe is nothing but a Neo-Feudal Kleptocracy serving its Banker Lords.

The Greek worker whose pay has been slashed in the “austerity” demanded by the banks serves the Banker Lords, as does the German worker who will be paying higher taxes to bail out Germany and France’s Banker Lords. Though the German is constantly told he is bailing out Greece, the truth is Greece is just the conduit: he’s actually bailing out the EU’s Banker Lords.

We can clear up much of the purposeful obfuscation by asking: exactly what tragedy befalls Europe if all the sovereign debt in the EU was wiped off the books? The one and only “tragedy” would be the destruction of the “too big to fail” banks, not just in Europe but around the world. As the big European banks imploded, then their inability to service their counterparty obligations on various derivatives to other big banks would topple those lenders.

While the political vassals call that possibility a catastrophe, it would actually spell freedom for Europe’s 500 million debt serfs. From the lofty heights of the Manor House, then the loss of enormously concentrated power and wealth is indeed a catastrophe for the Lords and their political lackeys. But for the debt-serfs facing generations of servitude for nothing, then the destruction of the banks would be the glorious lifting of tyranny.

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The top five places NOT to be when the dollar collapses

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by Silver Shield
Posted June 23rd,2011

http://dont-tread-on.me/top-5-places-not-to-be-when-the-dollar-collapses/

THE DOLLAR COLLAPSE WILL BE THE SINGLE LARGEST EVENT IN HUMAN HISTORY. This will be the first event that will touch every single living person in the world. All human activity is controlled by money. Our wealth, our work, our food, our government, even our relationships are affected by money. No money in human history has had as much reach in both breadth and depth as the dollar. It is the de facto world currency. All other currency collapses will pale in comparison to this big one. All other currency crises have been regional and there were other currencies for people to grasp on to. This collapse will be global and it will bring down not only the dollar but all other fiat currencies,as they are fundamentally no different. The collapse of currencies will lead to the collapse of ALL paper assets. The repercussions to this will have incredible results worldwide. (Read the Silver Bullet and the Silver Shield to protect yourself from this collapse.)

Thanks to the globalization and the giant vampire squids of the Anglo-American Empire, the dollar is the world’s reserve currency. It supports the global economy in settling foreign trade, most importantly the Petro Dollar trade. This money is recycled through the City of London (not to be confused with London) and New York. This fuels our corporate vampires that acquires and harvests the wealth of the world. The corporate powers suppress REAL assets like natural resources and labor to provide themselves massive profits. This Fascist, Statist, Collectivist model provides the money into the economy to fund an ever increasing federal government. That government then grows larger and larger enriching its minions with jobs to control their fellow citizens. Finally, to come full circle, the government then controls other nations through the Military Industrial Complex.

This cycle will be cut when the mathematically and inevitable collapse of the dollar occurs. In order for our debt based money to function we MUST increase the debt every year in excess of the debt AND interest accrued the year before or we will enter a deflationary death spiral. When debt is created, money is created. When debt is paid off, money is destroyed. There is never enough to pay off the debt, because there would be not one dollar in existence.

We are at a point where we either default on the debt, willingly or unwillingly, or create more money/debt to keep the cycle moving. The problem is if you understand anything about compounding interest, we are reaching the hockey stick moment where the more debt that is incurred, the less effective it is and this leads us to hyperinflation. There are only two actors needed for this hyper inflation, the Lender of Last Resort, the Fed,and the Spender of Last Resort, the government. These two can, and will, blow up the system. I believe they will wait until the next crisis and the whiff of deflationary depression before they fire up the printing presses. That crisis is coming very soon at the end of this summer or fall. The money and emergency measures are worn out. The fact is that NONE of the underlying problems that caused the 2008 crisis have been resolved. The only thing that has happened is that instead of corporate problems, we now have nation problems. In this movie Greece will play the role of Lehman Brothers and the United States will play the role of AIG. The problem is there is nowhere to kick the can down the road and there is no world government to absorb the debt, yet…(Problem,Reaction,Solution.)

So this leads me to the top five places not to be when the dollar collapses:

1. Israel- This Anglo-American beach head into the Middle East was first conceived by the most powerful family in the world,the Rothschilds, in 1917. The Balfour Declaration said that there will be a Zionist Israel years before World War Two and the eventual establishment of Israel. Israel has not been a good neighbor to its Muslim nations and has always had the two biggest bullies on the block at its back. When the dollar collapses, the United States will have much too much on its plate both domestically and internationally to worry about such a non-strategic piece of land. This will leave Israel very weak at a time when tensions will be high. This very thin strip of desert land will not be able to withstand the economic reality of importing its food and fuel or the political reality of being surrounded by Muslims.

2. Southern California- The land of Fruits and Nuts turns into Battlefield Los Angeles. Twenty million people packed into an area that has no water and thus food is not good to say the least. Throw on top of the huge wealth disparities and the proximity to a narco state and this does not bode well. We have seen riots for Rodney King, what will happen when the dollar is destroyed and food and fuel stop coming into this area? People will get desperate and do crazy things, especially when a huge proportion of its citizens are on anti-depressants. If food and fuel cannot get in, what about Zolfot? At a time when the world is falling apart, they lack the ability to deal with this new paradigm. If people come off of these drugs too fast they suffer psychotic breaks and you will have thousands of shootings or suicides.

3. England- The Land of the Big Brother and former Empire of world wide slave and drug trade will suffer heavily. The stiff upper lip that their the British Elite ingrained into their sheeple will not work any more as the British population explodes. The human character will sacrifice and unite for a foreign enemy, but not if the enemy has always been the Elite. The Anglo-American Empire may pull off another false flag to distract its population on another Emmanuel Goldstein like in 1984, but I feel this collapse will happen before they pull it off. This will make all eyes point at the British Elite as solely responsible for this catastrophe. We have seen massive riots for soccer matches with hooligans. What will happen when this island with very little food and fuel gets cut off?

4. New York City- Another large urban area living too high on the dollar hog. NYC is the area I moved out of in 2008. There is little doubt that all of the wealth in New York, New Jersey and Connecticut is derived from Wall Street wealth. The savings and investments of the whole nation and much of the world flows through this financial capital. As the world wakes up to the massive financial fraud, this will lead to the destruction of capital like we have never seen before. This will have tremendous effects on the regional economy as people (perhaps owning very expensive cars) suddenly wonder where their next meal is coming from.

5. Washington D.C.- The political collapse of the Federal Government will wreak havoc on the hugely inflated local economy. As more and more states find it necessary to assert their natural control, the Federal Government will suddenly lose power and importance as the whole world suffers from a Global Hurricane Katrina. The money that they create and spend will become worthless and the government minions’ pensions will evaporate. Millions that once relied on the ability to force others to send their money to them will learn that the real power has always been at the most local level. Massive decentralization will be the answer to globalization gone mad. Local families and communities will forgo sending money and power out of their community as they will care about their next meal and keeping warm.

“You can ignore reality,but you can’t ignore the consequences of ignoring reality.” -Ayn Rand

To sum up,those areas that have lived highest on the hog in the dollar paradigm will most likely be the worst places to live when the dollar collapses. Many of you will find this article of passing interest, but rest assured this dollar collapse is coming. It is a mathematical inevitability. We will not be as fortunate to muddle through this collapse like we did in 2008 when it was a corporate problem. This time around, it is a national and global problem. The global Ponzi scheme has run out of gas as the demographics decline, as cheap abundant oil declines, as hegemonic power declines. This comes at a time when we reach the exponential or collapse phase of our money. The Irresistible Force Paradox says, ”What happens when an unstoppable force meets an immovable object?” We are about to find out,when infinite money hits a very finite world.

If you want to become aware and prepared for this collapse, please join the free Sons of Liberty Academy.

Memento Mori: Remember that you are a mortal man

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from Jesse’s Café Américain
Posted 24 July 2011

IT IS SAID THAT DURING THE ROMAN TRIUMPH, in which a great hero was recognized by a procession through the city, generally for a military victory, a slave was positioned behind them, whispering in their ear:

“Memento mori,”  roughly speaking  ‘Remember that thou art a man.

As you may recall, Rome had become a Republic, after the overthrow of its monarchy, and enjoyed a period of Hellenistic influence, both in science and philosophy. In its decline into the reign of the imperial, god-like emperors and their increasingly idiot and sociopathic successors and sons, the elite became utterly distinct from the people by self-decree. ‘They would become as gods’ is a hallmark of an empire on the road to decline and decay, repeatedly endlessly through history.  It is the logical end of the will to power, in which none will be served but oneself, with power as an obsessive distortion of self-preservation and ego.

Death is the great leveler, and the balancer of the scales of fortune. Perhaps a member of the middle class can whisper this to the financiers and the politicians, those newly made masters of the universe, as they bask in their moments of power and triumph, and forget their commonality with the people.

Better to have someone whisper in your ear, than succumb to the excess of self-delusion and have the crowd cut it off with your head. But madness has no discourse with logic.

Roman Art: Memento mori, a philosophical theme during the Hellenistic period, an allegory of death that has rebalanced and weighs the same as all people regardless of their wealth and social status, with symbols of Life and Death.

Illustration above: Mosaic from Pompeii. 2nd style. 47×41 cm Museo Archeologico Nazionale, Naples

 

 

Gold and silver: We were right – they were wrong

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by Brandon Smith of Alt Market
Posted July 25, 2011

ONLY NOW, AFTER THREE YEARS OF ROLLER COASTER MARKETS, EPIC DEBATES, and gnashing of teeth, are mainstream financial pundits finally starting to get it. At least some of them, anyway.

Precious metals have continued to perform relentlessly since 2008, crushing all naysayer predictions and defying all the musings of so called “experts”, while at the same time maintaining and protecting the investment savings of those people smart enough to jump on the train while prices were at historic lows (historic as in ‘the past 5000 years’).

Alternative analysts have pleaded with the public to take measures to secure their hard earned wealth by apportioning at least a small amount into physical gold and silver. Some economists, though, were silly enough to overlook this obvious strategy. Who can forget, for instance, Paul Krugman’s hilarious assertion back in 2009 that gold values reflect nothing of the overall market, and that rising gold prices were caused in large part by the devious plans of Glen Beck, and not legitimate demand resulting from oncoming economic collapse.

To this day, with gold at $1600 an ounce, Krugman refuses to apologize for his nonsense. To be fair to Krugman, though, his lack of insight on precious metals markets is most likely deliberate, and not due to stupidity, being that he has long been a lapdog of central banks and a rabid supporter of the great Keynesian con. [And he a Nobel Prize winner!] Some MSM economists are simply ignorant, while others are quite aware of the battle between fiat and gold, and have chosen to support the banking elites in their endeavors to dissuade the masses from ever seeking out an alternative to their fraudulent paper. The establishment controlled Washington Post made this clear with its vapid insinuation in 2010 that Ron Paul’s support of a new gold standard is purely motivated by his desire to increase the value of his personal gold holdings, and not because of his concern over the Federal Reserve’s destructive devaluing of the dollar!

So, if a public figure owns gold and supports the adaptation of precious metals to stave off dollar implosion, he is just trying to “artificially drive up his own profits”. If he supports precious metals but doesn’t own any, then he is “afraid to put his money where his mouth is”. The argument is an erroneous trap, not to mention, completely illogical.

Numerous MSM pundits have continued to call a top for gold and silver markets only to be jolted over and over by further rapid spikes. Frankly, it’s getting a little embarrassing for them. All analysts are wrong sometimes, but these analysts are wrong ALL the time. And, Americans are starting to notice. Who beyond a thin readership of mindless yuppies actually takes Krugman seriously anymore? It’s getting harder and harder to find fans of his brand of snake oil.

Those who instead listened to the alternative media from 2007 on have now tripled the value of their investments, and are likely to double them yet again in the coming months as PM’s and other commodities continue to outperform paper securities and stocks. After enduring so much hardship, criticism, and grief over our positions on gold and silver, it’s about time for us to say “we told you so”. Not to gloat (ok, maybe a little), but to solidify the necessity of metals investment for every American today. Yes, we were right, the skeptics were wrong, and they continue to be wrong. Even now, with gold surpassing the $1600 an ounce mark, and silver edging back towards its $50 per ounce highs, there is still time for those who missed the boat to shield their nest eggs from expanding economic insanity. The fact is, precious metals values are nowhere near their peak. Here are some reasons why…

Debt ceiling debate a final warning sign

If average Americans weren’t feeling the heat at the beginning of this year in terms of the economy, they certainly are now. Not long ago, the very idea of a U.S. debt default or credit downgrade was considered by many to be absurd. Today, every financial radio and television show in the country is obsessed with the possibility. Not surprisingly, unprepared subsections of the public (even conservatives) are crying out for a debt ceiling increase, while simultaneously turning up their noses at tax increases, hoping that we can kick the can just a little further down the road of fiscal Armageddon. The delusion that we can coast through this crisis unscathed is still pervasive.

Some common phrases I’ve heard lately: “I just don’t get it! They’re crazy for not compromising! Their political games are going to ruin the country! Why not just raise the ceiling?!”

What these people are lacking is a basic understanding of the bigger picture. Ultimately, this debate is not about raising or freezing the debt ceiling. This debate is not about saving our economy or our global credit standing. This debate is about choosing our method of poison, and nothing more. That is to say, the outcome of the current “political clash” is irrelevant. Our economy was set on the final leg of total destabilization back in 2008, and no amount of spending reform, higher taxes, or austerity measures, are going to change that eventuality.

We have two paths left as far as the mainstream economy is concerned; default leading to dollar devaluation, or, dollar devaluation leading to default. That’s it folks! Smoke em’ if you got em’! This train went careening off a cliff a long time ago.

If the U.S. defaults after August 2, a couple of things will happen. First, our Treasury Bonds will immediately come into question. We may, like Greece, drag out the situation and fool some international investors into thinking the risk will lead to a considerable payout when “everything goes back to normal”. However, those who continued to hold Greek bonds up until that country’s official announcement of default know that holding the debt of a country with disintegrating credit standing is for suckers. Private creditors in Greek debt stand to lose at minimum 21% of their original holdings because of default. What some of us call a “21% haircut”.

With the pervasiveness of U.S. bonds around the globe, a similar default deal could lead to trillions of dollars in losses for holders. This threat will result in the immediate push towards an international treasury dump.

Next, austerity measures WILL be instituted, while taxes WILL be raised considerably, and quickly. The federal government is not going to shut down. They will instead bleed the American people dry of all remaining savings in order to continue functioning, whether through higher charges on licensing and other government controlled paperwork, or through confiscation of pension funds, or by cutting entitlement programs like social security completely.

Finally, the dollar’s world reserve status is most assuredly going to be placed in jeopardy. If a country is unable to sustain its own liabilities, then its currency is going to lose favor. Period. The loss of reserve status carries with it a plethora of very disturbing consequences, foremost being devaluation leading to extreme inflation.

If the debt ceiling is raised yet again, we may prolong the above mentioned problems for a short time, but, there are no guarantees. Ratings agency S&P in a recent statement warned of a U.S. credit downgrade REGARDLESS of whether the ceiling was raised or not, if America’s overall economic situation did not soon improve. The Obama Administration has resorted to harassing (or pretending to harass) S&P over its accurate assessment of the situation, rather than working to solve the dilemma. Ratings company Egan-Jones has already cut America’s credit rating from AAA to AA+.

Many countries are moving to distance themselves from the U.S. dollar. China’s bilateral trade agreement with Russia last year completely cuts out the use of the greenback, and China is also exploring a “barter deal” with Iran, completely removing the need for dollars in the purchase of Iranian oil (which also helps in bypassing U.S. sanctions).

So, even with increased spending room, we will still see effects similar to default, not to mention, even more fiat printing by the Fed, higher probability of another QE announcement, and higher inflation all around.

This period of debate over the debt ceiling is liable to be the last clear warning we will receive from government before the collapse moves towards endgame. All of the sordid conundrums listed above are triggers for skyrocketing gold and silver prices, and anyone not holding precious metals now should make changes over the course of the next month.

What has been the reaction of markets to the threat of default? Increased purchasing of precious metals! What has been the reaction of markets to greater spending and Fed inflation? Increased purchasing of precious metals! The advantages of gold and silver are clear…

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Chinese Real Estate and the Civil Unrest Powder Keg

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by Justice Litle
Editor, Taipan Publishing Group 
Posted 20 July 2011

In China, a massive real estate bubble has left 64 million apartments vacant – and millions of laborers angry.

Things are getting heated in western China. Via The Wall Street Journal:

BEIJING — Chinese police “gunned down” several rioters after four people were killed in an attack on a police station in the northwestern region of Xinjiang, the state media reported, in what appeared to one of the most violent incidents in the mostly Muslim area since it was shaken by ethnic rioting in 2009.

Two security personnel and two hostages were killed, and one other security officer was injured in the attack, which began around midday Monday in Hotan, a small, remote oasis city on the edge of the Taklamakan desert, the state-run Xinhua news agency said. The agency gave no details of how many attackers were killed or injured.

It is hard to know the frequency or intensity of “civil unrest” incidents, due to media suppression and spotty regional coverage. But it is clear the necessary conditions for sparking unrest – a civil unrest brushfire if you will – are in place.

One dynamic that could touch off the inferno – empty Chinese apartments.

By some estimates, China has as many as 64 million apartments that remain unlived in. This is a function of the “ghost cities” phenomenon (more on that in a minute), in which vast metropoli are constructed with no rhyme or reason.

Why would this be a factor for unrest? Because even as these apartments go empty, gathering dust waiting for renters who never come, poor Chinese laborers are living in epically crowded conditions. For all of China’s phantom real estate, there are multiple families sharing tiny domiciles, with as many as 11 in a two-bedroom apartment.

It doesn’t make sense. With so many residences barren and empty, why is the Chinese labor class packed in like human sardines?

Because the shiny new apartments are far too expensive for the average Chinese worker to afford – orders of magnitude more than the average salary, with very strict payment terms (50% up front, 36 months for the rest).

The Chinese real estate market is booming, nonetheless, because property developers keep finding ways to finance construction – and wealthy Chinese investors keep buying. Empty buildings will often see units snapped up by out-of-town buyers, only to have “for rent” signs go up in the windows a short time later.

The vast majority of apartments remain empty. Sold by Ponzi real estate developers… bought by Ponzi investors… a self-sustaining cycle in which prices go up because the buyers are making them go up. It’s the “greater fool theory” in full effect.

Here’s a thought: Why don’t Chinese officials just order large price markdowns on these expensive, empty albatrosses, so that the crowded laboring class can move into them and have nice places to live?

There is just one big problem with that notion: A wholesale markdown on Chinese real estate, to levels anywhere near what real buyers can afford, would potentially bankrupt China’s property developers… thoroughly outrage the well-connected property investor class… and lead to a full-blown banking crisis as hundreds of billions in loans went bad.

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