Thinking of investing in some China real estate?
http://www.businessinsider.com/pictures ... -12?slop=1" onclick="window.open(this.href);return false;
China's Ghost Cities
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China's Ghost Cities
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The Annoyed Man
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Re: China's Ghost Cities
That's just bizarre. You wonder if they are planning a forced migration of large parts of its population from existing ancient cities to these new modern ones. Weird.
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anygunanywhere
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Re: China's Ghost Cities
O'bama is going to send the Tea Partiers there his next term when he is re-elected by those on the government teat.
Anygunanywhere
Anygunanywhere
"When democracy turns to tyranny, the armed citizen still gets to vote." Mike Vanderboegh
"The Smallest Minority on earth is the individual. Those who deny individual rights cannot claim to be defenders of minorities." – Ayn Rand
"The Smallest Minority on earth is the individual. Those who deny individual rights cannot claim to be defenders of minorities." – Ayn Rand
Re: China's Ghost Cities
anygunanywhere wrote:O'bama is going to send the Tea Partiers there his next term when he is re-elected by those on the government teat.
Anygunanywhere
and then 
cause it's prolly true...be kinda cool to cruise around there with no one inhabiting! prolly feels like "last man in the world." wonder what the climate's like there. bizarre and fascinating.
FWIW, IIRC, AFAIK, FTMP, IANAL. YMMV.
Re: China's Ghost Cities
No matter how good the Chinese real estate market might look at the given time, at the end of the day if the government decides to commandeer your property there is not much you can do it. Sadly, China has been making more strides towards the free market while the US has been moving in the opposite direction. Still, I wouldn't put any money into business that operates under such a government.
This really comes as no surprise. The government, unlike private individuals and companies, do not operate on the free market. Instead of having to offer a product or service that people actually want in order to generate the revenues required to continue their business, they extract funding by force. Instead of having to allocate scarce resources (time, materials, labor, and the currency that represents them) based on a prioritization of the possible uses of those resources, the government acts as if its own resources are superabundant (something so plentiful that the use/consumption of it by some does not impact the ability of others to do the same). And as far as the government is concerned, its resources, namely currency that represents things of real value, is superabundant since they can tax, borrow, and print at will; no cooperation with others is necessary. This means that the price mechanism, that which allocates scarce resources, does not function; it is impossible then to determine if a project is worth while or not, there is no performance appraisal. The result is malinvestment, when resources are spent on things that actually reduce wealth rather than increase wealth. The elimination of malinvestment, when resources are reallocated away from non-wealth producing projects to other things, is a recession*.
This is because wealth is not an amorphous blob of "generic resource" that can be instantly shifted from one purpose to another. Wealth is land, machinery, buildings, labor, the training/knowledge/expertise of those people who labor, and etc. that are real, physical entities. So while it may seem easy to sell off something that is a losing prospect and invest in a winner, it is impossible to instantly convert that steel mill (what was thought to be a good investment, for example) into an electronics manufacturer (which the investors think will be more capable of producing things that people value more than the things required to produce them). Sure it can be done, but those furnaces and all that other steel mill-specific equipment will be sold for a loss at best (or sit idly). All those people who were hired, the expense of hiring them, and the expense of training them too can not be recouped. To convert to the electronics factory new people and/or new training must occur, more wasted resources, just as new equipment must be procured.
To use an individual example that we are probably all familiar with, you buy are car that you think will suit you well. Then you discover that the car actually does not suit you well, so you wish to exchange it. On paper it may seem easy that you spent X on the first car, so then you can sell it for X and buy a different car without losing any money. But we all know that it is nearly impossible to do this, since others will likely value your car less today than you valued it when you bought it. So the car is sold for a loss, that money is gone, and you purchase another car, lets say for the same price as the first, and are worse off by the difference between the purchase and sale price of the first car. That first car was a malinvestment, and keeping it longer (allocating more resources to it) would have only made the loss greater when the eventual sale would occur. The fact that resources are not amorphous reduces aggregate analysis of the economy to a rather meaningless and inaccurate affair.
So in the case of Chinese ghost cities, the government forcefully obtains resources for buildings that the original owners of those resources did not value highly (or they would have built cities themselves). Those resources are no longer available for things that people do value highly (more highly than the new cities at the very least). Since the new cities are not desired, people do not live in them, thus the resources that built the cities are wasted - they are not providing anyone with greater satisfaction than they would have having been used for other purposes. But the concrete and steel of a city is not amorphous and therefore can not easily be transformed into food, clothing, cars, iPods, travel, accountants, bakers, or whatever else people would rather have. Therefore, these resources are wasted, and everyone is worse off because of it since they have fewer resource and did not gain any satisfaction (or wealth, or value, or whatever label is preferred). When this occurs on a large enough scale a market collapse, or recession, or depression, again whichever label is preferred, occurs.
*As painful as it is, recession is necessary to expunge that from the economy that consumes more value than it produces, continuing to allocate resources to malinvestments is to continue the destruction. The malinvestments must be removed so that wealth can continue to be produced and enhanced, just as a tumor must be removed, in an often painful and destructive fashion, so that the body can continue to live.
Dubai, especially since the financial collapse of '08, has been having similar issues. I read an article that stated that the housing market was so hot that entire apartment buildings and neighborhoods were newly constructed and had never been lived in, only bought and sold and bought and sold again. One owner actually shocked the developers when he actually moved into the home he bought. "Wait, you actually plan to live here, not sell it?"
For example, the Burj Dubai, tallest building in the world, is largely unoccupied.
This really comes as no surprise. The government, unlike private individuals and companies, do not operate on the free market. Instead of having to offer a product or service that people actually want in order to generate the revenues required to continue their business, they extract funding by force. Instead of having to allocate scarce resources (time, materials, labor, and the currency that represents them) based on a prioritization of the possible uses of those resources, the government acts as if its own resources are superabundant (something so plentiful that the use/consumption of it by some does not impact the ability of others to do the same). And as far as the government is concerned, its resources, namely currency that represents things of real value, is superabundant since they can tax, borrow, and print at will; no cooperation with others is necessary. This means that the price mechanism, that which allocates scarce resources, does not function; it is impossible then to determine if a project is worth while or not, there is no performance appraisal. The result is malinvestment, when resources are spent on things that actually reduce wealth rather than increase wealth. The elimination of malinvestment, when resources are reallocated away from non-wealth producing projects to other things, is a recession*.
This is because wealth is not an amorphous blob of "generic resource" that can be instantly shifted from one purpose to another. Wealth is land, machinery, buildings, labor, the training/knowledge/expertise of those people who labor, and etc. that are real, physical entities. So while it may seem easy to sell off something that is a losing prospect and invest in a winner, it is impossible to instantly convert that steel mill (what was thought to be a good investment, for example) into an electronics manufacturer (which the investors think will be more capable of producing things that people value more than the things required to produce them). Sure it can be done, but those furnaces and all that other steel mill-specific equipment will be sold for a loss at best (or sit idly). All those people who were hired, the expense of hiring them, and the expense of training them too can not be recouped. To convert to the electronics factory new people and/or new training must occur, more wasted resources, just as new equipment must be procured.
To use an individual example that we are probably all familiar with, you buy are car that you think will suit you well. Then you discover that the car actually does not suit you well, so you wish to exchange it. On paper it may seem easy that you spent X on the first car, so then you can sell it for X and buy a different car without losing any money. But we all know that it is nearly impossible to do this, since others will likely value your car less today than you valued it when you bought it. So the car is sold for a loss, that money is gone, and you purchase another car, lets say for the same price as the first, and are worse off by the difference between the purchase and sale price of the first car. That first car was a malinvestment, and keeping it longer (allocating more resources to it) would have only made the loss greater when the eventual sale would occur. The fact that resources are not amorphous reduces aggregate analysis of the economy to a rather meaningless and inaccurate affair.
So in the case of Chinese ghost cities, the government forcefully obtains resources for buildings that the original owners of those resources did not value highly (or they would have built cities themselves). Those resources are no longer available for things that people do value highly (more highly than the new cities at the very least). Since the new cities are not desired, people do not live in them, thus the resources that built the cities are wasted - they are not providing anyone with greater satisfaction than they would have having been used for other purposes. But the concrete and steel of a city is not amorphous and therefore can not easily be transformed into food, clothing, cars, iPods, travel, accountants, bakers, or whatever else people would rather have. Therefore, these resources are wasted, and everyone is worse off because of it since they have fewer resource and did not gain any satisfaction (or wealth, or value, or whatever label is preferred). When this occurs on a large enough scale a market collapse, or recession, or depression, again whichever label is preferred, occurs.
*As painful as it is, recession is necessary to expunge that from the economy that consumes more value than it produces, continuing to allocate resources to malinvestments is to continue the destruction. The malinvestments must be removed so that wealth can continue to be produced and enhanced, just as a tumor must be removed, in an often painful and destructive fashion, so that the body can continue to live.
Dubai, especially since the financial collapse of '08, has been having similar issues. I read an article that stated that the housing market was so hot that entire apartment buildings and neighborhoods were newly constructed and had never been lived in, only bought and sold and bought and sold again. One owner actually shocked the developers when he actually moved into the home he bought. "Wait, you actually plan to live here, not sell it?"
For example, the Burj Dubai, tallest building in the world, is largely unoccupied.