Monday, March 4, 2013

MUST SEE: "60 Minutes" on China's Ghost Cities

At present, the Chinese economy is a combination of free markets and bizarre central planning. These ghost cities are heavily financed by local governments and the money that investors use to buy the properties is pumped about by China's central bank, The People's Bank of China. So much money has been pumped out by the PBOC that price inflation is starting to cause civil unrest. The PBOC and the government of China are trapped, the only way they can prop up the bubble is by more money printing, but that will cause price inflation to accelerate even more. If they stop printing, the real estate market and stock market will crash. It is possible it will it could result in the greatest crash in economic history.

The below "60 Minutes" clip provides some sense of the bizarre ghost towns and is important to view, but fails to explore the money printing and government role in these projects.

When this thing crashes, one way or another, it will be blamed on China moving "too fast" in the direction of free markets. It will be a myth, real free markets aren't goosed by government planner financing and involvement or massive central bank money printing.

1 comment:

  1. Governments are temporarily ruining the globe. I have little money, but it would be cool to buy a great apartment in China after the crash.

    It is a tragedy that the government in China is interfering in what could be the greatest economic success story continuing to unfold. What a crime, too, that the state is restricting their choices of investment and consumption.

    No doubt more reachable housing would be built for lower-income people, if the government would get out of the way. Sounds very familiar to us here.

    Down with the centralized state, through change of hearts and minds, not weapons. Viva Cristo Rey!