Monday, September 27, 2010
From Business Insider:
Property stocks in China were weak today due to media reports that the Beijing and Shanghai authorities were investigating the high vacancy rate for Chinese property. Markets are worried they'll be shocked by what they discover and clamp down on speculation even harder than they have.
How large might the vacancy problem be? Here's a taste:
Recent statistics show that there are about 64 million apartments and houses that have remained empty during the past six months, according to Chinese media reports. On the assumption that each flat serves as a home to a typical Chinese family of three (parents and one child), the vacant properties could accommodate 200 million people, which account for more than 15% of the country’s 1.3 billion population. But instead, they remain empty. This is in part because many Chinese believe that a home is not a real home unless you own the flat.
And so people prefer buying to renting, and as a result, the rental yield is relatively low.
Why would so many properties be held vacant? They're seen as long-term investments, even if renters aren't available. This is due to the dearth of investment options available to most Chinese, butting up against their rapid wealth creation.
They need to put their money somewhere, but the stock market is under pressure and bank interest doesn't cover inflation. So they plunk their money into a new property, just as a place to store their wealth, even if they don't intend to live in the place and can't find renters.
Multiply this behavior by a few hundred million, and the result is enough vacant properties to house over half of America.
BEIJING, Sep.25 (Xinhuanet) -- International gold prices rallied to record highs on Friday, with spot prices nearing 1300 US dollars an ounce. China's gold prices followed the trend and continued to climb. But consumer enthusiasm hasn't been affected.
It's China's traditional gold rush. The peak season for gold sales coincides with the two national holidays.
Impacted by a weaker US dollar and holiday consumption, international gold prices hit record highs.
In China,the price of pure gold exceeded 340 yuan per gram (?). But consumer enthusiasm is just as high as the gold prices.
One resident said "For us, the price is very high. But we need to buy gold now since the price continues to increase."
Consumers have flooded into gold shops, to find their perfect accessory.
Liu Ru, Sales Manager of Gold Shop said "Chinese people share a concept. That is to buy gold when the price is climbing. Since now it is holiday, many customers buy gold accessories as presents for relatives and friends. And also it is wedding season, increasing gold demand."
Silver prices have also soared, and even reached a 30-year high... making investments in the grey metal more attractive than ever.
Analysts say the continuous decline of the US dollar has stimulated investors to choose safe haven products such as gold.
And with high consumption and investment demand, gold prices will continue to rise in coming days.
As anticipated by LEAP/E2020 last February in the GEAB No. 42, the second half of 2010 is really characterized by a sudden worsening of the crisis marked by the end of the illusion of recovery maintained by Western leaders
(1) and the thousands of billions swallowed up by the banks and the economic « stimulation » plans of no lasting effect. The coming months will reveal a simple, yet especially painful reality: the Western economy, and in particular that of the United States
(2), never really came out of recession
(3). The startling statistics recorded since summer 2009 have only been the short-lived consequences of a massive injection of liquidity into a system which had essentially become insolvent just like the US consumer
(4). At the heart of the global systemic crisis since its inception, the United States is, in the coming months, going to demonstrate that it is, once again, in the process of leading the economy and global finances into the « heart of darkness »
(5) because it can’t get out of this « Very Great US Depression
(6) ». Thus, coming out of the political upheavals of the US elections next November, with growth once again negative, the world will have to face the « Very Serious Breakdown » of the global economic and financial system founded over 60 years ago on the absolute necessity of the US economy never being in a lasting recession. Now the first half of 2011 will dictate that the US economy take an unprecedented dose of austerity plunging the planet into new financial, monetary, economic and social chaos (7). ........read on
From the NIA:
In recent days, Japan has intervened in the foreign currency market to artificially drive down the value of the yen. Japan's actions to weaken the yen have driven it from 83 to 85.73 against the U.S. dollar. Most analysts in the mainstream media are portraying this as Japan's attempt to "head off a deflation spiral". Almost everybody is applauding Japan's move, saying it was needed in order to "shore up its export-driven economy".
The truth is, although Japan claims to be helping Japanese citizens with this move, Japanese citizens are the ones who will actually suffer. Despite Japan's economy entering into recession last year, the Japanese were able to maintain their same standard of living because prices were falling due to their strong currency. Some of the largest Japanese exporters like Toyota and Sony saw their revenues decline last year by 20.8% and 12.9% respectively, but this was only bad for shareholders of these companies. Despite rapidly declining revenues for Japanese exporters, Japan's unemployment rate only reached a peak of 5.6% last year and is now down to 5.2%.
The Japanese should be happy and grateful for how strong their economy is compared to the U.S. economy. When it comes to exporters in Japan, their problem is not the strong yen, but the weak U.S. dollar. If Japanese exporters allow the U.S. dollar to collapse, their revenues will continue to decline substantially, but that is a healthy part of a free market economy. Within a year or two, a strengthening yen would allow the Japanese to spend more on their own goods, and revenues for Toyota and Sony would come back strong.
Japan's efforts to postpone a few Japanese corporations going through a brief but tough readjustment period are helping to artificially prop up the standard of living for Americans one last time. NIA believes that the Japanese better be careful what they wish for. Never before in world history has nearly every developed country been in battle with each other to have the weakest currency. Asian producing countries want their currencies to be the weakest so that they can have the honor of shipping their products to Americans who can't afford them......read on
By Rick Ackerman:
For nearly twenty years, we haven't flinched from our prediction that the massive debt build-up of the last generation would precipitate out as a deflationary bust. That is what we still expect, although we now believe there is likely to be a hyperinflationary phase at some point as the financial system implodes. But the bottom line is that no matter how things play out, America 's standard of living will fall more steeply than at any other time since the Great Depression. As for the deflation-vs.-hyperinflation "debate," it is useful only to the extent it helps predict how mortgage debtors will fare as economic disaster unfolds. We seriously doubt they will be "saved" by the kind of hyperinflation that would put hundred-thousand-dollar bills in Joe Homeowner's wallet. Imagine how mortgage lenders would react if Joe could peel off three or four of those bills and say, "Okay, pal, we're square." This scenario will seem particularly unlikely to those who believe that these economic hard times have been engineered by Masters of the Universe intent on stealing our property. Trust us on this: If there's a hyperinflation, it is the rentiers who will get screwed most ruinously, not the little guys.
Even so, that doesn't rule out the prospect of a fleeting, hyperinflationary spike on the way down, since widespread notions concerning the dollar's true value could change precipitously overnight. We mention this because notions are already beginning to change in ways that leave the dollar increasingly vulnerable to a global run. The exploding caldera of fear that will eventually bring this about bubbled to the surface yesterday when the Fed made clear that it is absolutely clueless about how to get the economy moving. The central bankers' muddled talk of yet more "quantitative easing" (QE2) is about as reassuring as the promise of more sanctions against Paul Krugman may be the last person in America who still believes that additional heaps of "stimulus" will do the trick. On Wall Street, however, the belief is clearly ascendant that QE2 will only wreck the dollar without providing any lift to the economy. That could explain why stocks fell yesterday while gold and silver soared. Not that the yahoos on Wall Street exhibited perfect knowledge. To the contrary, the broad averages shot up initially, driven by headless-chicken panic; and T-bonds finished the day with anomalously big gains despite the louche tittering about further easing.
Peter Schiff has provided the most plausible scenario for a hyperinflation. He foresees a day when confidence in the dollar collapses, forcing the Fed to become the sole buyer of Treasury debt. When municipal and corporate bond traders realize on that same day that there is no official support for their markets, private debt will go into a death spiral, forcing the Fed to monetize all bonds. Under the circumstances, the Fed would not become merely domestic debt's buyer of last resort, but the only buyer. Voila! Hyperinflation.
It should be noted that it is not some certain quantity of money injected into the banking system that will cause hyperinflation; rather, it will be the repudiation of all dollars already in circulation. Holders of physical dollars will panic to exchange them for anything tangible, causing the dollar's value to fall to zero in mere days. Everything needed to trigger this collapse is already baked in the pie, and it is only the truly benighted, Nobelist Paul Krugman foremost among them, who cannot see the obvious. As for mortgage debt, you will still owe $250,000 on your home the Day After, except that your home will be much more deeply underwater than before - worth perhaps $20,000 instead of $180,000. Mortgage lenders will have to work with you - work with scores of millions of homeowners in the same boat - to bring about a reconciliation. No one can predict how already-unpayable mortgage debt will ultimately be paid, but it is almost certain to require a radical change in our laws in order to avoid the kind of social upheaval that could jeopardize the very rule of law.