ding73ding "Harper is simply the worst of what democracy has to offer."



Although I agree with your description of Harper, I have to ask, have you ever been to a political meeting? It was one of the most exasperating experiences I have ever undertaken. The quality of the dialogue was appalling. I felt like I was in a bar with a bunch of drunks from Toronto watching the leafs lose. Cliches, pat answers, standard political tropes being exchanged, more like a liturgy.

When I would ask a question or tried to bring something up, it was like I was talking to myself. No one, and I mean no one had any interest in policy discussion. It was more like a cheerleaders training class, these are your cues, these are your pat phrases etc.

everyone should give it a try sometime, its a good reality check for the politically frustrated.

I am aware that it is cash at the Canadian end, how do you know what is happening and the Taiwan/HK end? When a Taiwanese or HK buyer buys one of Lee Ka Shing's Canadian properties is it all cash and how do you know that?

People mortgage properties, businesses all the time and shift the assets to other uses. I'm not that confident either, but one wonders.

As to how one controls this, I think that it will be done through local taxes and assesments. My guess is that over the next 10 years or so, as federal and provincial jurisdictions lose their ability to support community infrastructure the burden will fall on municipalities and regional districts.

In Vancouver taxes are based on the resent market valuations. At present the rate is unevenly applied with commercial properties paying 5 times the amount of home owners. Will these business investors be willing or able to pay the cost?

And as I have outlined earlier these cost are substantial. So far federal and provincial income taxes have covered a lot of the burden, If you look at recent numbers on the revenue side, we are in for a bit of sh*t kicking.

The money has to come from somewhere.

Michael,

HAVE there been real estate price bubbles brought on by HK money in other CANADAIN cities, or is Vancoucer a special case because it is favoured by ASIAN buyers?

WITHOUt waiting for your answer, if it turns out that VANCOUver is a special case, I SUGgest the following factor might be at play:

www.atimes.com/atimes/China/LB13Ad01.html


HONG KONG people are very big on feng shui. I knew even before I READ THE article that it is not unusual for a HK businessman, before opening a new business premises or relocating his office, to employ a feng shui master to inspect the premises and assess its FS merits for the sake of atracting good fortune.

I read that HKers point out that Victoria Harbour, which their city fronts up upon is in the approximate shape of an open moneybag - a feature that atracts wealth. The PEAk at rear of city gives it its mountain (Black turtle) backup (in dramatic form) whilst Victoria Harbour furnishes the open space (red Phoenix) out front.

Vancouver has the same regional landform features (CANADIAN Rockies, Georgia Strait) in a visually stark form. Looked at from the perspective of a FS devotee, it would be hard to find a city around the Pacific Rim whose regional landform FS so starkly resembles that of HONG KONG. FOR HK expats, it opens the prospect of building a second HONG KONG in a temperate climate.

Good FS is alleged to attract wealth. In Vancouver's case it seems to atract lots of moneyed HK buyers.

MW
probably a little spill over into Victoria, but am not aware of any other cities affected.

Infiniti, there have been a few scandals in the school visa program, schools not delivering on what they promised, absconding with the money, making false promises, students coming in on student visas and then disappearing into the crowd. normal stuff

the rent scam you mentioned has always been a component of the migrant scene in Vancouver, the Anglophones did it, the Italians did it, the first wave of Chinese did it etc
people who are forced to migrate to new surroundings do what the have to do in order to get buy.

don't particularity like it, but I understand it and accept it,

Hi, everyone. Sorry I went into hiding for a few days. My free time had been sucked up between watching the (American coverage of) Vancouver Olympics and writing. In just a few days I heard the word “Canada” on American TV more times than in 5+ years of living in New York, mostly on shows produced by Comedy Central (South Park and Jon Stewart).

Ahh yes I was writing in private... I wrote a draft article for ATOL! Many thanks go to Chan Akya, AQ and others for inflating my self-confidence to such unrealistic height. Hopefully ATOL would lower their standards just this once. If ever an article by “C.T. Chin” comes out, that’s me!

BTW, I renamed my ATOL identity, my previous handle is my spam siphon. I should not have used it to register on ATOL in the first place. But back then... I was so disheartened by Spengler’s forum (not by Spengler himself) that I was quite unsure atimes.net was worthy of my “true” online handle. Unfortunately some posts in the past addressing me by name would now look confusing, sorry about that!

Now back to the conversation...

Hi Michael,

How did your trip through the SOUTH go? Did you escape the cold weather or did it follow you everywhere?

This is an interesting conversation really - I am enjoying new insights into the development in Vancouver

If I may interject with the original point or rather question, we were looking at the lack of affordability of asset prices in Vancouver. So far we have determined:

a. There is huge influx of "real money" (as against leveraged money) into Vancouver property

b. The primary source is Hong Kong / China

c. Geomancy could be playing a part in the rise of property values

d. There is an imbalance between immigrants and taxpayers in terms of funding for schools, facilities


So here are the unresolved questions (in my mind) at least:

A. What are the economic implications of the above for Vancouver - for example, does a simple service like a hair cut cost more in the city as compared to other Canadian cities? Do people get paid more?

B. What are the political dynamics from the unsustainable asset prices in the city - is there clamouring for government subsidies to "Canadians"? A rise of the rabid right wing that goes against immigration in general?

Thanks

CA

Chan Akya wrote:
the notion that government servants are NECESSARILY inept is actually central to my thesis about markets.
WHY IS THAT?

Why can't you accept governments, government agencies and even certain non-government agencies (such as the Fed) to be legitimate agents in market economy? This distinction of public vs. private seem very arbitrary to me.

It wasn't so long ago that I was a committed free market faithful. But after I left HK and get a up-close-and-personal experience of many public and private sectors in Canada, The Netherlands and USA, I really find that the conventional wisdom of private=good, public=bad is plain bunk. There is just really so little daylight between public and private sectors in reality. At least, I should admit, that's the case for stable societies. For unstable, in-flux states such as wartime or rapid growth, ok perhaps there would be a "natural" tendency for private sectors to be more agile and responsive. But for stable society, hmm...

In economic analysis, money is money, there's no value judgment that this $20 bill cashed from a welfare cheque is any better or worse than that $20 bill that Best Buy took from a customer to pay for a Transformer 2 DVD (well-deserved winner of the Golden Raspberry) or another $20 bill a junkie used to buy crack. Take the $20 bill to a bank and you will get... ah... well two $10 bills?

Anyway the point is why is every person, man, woman, and child, sometimes even dead person, every family, every company, trade union, trade organization, shell corporation, church, and even political party can be treated as valid economic agent but not the government?

As long as someone or something is conducting legal transaction of goods and services with another economic agent, in my book that's a legitimate economic agent too, I don't even care if it's a government that is democratic or authoritarian or "state sponsor of terrorism" or any SWF or central bank. Just look at the historical records, you can find unending examples of both goods and bads in both public and private sectors. You can perhaps compile some kind of statistics that says on average private sector is so many percents more efficient or whatever than the public sector. But I think the difference is small, and anyway won't be enough to support a generalizable universal truth that seems to be your central thesis about markets.

Paulson makes the interesting point that the bailout of Mexico ... The company that emerged from the crisis therefore had a "false" expectation of a government bailout in future - and accordingly behaved in that fashion.

What do you suppose I should make out of this? That Clinton-Rubin should be blamed for Lehmans' miscalculation 13 years later? If a top investment bank's business model includes a calculation based on expected government bailout, if a business hasn't figured to question 13-year-old assumptions, you've just managed to lowered my meager respect for the private sector.
When you had Paulson in the fray, the decision matrix actually changed.
I am not so sure Paulson's neutrality is reliable when it comes to Clinton.
They knew, more than anyone else, that inflows from Asia were skewing the interest rate picture and with that backdrop it was impossible to avoid an asset bubble.
I continue to disagree with you about the role of Asian capital in causing the global (i.e. primarily US&EU) crisis. What was the total size of Asian capital in US economy at the peak? Before the bubble popped, China had no more than $2 trillion, let's say Japan had the same again, India? Let's say (very generously) $1 trillion. Combined with the rest of Asia it still won't crack $10 trillions, spread over a complete range of investment in every economic sectors under the sun. The US mortgage market alone ($12 trillion) already topped that number. Actually that's a poor comparison, it's too late for me to google up something better... I found a "US Household Net Worth" is $55 trillion, that's not counting corporate wealth and the US government's net worth, I suppose...

My point is that if I have a net worth of $55,000, and a bunch of my neighbors who are a bit... what's the term... "dodgy" and they have combined $10,000 in cash and offer to lend it to me to spend on booze, whores and anything. Ehh... sorry I fail to be scared.

In absolute and relative term the US and EU economy are so much bigger and wealthier than China and India, it's mind boggling that Bush/Obama & co. has the thick skin to go around blaming Asia (mainly China).

Anyway let's leave that aside for now.

Let's you are right, Asian capital are the root of the problem, and further that Fed was powerless to avoid an asset bubble (I DOTH PROTEST!). So what's the solution? STOP THOSE DAMN ASIAN MONEY AT THE BORDER! It's completely within US jurisdiction to throttle capital flow. It was in fact an entirely US initiative in 60-70s to free global capital flow. All the rules were written by the US & EU. Remember not so long ago China was begging on hands and knees to be allowed to join the dance. If a bunch of "emerging markets" managed to skew US capitalism, my first reaction is to question the underlying health of capitalism itself.

Just to put emerging market in perspective, 30 years ago, the IT age was dawning as millions of Americans brought TRS-80 and Apple II computers. 30 years ago in one of the most affluent agricultural county in China, my maternal relatives drew well water with a hand-cranked pump and enjoy electricity for 3 hours each day (6pm-9pm). They were actually the envy of the village since they could afford the hand-crank pump.

30 years ago, I was sleeping in the dark at 9:15pm and REALLY REALLY wishing to be back in HK, with the A/C roaring, sipping ice-cold odor-free water, and playing video games on my Apple II clone. Not in the wildest dream could I have imagined I would live to see the day that the POTUS would ask for help, for ANYTHING, of Communist China.

Let us take you up on the $20 bill ... funny as it may seem, its actually NOT the same whether you get it from a welfare check or from honest work. In the first case, the money is essentially a gift, and therefore has the pernicious effect of creating something for nothing. In the second, the money is earned and therefore, enhances the economy - you delivered a service, got paid, and now are using the money to buy products and services for yourself.

The government is not the same as the rest because it is merely a FUNNEL that acts between the creators of economic value - those organizations you name - and society at large. Let me explain - if there is NO government, society will continue to function as an economic unit, but not necessarily as a political one. Rich people will want security, and poor people will want facilities that they cannot afford to pay marginal rent on. Hence, you create government as a go-between i.e. collect taxes and spend the money on infrastructure as a basic goal.

Since you mentioned Hong Kong, let me relate a joke that was told to me back in 1994: apparently, HK's financial secretary every first working day of Jan calls all the major HK companies - HSBC, Hutch, Jardines etc., to find out the date on which they will report the annual results for the previous year. He then schedules the annual HK budget statement to NOT coincide on those dates - because if the HK government makes an announcement on the same day that Hutch releases results, HK newspapers will put the government budget on Page 5, and Hutch results on pages 1 to 4. The point was that basically, the HK government is a non-entity from an economic perspective. And yet, Hong Kong is the world's best city from an infrastructure perspective.

Look at everywhere else in the world where the government dominates Page 1; chances are, the infrastructure / public living standards are actually quite poor. The worst by far are the countries where a personality cult is developed in order to push the government agenda. Cuba is the best such - Castro has been on Page 1 for the past fifty years and yet, where would you rather live - HK or Cuba? If you saw the last three leaders of the HK government, would you even recognize them? What harm has the lack of public image ie. a small government done for Hong Kong?

The horrors of the Weimar Republic and Germany's subsequent slide into Nazism are still central to the thinking behind big government i.e. the government as an "economic agent of change" rather than as a "pass through mechanism".

I would say that this is what makes governments more dangerous from an economic perspective - because they wilfully create distortions in the name of the "public good". That is a slippery slope - after all, there are countries where people are beheaded in public for the same "social values".

The reason why government servants cannot be trusted is that they do not or more importantly cannot behave rationally in economic terms. They will spend money because there is a budget for it, not because there is a need to spend the money. They will choose a provider because he meets their tender guidelines, not because the contractor is going to provide value addition. Your tax money will be more often mis-spent than properly spent. Yes, even in all those "stable" societies you speak of.

Now for the Fed. When you are the central bank and see a huge imbalance in flows, created by artificial inflation of asset values and impossible assumptions of future values, it becomes your job to protect your financial sector. This you do not by the artifact of capital controls which you suggest, but by using interest rates judiciously and pre-emptively.

The lack of a freely traded CNY also means that the Fed should have considered the asset bubble implications immediately.

Ten years ago, in the 1999 Jackson Hole summit, a young central banker made a presentation on why the Fed should NOT tackle asset bubbles because of multiple factors; this was greeted rather approvingly by the chairman, Alan Greenspan. That young banker was Bernanke, who ended up succeeding Greenspan - and the rest, as the bard would say, is history.

Your numbers about US household wealth are about correct - $50 Trillion, with about $25 Trillion of total debt. The rise in debt was about $10 Trillion, but there has subsequently been about $20 trillion of assets wiped out (mainly in terms of home values and stock market decline). Hence, the total diminution of debt i.e. losses, should be that figure - and yet total losses booked to date are "only" about $1.5 Trillion. So, there is a large volume of losses yet to be revealed.

This is the reason the Fed is desperately trying to inflate its way out of the situation and the reason why the USD in terms of purchasing power will continue to get crushed. And as I subsequently wrote in "Oedipus Wrecks", whatever the US suffers from, Europe will have it worse. So the EUR is toast too ...

Hence the term, "Vestigial organs" when thinking of the USD and EUR as reserve currencies.


CA