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Beijing Real Estate Is Worth As Much as Tokyo Real Estate Was in 1990

Written by

John Hunter

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This is a startling piece of data, from The nagging fear that QE itself may be causing deflation:

China’s top developer – says total land value in Beijing has been bid up to such extremes that is on paper worth 61.6pc of America’s GDP. The figure was 63.3pc for Tokyo at the peak of the bubble in 1990. “A dangerous level”

The situations have many differences, for example, China is a poor country growing rapidly, Japan was a rich country growing little (though in 1990 it showed more growth promise than today). Still this one of the more interesting pieces of data on how much a bubble China real estate has today. Japan suffered more than 2 decades of stagnation and one factor was the problems created by the real estate price bubble.

The global economic consequences of the extremely risky actions taken to bail out the failed too-big-too-fail banks including the massive quantitative easing are beyond anyones ability to really understand. We hope they won’t end badly that is all it amounts to. Noone can know how risky the actions to bail out the bankers is. The fact we not only bailed them out, but showered many billions of profit onto them (even after taking billions in fines for the numerous and continuing violations of law by those bailed out bankers), leaves me very worried.

It seems to me we have put enormous risk on and the main beneficiaries of the policies are the bankers that caused the mess and continue to violate laws without any consequences (other than taking a bit of the profit them make on illegal moves back sometimes).

The theme refuses to go away. India’s central bank chief, Raghuram Rajan, says QE is a beggar-thy-neighbour devaluation policy in thin disguise. The West’s QE caused a flood of hot capital into emerging markets hunting for yield, stoking destructive booms that these countries could not easily control. The result was an interest rate regime that was too lax for the world as a whole, leaving even more economies in a mess than before as they too have to cope with post-bubble hangovers.

The West ignored pleas for restraint at the time, then left these countries to fend for themselves. The lesson they have drawn is to tighten policy, hoard demand, hold down their currencies and keep building up foreign reserves as a safety buffer. The net effect is to perpetuate the “global savings glut” that has starved the world of demand, and that some say is the underlying of the cause of the long slump.

I hope things work out. But I fear the extremely risky behavior by the central banks and politicians could end more badly than we can even imagine.

Related: Continuing to Nurture the Too-Big-To-Fail Eco-system – The Risks of Too Big to Fail Financial Institutions Have Only Gotten Worse – USA Congress Further Aids The Bankers Giving Those Politicians Piles of Cash and Risks Economic Calamity Again – Investment Options Are Much Less Comforting Than Normal These Days

Comments

2 responses to “Beijing Real Estate Is Worth As Much as Tokyo Real Estate Was in 1990”

  1. Jack Avatar
    Jack

    Couldn’t agree more. Having lived through the Japanese economy second-hand throughout the 80s and 90s, it will be interesting to see how China survives their ascendance.

    Granted, China has a much larger population and natural resources to exploit than Japan did. However, it will be interesting to see how / if their political and economic systems survive the the coming turmoil.

    Interesting times.

    Reply
  2. Kiat Avatar
    Kiat

    I think things will surely end badly, when you are out of money mean you are out of money, there is no different between, human, company or country. Printing money to help the economy is just not facing the music.

    Reply

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