This is a really nice summary of things I knew before in a very general way but it put it all together in a big picture analysis and also added details that were fresh to me.
China's leaders have a 'theory of government' and a 'theory of society' based on their natal communism. They also have a 'theory of money' which seems to work well in the modern world. These theories allow for much experimentation, trial and error, mistakes and rectification; this article shows how the Chinese real estate market got into trouble, but emerged in a socially useful way.
Housing price bubbles are particularly bad because: a) they encourage wasteful consumption and lack of ambition and innovative business creation among those lucky to be owners of housing when the bubble begins to inflate; b) they inhibit household formation by young people who don't have rich parents to gift them property, leading to birth deficit and thereafter pressure for immigration to supply missing workers; c) because housing bubble benefits so many voters, much more politically difficult to burst than ordinary speculative bubbles and even results in policies to further inflate the bubble, like mortgage subsidies, restrictions on building new housing, pressure for more immigration to increase housing demand, etc. Canada has all the issues, USA has them to a much lesser extent. Both Canada and USA will be forced to deflate their housing bubbles via inflation (bring down real value without reducing nominal value), to avoid a debt deflation. There will be much gnashing of teeth, because the middle class hates inflation. Krugman's prediction of increasingly falsified inflation statistics is the path of least resistance.
China has successfully deflated the housing bubble and reoriented to technological R&D and industrial capacity expansion, but at what cost?? 🤣
Cost to whom?
This is an insider joke from the very recommendable site Moon of Alabama:
https://www.moonofalabama.org/2025/01/sowing-doubt-about-china-but-at-what-cost.html
Yeah, Man! I've been a faithful "lurker" (consumer rather than contributor) there for about a decade. That's how I discovered Roger & Karl.
This is a really nice summary of things I knew before in a very general way but it put it all together in a big picture analysis and also added details that were fresh to me.
Thinking with doing can be so dynamic .
If only Canada could deflate and learn from the Chinese how to do things .
No hope seen yet in my view.
China's leaders have a 'theory of government' and a 'theory of society' based on their natal communism. They also have a 'theory of money' which seems to work well in the modern world. These theories allow for much experimentation, trial and error, mistakes and rectification; this article shows how the Chinese real estate market got into trouble, but emerged in a socially useful way.
Good idea to build up on public housing stock when prices are low! Brilliant 👍
Excellent and enlightening article. Thank you!
Housing price bubbles are particularly bad because: a) they encourage wasteful consumption and lack of ambition and innovative business creation among those lucky to be owners of housing when the bubble begins to inflate; b) they inhibit household formation by young people who don't have rich parents to gift them property, leading to birth deficit and thereafter pressure for immigration to supply missing workers; c) because housing bubble benefits so many voters, much more politically difficult to burst than ordinary speculative bubbles and even results in policies to further inflate the bubble, like mortgage subsidies, restrictions on building new housing, pressure for more immigration to increase housing demand, etc. Canada has all the issues, USA has them to a much lesser extent. Both Canada and USA will be forced to deflate their housing bubbles via inflation (bring down real value without reducing nominal value), to avoid a debt deflation. There will be much gnashing of teeth, because the middle class hates inflation. Krugman's prediction of increasingly falsified inflation statistics is the path of least resistance.