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Guest Post: Some Thoughts On Overseas Investing In U.S. Real Estate

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Submitted by Charles Hugh Smith from Of Two Minds

Some Thoughts on Overseas Investing in U.S. Real Estate

Overseas investor buying of U.S. real estate is a consequence of trade deficits that have built up huge surpluses of U.S. dollars that must be recycled into dollar-denominated assets. Perhaps we should welcome the investment as both necessary and positive.

What few media pundits seem to grasp is that when our trade deficits transfer hundreds of billions of dollars to other nations, those dollars have to end up in dollar-denominated assets like bonds, stocks or real estate. Mish of Mish's Global Economic Analysis has tirelessly explained this dynamic many times: when U.S. dollars (USD) end up in another country as a result of our gargantuan trade deficits, the dollars don't just vanish into some other currency. One way or another, they have to flow into one dollar-denominated asset or another.

Many people have missed the difference between dollars used to settle accounts and dollars held as a result of trade deficits. Many of those emotionally wedded to the belief that the U.S. dollar is doomed gleefully grabbed onto the news that China and Japan will swap currencies directly (yen and yuan) rather than intermediate the trade with U.S. dollars. This was mistakenly seen as a nail in the coffin of the USD.

If I am in Japan and I have yuan due to trade with China, and I want to exchange those yuan for yen, I only need USD for about 10 seconds to intermediate the exchange. Cutting out the USD simply cut the exchange costs and lowered the daily trading volume of the USD.

This reduction in the transactions needed to exchange yuan for yen did nothing to change the dollars held by China or Japan as a result of their trade surpluses with the U.S.

This also didn't lower the amount of assets or credit (debt) denominated in USD. In other words, the effect on the value of the dollar is trivial.

No matter how many exchanges the USD sitting in overseas accounts are pushed through, they still end up in dollar-denominated assets somewhere. If China exchanges its surplus USD to Saudi Arabia in exchange for oil, the USD didn't vanish or become yuan: the USD were simply transferred to Saudi Arabia, which can either exchange them with another nation for goods or services, or they use the USD to buy dollar-denominated assets: bonds, stocks, U.S.-based companies, land in the U.S., etc.

Every time overseas holders of dollars start using their monumental stash of USD to buy real estate in the U.S., domestic pundits freak out and declare "X is buying America!" What the xenophobic pundits fail to understand is the overseas holders of USD have to buy something with their surplus dollars, and if they're sick and tired of buying negative-yield bonds (i.e. the bond yield is lower than inflation) then they have little other choice but to buy land, buildings and businesses in the U.S.

The largest overseas owners of U.S. assets have long been the Europeans, chiefly the English. Tremendous sums have been sunk into the relative safety and dynamism of the U.S. economy, going back to the 16th and 17th centuries.

Foreign Investment Surges: U.S. Attracts Billions of Dollars as Investors Seek Relief From Global Turmoil:

"Foreign investment in the U.S. last year totaled $234 billion, a 14% jump over $205.8 billion in 2010, with around two-thirds of the cash coming from Europe."

There is an element of implicit racism at work when the cries of "we're being taken over" swell after the Japanese or Chinese make a signature purchase of U.S. assets: beneath the surface, the message is clear: it's OK for Caucasian Europeans to buy huge swaths of American land and built capital, but not OK for Asians to own the same percentage of assets.

Let me put this bluntly: if you don't want overseas investors to buy American assets, then stop running gigantic trade deficits with them. Once you transfer hundreds of billions of dollars a year, each and every year, to overseas accounts, the owners of those USD will have to buy something denominated in dollars. And since we presumably made those trades of our own free will to our own benefit, then it's hardly cricket to get all hot and bothered when those owners of USD seek the same thing we do: assets that return a higher yield at a lower risk.

That leads many holders of USD to U.S. real estate. As I outlined yesterday in Some Thoughts on Investing in the "Bottom" in Housing, rental properties offer attractive returns in a zero-interest rate world.

Why are the Chinese investing in Toledo?

I have raised hackles by suggesting that the U.S. remains a very attractive "safe haven" for overseas holders of USD. The people who are emotionally attached to the "dollar will be destroyed" ideology are often equally attached to the notion that the U.S. is an internationally unattractive place to live/invest.

Yes, I share the concerns about the erosion of civil liberties and the extreme over-reach of the State and concentrations of private capital in the U.S. These are real and worrisome trends I have covered in depth for years.

But we need to see the U.S. through overseas eyes--for example, from a Chinese perspective. Since we have many close friends in China, Japan, Korea and Thailand, and have traveled extensively "on the ground" in these nations over the past 20 years, I have multiple first-hand reports of conditions and perceptions in Asia.

The first thing that is attractive about the U.S. is the wide open spaces--just look how much of the country is sparsely inhabited. Compared to places constantly teeming with people, the U.S. is wide-open. (Recall that the U.S. is Meiguo in Mandarin: Beautiful Country.)

Just another landscape in America, ho-hum....

The northern side of Mt. Rainier (Sunrise):

Also noteworthy is the air is generally amazingly clean in the U.S. Even smog-ridden Los Angeles is relatively clean compared to Chinese urban air quality.

Then there's the rule of law, which despite constant abuse still exists in the U.S. Your assets will not be expropriated at the whim of a senior Party official.

These same conditions also make Australia, New Zealand, Canada, Chile and Europe attractive places to invest surplus currency. The difference between all these places and the U.S. is of course the size of the currency holdings needing a home: the long-standing trade deficits with China have stockpiled hundreds of billions of USD in China. That alone powers a much greater interest in U.S. real estate.

Despite its bloated Plutocracy and numerous structural problems, the U.S. is exceedingly stable compared to other nations and remarkably dynamic compared to less-dynamic safe-havens such as Japan.

Lastly, there are enclaves serving dozens of nationalities in the "98% of us are immigrants" U.S. (92 languages have been identified among students of the Los Angeles Unified School District.) Your religious faith, class origins, caste and all the other social attributes than limit your social and financial mobility in much (if not most) of the world don't matter that much in cosmopolitan parts of America. In general, people here are too busy to care about your personal history: just get the job done and don't rip-off/exploit others, and you are good to go about your business.

Those with assets in China are feeling increasingly insecure. Even if your wealth was earned legitimately, as opposed to being skimmed via corruption or officially sanctioned theft, it doesn't matter: when the blowback to corruption and inequality arises, everyone with assets will be a target.

This is why everyone with significant assets in China is seeking an overseas passport, green card and a safe haven for their wealth. This is a longstanding trend that seems to be picking up momentum: Hedging their bets: Officials, looking for an exit strategy, send family and cash overseas (the Economist).

THE phrase “naked official”, or luo guan, was coined in 2008 by a bureaucrat and blogger in Anhui province, Zhou Peng’an, to describe officials who have moved their family abroad, often taking assets with them. Once there, they are beyond the clutches of the Communist Party in case anything, such as a corruption investigation, should befall the official, who is left back at home alone (hence “naked”). Mr Zhou says the issue has created a crisis of trust within the party, as officials lecture subordinates on patriotism and incorruptibility, but send their own families abroad.


You do not have to be corrupt to be “naked”, however. Sending your family abroad is simply a state of maximum readiness. It does not suggest huge confidence in a stable Chinese future. Many wealthy businessmen have also been preparing exit strategies. One of the most common legitimate routes involves immigrant-investor programmes in America, Canada or Hong Kong, typically requiring an investment of up to $1m. Chinese nationals have rushed to apply for these. Three-quarters of applicants for America’s programme last year were Chinese.


In 2011 the central bank published an estimate on its website, attributed to the Chinese Academy of Social Sciences, that up to 18,000 officials had fled the country between 1995 and 2008 with stolen assets totalling 800 billion yuan ($130 billion at today’s exchange rate). The bank then claimed the figures were inaccurate, and scrubbed them from its website.


Officials who can afford to send their families abroad are usually the most powerful, and the most aware of China’s problems. Says Mr Li of Peking University, “They know better than anyone that the China model is not sustainable and that it’s a risk to everybody.”

In essence, investing a mere $1 million in U.S. business and promising to hire Americans will yield up a highly-valued green card. From an overseas point of view, wages in the U.S. are not that burdensome: Apple store employees, and millions of other workers, earn $11.25 an hour.

We have to put all this overseas investment in perspective. There are roughly $62 trillion in net assets in the U.S., and over $20 trillion in real estate. $200 billion or even $2 trillion isn't going to buy a dominant piece of the U.S. economy.

There are positives to overseas investors buying U.S. properties. Everyone who owns real estate wants their parcel to start rising in value, and the only way that can happen is for demand to exceed supply. The "creative destruction" of capitalism only works if owners who have failed to capitalize on assets move on and turn the assets over to those with capital and a desire to rework the assets into productive uses.

The irony is that the driver of overseas buying of real estate--trade deficits--could decline as oil prices slip and imports from China decline in recession. Those complaining about overseas buying may withdraw their complaints if the drivers of overseas investment dry up and the buyers vanish, leaving the U.S. real estate market vulnerable to another cascade down in valuations.

At that point, people may wish Chinese investors were still buying in Toledo.


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Wed, 06/27/2012 - 20:12 | 2566902 zorba THE GREEK
zorba THE GREEK's picture

I say we sell Detroit to China. Any offers?

Wed, 06/27/2012 - 20:19 | 2566917 strannick
strannick's picture

its the flow stupid

Wed, 06/27/2012 - 20:21 | 2566926 phyuckyiu
phyuckyiu's picture

I have some property in Stockton, CA. to sell the poster. On sale, super cheap. Should rent really well as long as section 8 vouchers are cool with you.

Wed, 06/27/2012 - 22:10 | 2567134 Doña K
Doña K's picture

Before Hong Kong was returned to China, the rich HK Chinese moved their domiciles to Vancouver and real estate values exploded to the point that the locals could no longer afford them.

When Hawaii became a state, similar story, to the point that the state government had to subsidize housing to native Hawaiians through lottery system. Otherwise the locals could have never afforded houses in the nicer places.

Nice places will always attract foreigners, but forget about the devastated areas. Prices are as low as $1,000 per house and no takers.

One more point: The need to buy dollars to settle accounts artificially boosts the dollar even though it may be a wash if the one receiving the money converts it into another currency. But most keep dollar denominated accounts. 

Thu, 06/28/2012 - 06:28 | 2567604 Harlequin001
Harlequin001's picture

This guy's clueless.

'What the xenophobic pundits fail to understand is the overseas holders of USD have to buy something with their surplus dollars, and if they're sick and tired of buying negative-yield bonds (i.e. the bond yield is lower than inflation) then they have little other choice but to buy land, buildings and businesses in the U.S.'

What utter bollocks. They'll buy gold, and when they do, and all those dollars come back to the US yes they have to go somewhere, rice, wheat and corn i.e. hyperinflationary collapse.

That's the way it ends. You don't need to be a rocket scientist to work that one out, you just need to go re read your history...

Thu, 06/28/2012 - 10:05 | 2567959 easypoints
easypoints's picture

"In the U.S ... Your assets will not be expropriated at the whim of a senior Party official."

John Corzine?

And I don't know about politicians, but bankers in China have recently been excecuted for said behavior, while in the U.S. the penalty is to tax the fraud in the form of a "fine".

Thu, 06/28/2012 - 01:05 | 2567426 Joseph Jones
Joseph Jones's picture

You might have missed the 4k sf Detroit home that sold for $1800 (annual property tax about $2700).

Fri, 06/29/2012 - 13:19 | 2573785 mkkby
mkkby's picture

CH Smith used to write about the death of the USD and buying gold.  Now everything's fine?  WTF...

Despite safe haven flows... for now -- the USD WILL DIE of massive devaluation or hyperinflation.  It may take a long time.  But once Europe goes thru this turmoil it will rise as the safe haven.  Then it's over for the dollar.

Wed, 06/27/2012 - 21:18 | 2567054 blindman
blindman's picture

Stock and flow
From Wikipedia, the free encyclopedia
From Wikipedia, the free encyclopedia
Stock vs. flow
Dynamic Stock and flow diagram
Economics, business, accounting, and related fields often distinguish between quantities that are stocks and those that are flows. These differ in their units of measurement. A stock variable is measured at one specific time, and represents a quantity existing at that point in time (say, December 31, 2004), which may have accumulated in the past. A flow variable is measured over an interval of time. Therefore a flow would be measured per unit of time (say a year). Flow is roughly analogous to rate or speed in this sense.

as in a derivative. a flow is a derivative.
life, itself, is a derivative.
a verbe, in transit like term, not a noun type, object,
in hemispheric terms. a level of spin energetically
accomplished along an axis of orientation opposed to
and alien to its basis or origin, ready to collapse
at any moment depending on underlying energy.
here the basis of essential compassion
and the foundation of ecology. maybe?

Wed, 06/27/2012 - 20:20 | 2566919 veyron
veyron's picture

I'd buy detroit for -1 cents on the dollar.  Anyone dare exceed my bid?

Wed, 06/27/2012 - 20:24 | 2566932 nmewn
nmewn's picture

So, thats like five bucks?

Wed, 06/27/2012 - 22:19 | 2567150 El Oregonian
El Oregonian's picture

It's $3.78... It's frigg'in Detriot, no round-ups...

Wed, 06/27/2012 - 21:26 | 2567074 The Gooch
The Gooch's picture

Move over NIRP, 'cuz here comes NIRD, yo. Negative Interest Return (on) Detroit.


Wed, 06/27/2012 - 20:33 | 2566951 philipat
philipat's picture

I have several froiends who have looked closely at buying US RE. The problem is that overseas investors are familiar with actually taking possession of a real physical paper title deed. In the US, especilally after the MERS fiasco, it is always unclear WHO actually owns a property and IF the title deed/promissory note will be available for processing? It seems to be a case of, look just pay the money and we promise you. Right.

Wed, 06/27/2012 - 22:03 | 2567124 mjk0259
mjk0259's picture

That's who owns the mortgage. Owning the title is pretty clear especially compared to China where the government owns all the land. You get a 99 year lease subject to whims of local officials.


Thu, 06/28/2012 - 04:31 | 2567555 philipat
philipat's picture

My point being, if there is no immediate access to the title deed, who the hell KNOWS if there IS a Mortgage and, if so, who owns it? It's a nightmare. And there are some wonderful scams online carefully designed to draw in foreign dopes. "With just USD 299K you can buy not one, not two, not three, not four but FIVE US properties!!!!!!!!!!!!!" And that is even without CDO's. Probably in beautiful downtown Detroit. The American dream. Shit, go for it!!

Thu, 06/28/2012 - 03:57 | 2567536 bank guy in Brussels
bank guy in Brussels's picture

Whopping falsehood by Charles Hugh Smith in this article here, he says:

« ... Then there's the rule of law, which despite constant abuse still exists in the U.S. Your assets will not be expropriated ... »

Ha! Bullsh*t.

Ask MF global account owners.

Ask the Americans whose cars and homes and bank accounts were confiscated by local authorities for bogus reasons.

Ask the victims of bribed American judges and crooked lawyers in an endless variety of cases.

All 'legal' of course. As Martin Luther King said, everything Adolf Hitler did was 'legal', too.

So-called 'rule of law'. Ha!

Wed, 06/27/2012 - 20:35 | 2566954 Son of Loki
Son of Loki's picture

Some Martians stopped me the other day...asked for directions to where those green shoots are growing.....said they were mighty hungry after their long journey....

Wed, 06/27/2012 - 20:35 | 2566961 Belarusian Bull
Belarusian Bull's picture

I can't vote, but i like the idea.

Wed, 06/27/2012 - 20:42 | 2566969 IndicaTive
IndicaTive's picture


Wed, 06/27/2012 - 21:21 | 2567063 The Gooch
The Gooch's picture

I'll give you eight miles of Renmibi (sp) and a box of glass, Chinese, crack-pipes disguised as "Roses" or "Pens" for everything East of 94 and South of 9 Mile.

-"Maserati Rick"-

Wed, 06/27/2012 - 21:34 | 2567082 Marginal Call
Marginal Call's picture

Silver coffin?  Know where I'm going post crash. 

Wed, 06/27/2012 - 20:14 | 2566906 Fukushima Sam
Fukushima Sam's picture

The chickens (dollars) coming home to roost?

Wed, 06/27/2012 - 21:03 | 2567012 Ragnar24
Ragnar24's picture

I'm not so sure -- in the near term.  I think the big difference with real estate is debt.

Charles is referring to overseas EQUITY investments in real estate -- the remainder of the asset is financed with DEBT. and even if the foreign investor isn't using debt, the rest of the commercial real estate market is! 

So what happens to real estate prices when the cost to finance an acquisition increases (i.e. higher mortgage rates)? Or how about when credit freezes up again?  We saw the deflation that occured in a debt-fueled housing bubble already... 

And I'm pretty sure interest rates rise when China/Japan no longer transact in USD (although I'm not entirely sure given how manipulated these things are).

Wed, 06/27/2012 - 22:18 | 2567146 kito
kito's picture

no really, the chinese are lining up in suburbia to put a dent in those millions of 4 bedroom 3.5 bath foreclosures...the chinese will save us....and solve our debt problem...hey MAYBE INSTEAD OF GOLD, WE CAN BACK OUR CURRENCY WITH HOUSES!!!!! PROBLEM SOLVED!!!!!

Wed, 06/27/2012 - 20:16 | 2566909 New_Meat
New_Meat's picture

Japs got royally screwed in the end of the Carter-era, snapping up everything in sight.  Been downhill since.

- Ned

Wed, 06/27/2012 - 22:26 | 2567165 mjk0259
mjk0259's picture

Screwed relative to what? Japanese real estate went down more. Japanese stocks still down 75%. If they bought houses at that time, they are still ahead. It was only commercial real estate they overpaid and they were getting the money by selling bubble stock. A lot of individuals bought houses in Hawaii and that hasn't been hit relative to 1970's.


Wed, 06/27/2012 - 20:19 | 2566915 sitenine
sitenine's picture

I'm generally a big fan of Charles Hugh Smith.  I'm pretty sure he understands that when dollars aren't needed elsewhere, they come home (to roost so-to-speak), which will contribute to the inflation problem which comes shortly after the deflation problem.  I'm confused - going to sit down and think about this one for a while..

Wed, 06/27/2012 - 20:31 | 2566945 dick cheneys ghost
dick cheneys ghost's picture

Add me to the 'Im confused camp'..........altho, thats nothing new.........

Wed, 06/27/2012 - 22:21 | 2567155 MachoMan
MachoMan's picture

More like a mild hiccup on the deflationary snowball's path down the mountain...  Look at it from another perspective...  do you really believe that if all the dollars came home to roost, that nominal real estate prices would even get close to rekindling the peak?  pushing on a motherfucking string...

All they'll do is help prop up prices, at best, and ease some of the depreciation in debt laden assets (note, all of J6P's "investments").

The only inflation to be scared about is debasement of trust in the currency... 

Wed, 06/27/2012 - 22:30 | 2567177 fonzannoon
fonzannoon's picture

thats a pretty legitimate concern

Wed, 06/27/2012 - 23:20 | 2567233 BlandJoe24
BlandJoe24's picture

(appreciated your previous post to me - cheers to you too!)

Refreshingly Charles counters the "USD is about to be worthless" meme (look how low his article was rated).  Global trade is in USD.  Global debt, is overwhelmingly in USD.  The loans must be repaid in USD.  Credit is collapsing, so borrowing to get USD is getting very hard.  Profits are decreasing so "making" USD by profiting  is getting harder and harder.  Tax base is decreasing, so fewer USD around.  Printing cannot out-pace ponzi collapse, and in any case the Fed may not actually even be truly interested in extreme printing  (see below).  As the enormous global credit ponzi collapses and deleveraging occurs only debtors who have USD cash and can make payments in USD will survive.  Everybody else goes bankrupt.   

So what becomes more and more valuable in this deflationary scenario (which may go on for months or even a few years)?  USD. 

And from a post of mine a while back:

Global credit collapse/deleveraging = global deflation because of the extreme size of the current global credit bubble and the rapidity with which it can collapse. If the size of a particular credit bubble is small or moderate, and gradual, then its collapse can be matched (neutral) or outpaced (inflation) by CB printing.

But the size of the current global credit bubble is in the hundreds of trillions of USD.  That is many orders of magnitude past anything the The Fed/UST can out-print (even if it wanted to, which it wouldn't - read below).  These days a one or two trillion USD print is a big deal.  The Fed/UST can't get much over that before the power of the bond market (via UST yields) will put the brakes on. 

If the Fed theoretically ignored bond market pressure, then the treasury would be absolutely bankrupt through USD devaluation long before it could print anything close to enough to match a global credit collapse. But that will not be permitted, because the root driver of global financial policy is the profit/power motive of the financial elite. 

As long as it is to the to the advantage of greed and power to keep the USD a reserve currency, it will not be allowed to be devalued significantly by printing.   It's worthwhile to at least contemplate the awful logic that a severe global deflation of a few years might actually appeal to extreme power greediness since a deflation will make a very few people obscenely rich while most everyone else (economically speaking) become serfs (in debt, owning nothing).


Wed, 06/27/2012 - 23:49 | 2567289 sitenine
sitenine's picture

So what becomes more and more valuable in this deflationary scenario (which may go on for months or even a few years)?  USD.

That's the rub.  It is until it isn't - and when isn't gets here, it will be epic.

Epic, because when rich become poor, they do stupid-ass shit.  Don't even get me started on how stupid people have become in the first place.  When corporations become insolvent, they stop providing us with services that we depend on to live.  What happens if Walmart closes its doors, for instance?  Has anyone ever considered that a possibility?  No, because society has turned into a bunch of stupid arrogant slobs - but I chose to digress again.  All I really mean to say is, nothing lasts forever.  Have something physical that you can depend on.  This deflationary situation is a blessing.  Use it to your advantage to prepare in whatever way you see fit - but DO prepare.

Thu, 06/28/2012 - 00:29 | 2567357 BlandJoe24
BlandJoe24's picture

(update to sitenine: you added more to your post, so my response below is almost totally irrelevant to what you said :-) So editing it to be a generalized comment.  But first, did you look at the link i previously recommended (it's a very short read and really connects with what you wrote and i'm curious to find out what you think in response): ... after reading that look at this: )

I'm tired, so only come up with this silly analogy to anyone who says, "yes we're in deflation, but i'm worried about HI down the road"

You look in your powerful space telescope and see a hostile alien army (HI) somewhat past the edges of the solar system, heading to earth, to arrive months or perhaps a few years from now.  This is a big threat and something to get prepared for.  At the very moment you are looking in your telescope, giant spaceships from a different alien planet are landing on earth and hostile and very dangerous aliens (deflation) of ever-increasing numbers are marching towards your town (and most every other town in the "developed" world) hungry for blood...  You keep thinking about what you are going to do about those other aliens still in space... 

Both HI and a deflationary depression can be devastating.  Zimbabwe was horrible.  The Great Depression was horrible.  They have a lot in common, but they have some significant differences.  And somewhat different advantageous ways of being prepared.  We may get both, but the first is looking to be the deflationary depression.  And that can be an enormous, prolonged difficulty. 

Yes, be aware and prepared for what may be coming down the road a ways (HI), but not at the expense of being prepared for what's here and likely to be much worse for quite a while (deflation).



Thu, 06/28/2012 - 00:37 | 2567383 sitenine
sitenine's picture

To wrap it up, can I say, "We know it will come, but we don't know when, so don't put all your eggs in one basket."?  I really get the feeling we're agreeing here, but we have very different ways of expressing ourselves.  It's been a pleasure to read your comments.  Sorry about the editing thing - afterthoughts are a bitch sometimes ;)

Thu, 06/28/2012 - 02:16 | 2567475 BlandJoe24
BlandJoe24's picture


...and still curious to hear your responses to those links, if you're willing. :-)

Thu, 06/28/2012 - 13:41 | 2569654 sitenine
sitenine's picture

Hmm. You've got me thinking pretty hard. I don't know how I feel about the possibility of a deflationary apocalypse scenario. I vehemently oppose selling all your commodities though. In a scenario where your money suddenly buys you everything, the system collapses very quickly because resources are still finite (unless you're Krugman ), but trade can still occur if people are willing to step outside of the status quo (at which time, who will have a choice anyway?). In a fiat society, we have forgotten what's worth something and what's not. When paper is substituted for gold, there is no longer a desire to have resources because the paper becomes worth something in and of itself. It's not though. It's paper, and no amount of coercion can change that fact. That's were trust/faith comes in. Deflation can go on for only a very short time because you obviously can't buy unlimited anything. The dynamics change very quickly when resources are no longer available due to increasingly unlimited purchasing power, and that inflection point is whatever society is willing to let it be. I'm leaving out consumption though. Will an individual consume more simply because they can 'afford' more? To a certain extent I suppose, but just as resources are limited, there are also limits to consumption. So, it gets philosophical. What do you believe about limits of dynamic supply and demand coupled with uncontrollable fiat appreciation? What do you believe are the consequences, and how rapidly does it play out? These are the questions we all come here to ask.

P.S. I'm not in the habit of recommending MW articles, but this one speaks directly to our topic of conversation:

Thu, 06/28/2012 - 00:37 | 2567382 Uchtdorf
Uchtdorf's picture

Wait a sec there, Joe. Are you telling me that the British handlers of all the US banksters are going broke before the USD does? That seems far-fetched to me. The City rules. I'm not saying I like it, but thems the facts, ma'am.

Thu, 06/28/2012 - 00:57 | 2567406 sitenine
sitenine's picture

Fuck London - It's hypothicated 100 times over. You think a margin call is bad?  What do you think a collateral call would look like?  There's no redemption in The City, and there will be no mercy.  Sounds far fetched?

Thu, 06/28/2012 - 02:23 | 2567474 BlandJoe24
BlandJoe24's picture

I wasn't talking one city-nation-state over another, just the strength and staying power of the USD.  The USD is the world's reserve currency, the lubrication of most of the world's financial and broad economic transactions.  It is also  the store of the trans-national super-wealthy's wealth, and the very muscle through which they wield their power.  So therefore,  it is the currency they are most likely to try and keep strong while most fall...(until it eventually falls too). 

To be clear: i'm mostly parroting the wisdom of others and in truth have no absolute knowledge of what will happen


Thu, 06/28/2012 - 01:33 | 2567447 Cursive
Cursive's picture


What's so confusing?  When a country runs a current account deficit it, by definition, has an equal and opposite capital account surplus.  Two of our biggest trading partners, China and Japan, are always looking for ways to spend those dollars.  The yield on Treasuries suck, so maybe they try real estate.  This is usually the sign that the shit is about to hit the fan just as when a Japanese company bought 30 Rock.  They sold it a couple of years later for a huge loss.

Thu, 06/28/2012 - 02:05 | 2567469 sitenine
sitenine's picture

I think what's confusing me is the lack of flow analysis.  I don't buy into the 'fact' that China and Japan not buying dollars for a few minutes to complete an exchange doesn't affect the broader system.  Of course it does, doesn't it?  Aren't these dollars traded on the Forex, and if they weren't, well, then, they wouldn't be, so that affects the system.  I feel like I'm grasping at straws though for some reason.

Thu, 06/28/2012 - 06:49 | 2567628 Withdrawn Sanction
Withdrawn Sanction's picture

2 other factors ignored by CHS are:

(1) the fiscal deficit also plays in here.  To the extent domestic savings are insufficient to support it, those savings must come from somewhere.  So while WalMart shoppers share some of the blame, so too do the spenders of SNAP benefits, defense contractors, and Iowa corn farmers.

(2) a fourth option (besides stocks, bonds, and RE) is the foreign holder of USDs can simply request conversion through his/her domestic banking system into another currency of choice.  Then, through the network of CB FX reserves, these USDs will eventually end up back from where they came.

His argument really seems to be that worldwide demand for dollars is inelastic.  There may indeed a degree of price insensitivity as far as dollars are concerned b/c of its unique reserve status, but its not hardly as steep (or rosy) as his analysis implies.  And every tick in favor of the dollar has a sharp counterpoint as the other authors have suggested above.  Indeed, the claim about security of property and rule of law really actually made me chuckle.  Tell that one to Kelo.

Thu, 06/28/2012 - 08:33 | 2567862 ozman
ozman's picture

Articles like this is meant to obfuscate and confuse people after all if you read the authors articles, this article (influenced by the mainstream -- the economist who quotes US backed/funded Chinese dissident blogs) is contradictory to his thesis in previous articles such as the evil US oligarchs are depriving US middle class and siphoning the wealth of the country while moving the wealth offshore.

The problem with articles like this is that it does alot of contradiction, for example author advocates rule of law in the US to prosecute bankers, politicians and other oligarchs while at the same time says there is rule of law in the US.  You cant have it both ways, either you have it or you dont.  In this article he scoffed at China for prosecuting or trying to prosecute the corrupt politicians and the crooked business.  So if you see it clearly, if China does not pursue trying to catch these corrupt people who funnel their money to the US does that not say there is no rule of law?

Let us understand the situation and connect the dots.

First lets ask where did all the money come from.  To understand this game is to follow the money.  The paid dissidents of China which have never worked a day on their life and earn $170K a year funded by the US state department has a job to do which is to incite insurrection in the country.  None of them ask where did the money come from.  For the uneducated people in China they would instantly think all these wealth were accumulated from tax money which are in RMB.  No they are not, those corrupted RMBs are barred from capital flight by the government and most of those went into real estate speculation and funding the lifestyles of mistresses in the country.  As the author says those are US dollar denominated currency that is being laundered.  So where are these massive US dollars in China coming from? 

In China, US dollar arrives in these ways:
1.  Trade Deficits which majority of the business people exchange the dollars with the government for RMBs to create capital investment needed to run their business.  The US dollars now in government hands are sliced 10% by the politicians and the rest went to sovereign wealth funds.
2.  Economic Hitman and the carry trade- If you read John Perkin's book it details how US dollars are funneled into countries corrupting politicians.  The Bo Xilai scandal clears this up, monies coming from hedge funds like Quantum (George Soros) and Berkshire funded by the offshore accounts of US/Western oligarchs all aimed to assist US corporations get contracts and launder the monies to seek higher yields goes into the pockets of these politicians and businessmen in China. 

So why the capital flight?  Because Guanxi which is the root of corruption but also the way business is conducted in present China is now being prosecuted and wealthy people who most of them like anywhere else in the world are all earned through fraudulent means are now  trying to protect these wealth.  In the US control fraud and corruption are protected as long as the victims are not the rich (got that Madoff?).  If you now see it most of the money come from number 2 cause none of those has to be contributed to the government sovereign wealth fund.

So lets see what are the assets bought with these money.
1.  farmland, mines, malls and infrastructure -  all coming from soveriegn wealth funds linked somewhat to the talf program
2.  homes and other luxuries including children's foreign education - money laundered from economic hitmen which originated from the US/Western oligarchs in the first place.

So is this all bad for China. Not really, the pro to this for China is that it turns America into a penal colony for China indirectly.  All these monies come to America and with it shady businesses connected to the triads also arriving to the country.  The death of these capital is beneficial for small entrepreneurs in China as none of them can be used to do business and hence small start ups have alot of chance to succeed which makes assist China in booming.

If you connect the dots and you'd see a spade is a spade.  The Chinese corruption and the American corruption is one in the same, instead of swiss bank accounts the Chinese use America just like the Saudis and most other nations from Columbia, Kenya to the Philippines.  The Americans offshore their wealth to offshore to the Caymans and Swiss where in turn are rolled back into hedge funds who launder the money through economic hitmen back to those nations who laundered them to the US.  It is a shell game, all in all it is just paper transfer.

Unlike the US however at least China is doing something about this.  They are now cracking down on economic hitmen, reforming the banking system and the central bank and the biggest of all they are cracking down on corruption.  So where is the country that does not have the rule of law?  In the US, the rule of law is spelled Just-Us. 

If you look at it I have more hope for China because the country at least is changing and one thing for sure the future is not like the present. 

Fri, 06/29/2012 - 13:28 | 2573820 mkkby
mkkby's picture

Nothing has changed.  The huge trade imbalance always had to go somewere.  Most here predicted it would be hyperinflationary and said "get gold".  The US has always been a safe haven in bad economic times.  As soon as Europe crashes and heals, it will become the safe haven. 

It may take many years, but we weill get the dollar crash as soon as there is a viable alternative.

Wed, 06/27/2012 - 20:21 | 2566918 Maos Dog
Maos Dog's picture

I gave him a one when I read this line here:

There is an element of implicit racism at work when the cries of "we're being taken over" swell after the Japanese or Chinese make a signature purchase of U.S. assets: beneath the surface, the message is clear: it's OK for Caucasian Europeans to buy huge swaths of American land and built capital, but not OK for Asians to own the same percentage of assets.

Cry racism = lose

It's a lazy argument and a sign of a weak mind, when, instead of attacking the other sides economic argument, you just shout "RACISM"

I used to like this guy 

Wed, 06/27/2012 - 20:49 | 2566988 nmewn
nmewn's picture

"I used to like this guy"

Me too.

Waiting with breathless antiipation where Caucasian Europeans buying "huge swaths" of "land and built capital" in any foreign country ceases to be called "investment" (in his self loathing parlance) and instead be called racism.

Turning blue over here ;-)

Thu, 06/28/2012 - 12:46 | 2569610 Diogenes
Diogenes's picture

Right. First it is called "Imperialism" then "Colonialism" only then do they get to "racism".

Wed, 06/27/2012 - 21:14 | 2567045 Marginal Call
Marginal Call's picture

He's right to a degree.  But I'll come out and say it.  Fuck the chinese.  Out here on the west coast we've seen enough of them, and it doesn't take much to get even the most die hard politically correct Obama supporter to go off on the Chinos.


I grew up on an island in Puget Sound with a large number of Japanese, and they were polite, reserved, generous, and went to great lengths to integrate and be respectable.  Now, I go to the south Seattle Costco and it's swarming with Chinese people in full on combat shopping.  80 year old ladies mowing people down with shopping carts, because they are used to living in a fucking ant hill and that's how they roll. 


I can't buy my pallet of Charmin in peace and it's Nixon's fault.  Fuck Nixon, and fuck China. 

Wed, 06/27/2012 - 22:17 | 2567143 Doña K
Doña K's picture

And... When there is a scare, the 50lb rice bags disappear in a NY minute.

Wed, 06/27/2012 - 21:22 | 2567066 Ragnar24
Ragnar24's picture

Agreed.  It's IDEOLOGY that Americans "fear" will infiltrate our borders.  

I have no problem with the Arab race, but I do have a big fucking problem with the fact that we're supposed to "tolerate" Muslims instituting Sharia in Dearborne, Michigan while they intolerantly "stone" Christians.  

The Europeans might be devolving into similarly violent primitivism, but the Muslim idealogy never quite progressed past the primitive stage of societal development.  

And I am unequivocally against all FOREIGN wars; however, this behavior should not be tolerated INSIDE our borders.

Wed, 06/27/2012 - 22:25 | 2567164 Doña K
Doña K's picture

That behavior, has been allowed to exist by the liberal elite professors of our higher education institutions. I was once lectured by one telling me that I was priviliged and I could never understand. Funny, but I was not priviliged and I understood very well. Americans are supposed to all be treated equally, including educational opportunities. A supreme court decision which higher learning institutions have been ignoring by labeling their deviation diversity. 

Thu, 06/28/2012 - 05:28 | 2567581 Lebensphilosoph
Lebensphilosoph's picture

The Europeans might be devolving into similarly violent primitivism, but the Muslim idealogy never quite progressed past the primitive stage of societal development. 


Whatever it is today, Islamic culture passed its zenith in your so-called "Dark Ages" at which point it had far surpassed our degraded "modern society" in its development of an aesthetics and ethics. Moorish Spain or the Baghdad of Harun El Rashid are examplary instances of cultural refinement in the history of the world. Perhaps they never preached your 'progressivist' morality, the judgment as to its 'superiority' because of its 'progressive' nature being entirely subjective. But what is new about that in any case? What in our own ethics is not contained, for instance, in the doctrines of the Stoics, that wasn't lived by many a Roman and tossed aside by their Germanic successors?  Violent primitivism? What where the Napoleonic Wars, the Great War, the Second World War then? If primitives are so violent, what are you as a civilsised man? A demon spawned of the Devil in the first circle of Hell?

Thu, 06/28/2012 - 12:52 | 2569649 Diogenes
Diogenes's picture

A hundred years ago the "young Turks" were turning the Islamic world into a modern, progressive, liberal culture. This was stamped out by the CIA who drew the line at nothing, including assassinating freely elected leaders because they were "socialists" and replacing them with brutal dictators. The reaction was a rise of religious throwbacks who looked like the people's only hope.

Wed, 06/27/2012 - 22:20 | 2567149 malek
malek's picture

Your rebuke is standing on shaky ground, me thinks.

1. Not even you are denying the "we're being taken over" calls are numerous

2. What else than implicit racism (out of fear of losing in the competition) are such cries, when the purchasers are Asians with good moral and work ethics?

Wed, 06/27/2012 - 23:17 | 2567265 Maos Dog
Maos Dog's picture

You talking to me? :)

My thoughts:


1. Not even you are denying the "we're being taken over" calls are numerous

I read a lot of financial press, and all of these calls of "we're being taken over", well, I havent really seen any myself, possibly a strawman argument he's making? Unless all these "begin taken over" calls are on CNBC or something I don't watch.

2. What else than implicit racism (out of fear of losing in the competition) are such cries, when the purchasers are Asians with good moral and work ethics?

There is a ecomonic argument to be made, (I am not even claiming they are good arguments) which the author does not even try:


A) Money comming back into the states is inflationary in and of itself

B) Forigners outbid locals for real estate, Bid up assets

C) Profits from the real estate rentals / other investments go back overseas instead of into our local economy.


I want to see an argument against that, not cries of "racism!!"

And then the thing about the Europeans is just fucking foolish.


Thu, 06/28/2012 - 12:53 | 2569660 Diogenes
Diogenes's picture

You're not being taken over. You sold out, or your leaders sold you out. Where do you think they got the dollars they are buying you with?

Thu, 06/28/2012 - 21:59 | 2571977 malek
malek's picture

Really funny.

A) Money comming back into the states is inflationary in and of itself

Great, and who created that inflation in the first place, and then neutralized it for a while with deflation by moving production into cheaper parts of the world?

B) Forigners outbid locals for real estate, Bid up assets

OMG. There it is "we're being taken over!" And did you also cry out how the US were buying up assets and commodities on the cheap in other countries, when the US Dollar was still strong?

C) Profits from the real estate rentals / other investments go back overseas instead of into our local economy.

That can be fixed by a stroke of the pen, as you might be aware: taxation

Thu, 06/28/2012 - 06:27 | 2567607 Lebensphilosoph
Lebensphilosoph's picture

What else than implicit racism (out of fear of losing in the competition) are such cries, when the purchasers are Asians with good moral and work ethics?

So what? So what you little moralist? If it takes 'racism' to preserve my people, my culture, and the land of my ancestors as a homeland for my progeny, then so be it. Do Chinese, Japanese, Jews, Arabs, Zulus, Indians, La Raza, or 'African Americans' forsake their ethnic identity and its politics, and open the floodgates of their ancestral homelands to the flood of massive immigration in order to bow to the progressivist moral discourse of postmodernity? And are they demonised for not doing so, you emasculated little twit?

Thu, 06/28/2012 - 22:08 | 2571981 malek
malek's picture

That's usually called Nationalism.

You still have a lot to learn, for example what made the USA strong, some centuries ago.

Thu, 06/28/2012 - 06:30 | 2567608 Lebensphilosoph
Lebensphilosoph's picture

1. Not even you are denying the "we're being taken over" calls are numerous

And look how ignoring the urgency and veracity of those calls worked for the damned Romans, you fool.

Thu, 06/28/2012 - 22:05 | 2571995 malek
malek's picture

Did I say the calls are wrong?
Did I propose to ignore them?

The point is we have to clean up our own kitchen instead of resorting to slinging poop into other people's ones.

Wed, 06/27/2012 - 20:22 | 2566924 dwdollar
dwdollar's picture

"U.S. is exceedingly stable compared to other nations"

Yeah... just like Treasuries are exceedingly low right now. We'll see how that goes.

Wed, 06/27/2012 - 20:46 | 2566981 Seer
Seer's picture

"U.S. is exceedingly stable compared to other nations"

Best looking horse at the glue factory!  USA #!

Wed, 06/27/2012 - 20:47 | 2566986 Seer
Seer's picture

"U.S. is exceedingly stable compared to other nations"

It should read: "U.S. is exceedingly CONTROLLED compared to other nations"

Wed, 06/27/2012 - 20:46 | 2566928 Intelligence_In...
Intelligence_Insulter's picture

Complaining about overseas buyers of investment properties?  Does it matter what nationality the douchbag landlord is when he's rent extracting from a location he probably doesn't even visit?

Capitalist investors are part of a global investor class.  Nationality is something peons bicker over.

Wed, 06/27/2012 - 20:32 | 2566947 divide_by_zero
divide_by_zero's picture

Anyone investing in RE from overseas will likely get blow torched in the end like the Japs did.

Wed, 06/27/2012 - 20:44 | 2566978 lotsoffun
lotsoffun's picture

and it becomes very simple.  because it looks beautiful.  and we build a wonderful housing complex on it.  an we shit on it an we drive on it and we plow it down for parking lots  and then there is no run off for the rains and no more we get floods and then it's just another congested termite humanity relic.  and then it floods.  and everybody crys.

but it's 'growth' because there are more consumers of coke and pepsi and mcd's and heinz and cable tv and lebron whoever's contract gets bigger as the stadium gets bigger and there are longer seasons and more and more cable stations and bigger and bigger whatever, because bigger and more is better and everybody is happy because consumption (which was formally the term for tuberculosis) consumes everyone and everything as the be all and all of growth.  but growth is good.  that's all we need to know.

ps.  china and india aren't hurting for open space or land even with the huge populations.


Wed, 06/27/2012 - 20:52 | 2566996 Seer
Seer's picture

"china and india aren't hurting for open space or land even with the huge populations."

Don't mistake "open space" with "USABLE space!"  There's LOTS of "open space" in Antarctica.  The carrying capacity of land isn't all the same!

Wed, 06/27/2012 - 21:00 | 2567013 Stoploss
Stoploss's picture

Im getting a bigger truck.  FTMFW.

Wed, 06/27/2012 - 21:01 | 2567015 Bunga Bunga
Bunga Bunga's picture

Let's sell the Rockefeller Center to the Chinese this time.

Wed, 06/27/2012 - 20:54 | 2566992 Atomizer
Atomizer's picture

USA can always invest in the City of Ordos tourism market. You just need to coordinate your timeshare visit with outbound freight container vessels heading back to the United States. This vacation package is entirely a la carte, granted that ship duty requirements are met.



Wed, 06/27/2012 - 20:56 | 2567003 Bunga Bunga
Bunga Bunga's picture

Let's get the Chinese paying our taxes too.

Wed, 06/27/2012 - 21:07 | 2567030 Seer
Seer's picture

In a way they are...

Wed, 06/27/2012 - 21:01 | 2567017 Seasmoke
Seasmoke's picture

you can pay a Jew landlord or a Chinese landlord....pick your poison

Wed, 06/27/2012 - 21:14 | 2567043 printmoremoney
printmoremoney's picture

You can buy some good stick in Thailand with a US dollar. The other dollar-denominated asset he failed to mention.

And 2 for 1 teenage whores and change back from your Lincoln.

The US dollar is the black market currency of the world.

The CIA won't take anything else for the Smack they sell from the Jihadists either.

I call it the US Cabal International Dollar. Bankster racket.

Hell, overnight in Iraq, the Dinar died, and the whole country was dollar-denominated in 1 day.

And 70% of the wealth in the US is in the hands of the 1%. They are not selling. They are buying the rest of the assets for 10 cents on the dollar after they crash it. The foreigners will have to compete with them. The only thing being sold are the crumbs of the masses to the foreigners.


Wed, 06/27/2012 - 21:38 | 2567090 toomanyfakecons...
toomanyfakeconservatives's picture

Regarding you last thought, tens of millions of U.S. gun owners, the U.S. military, the Federal Marshall, and the Patriots will have something to say about that. They are the 8 trillion pound gorilla so rarely mentioned in political and financial what-if's around here.

Wed, 06/27/2012 - 22:07 | 2567129 mjk0259
mjk0259's picture

Hmm, and last time they did something was what 1780 in one county a whiskey tax rebellion? Europeans actually revolt and change their government to sometimes something different. Americans sit at home polishing their guns and telling themselves their free.

Wed, 06/27/2012 - 22:29 | 2567170 toomanyfakecons...
toomanyfakeconservatives's picture

Yeah, yeah... nice try. When push comes to shove and Red Dawn (the original) becomes a reality. Europe and most of the rest of the world is a collection is sad, defeated nations squatting on the ruins of their once great civilizations. America is only defeated, listless, and neutered in the effluent of the shitstream media. In reality, America is powerful, hopeful, armed, and untouchable in a shit-hits-the-fan situation.

Wed, 06/27/2012 - 22:57 | 2567227 Marginal Call
Marginal Call's picture

Hoooo boy.  You invoked the Swayze defense, which is weaker than the Chewbacca defense.


Because you know, we could get Red Dawn Swayze, Road House Swayze, or Point Break Swayze.  And the correct answer is Lando Callrissian "we made a deal, fuck this place I'm outta here".  

Wed, 06/27/2012 - 23:24 | 2567278 toomanyfakecons...
toomanyfakeconservatives's picture

I was thinking the Powers Boothe defense... ala Southern Comfort.

Thu, 06/28/2012 - 07:51 | 2567756 Lebensphilosoph
Lebensphilosoph's picture

You can buy some good stick in Thailand with a US dollar ...And 2 for 1 teenage whores and change back from your Lincoln.


Yeah,and if you're lucky, the teenage whores are actual girls.


Stick? Some good chicks with sticks too. 

Wed, 06/27/2012 - 21:16 | 2567049 Stuck on Zero
Stuck on Zero's picture

A lot of hooey in this piece.  The Asians prefer to buy our farmlands, mines, oil companies, coal companies, and politicians ... not "real estate."   These are not friendly.  They could buy our products in tit-for-tat trading but they will not.  I hope the mercantilists hold the dollars till they are worthless.


Wed, 06/27/2012 - 21:20 | 2567059 Marginal Call
Marginal Call's picture

And when the dollars are worthless, so are their claims on the mines, farmland, and oil.  They are welcome to show up and try to take posession. 

Wed, 06/27/2012 - 21:29 | 2567079 nmewn
nmewn's picture

Thats where I'm at...they chose to trust bureaucrats.

They're slow learners.

Wed, 06/27/2012 - 22:04 | 2567125 Confused
Confused's picture

Just a quick question....what products would THEY buy from US?


Other than the ones that keep funding this empire of course. 

Wed, 06/27/2012 - 22:18 | 2567147 Stuck on Zero
Stuck on Zero's picture

Their people would love to drive Cadillacs, fly in Boeing Airplanes, eat our organic food, and have modern medicines and medical equipment.  Their government will not allow these products into their countries through a myriad of rules and regulations.  China, Japan, Korea, Taiwan, etc. will not allow U.S. manufactured products into their countries.  Only raw materials. 


Thu, 06/28/2012 - 08:39 | 2567882 TGR
TGR's picture

You're half right, except factually wrong. The government allows all these products and more in China. GM is ramping up 3 production lines in China itself right now to focus on selling cadillacs and buicks, Boeing has several deals on the go - one signed last year for 200 planes to be sold into China, there's few medicines you can't get in China, at a fraction of the price elsewhere (yep some might be fake, but buy from a state-registered pharmacy and it's ok), organic imported and domestic food is in all the major cities. Pricey, but it's there.

Wed, 06/27/2012 - 23:28 | 2567286 GMadScientist
GMadScientist's picture


Get busy.

Wed, 06/27/2012 - 21:19 | 2567056 toomanyfakecons...
toomanyfakeconservatives's picture

The country might be "exceedingly stable" but governments, such as our fraudulent, lawless one, are fragile and replaceable. Just you wait until the MASS ARRESTS occur and the world sees Obama, Brenanke, and over 1000 other top traitors in chains and orange jumpsuits.

Wed, 06/27/2012 - 21:20 | 2567061 fonzannoon
fonzannoon's picture

breaking zh zombie news

MIAMI -- The Miami "cannibal" who chewed off half of another man's face last month had no drugs in his system other than marijuana, officials said Wednesday, defying suspicions that he was high on "bath salts" during the grisly attack. Read more:

Wed, 06/27/2012 - 21:38 | 2567091 nmewn
nmewn's picture

An insane man who chewed on a homeless mans face on a freeway overpass is exonerated from using bath salts recreationally.

In keeping with the evolving storyline here...can we now say he was just looking for the other white meat?

Was dat rayciss? ;-)

Wed, 06/27/2012 - 23:27 | 2567284 GMadScientist
GMadScientist's picture

I've had the munchies, but never that bad.

Wed, 06/27/2012 - 21:38 | 2567092 YesWeKahn
YesWeKahn's picture

Well, these stupid people will learn how the property taxes will eat them live. every 50-100 years, the cost of a property double thanks to the property taxes. They usually forget to pay them, therefore these properties would be auctioned at a discount price.

Wed, 06/27/2012 - 22:06 | 2567127 Cathartes Aura
Cathartes Aura's picture

nice pics of Mt. Rainier, must be old stock photos, given the daily aerosoling that goes down lately. . .

while I honestly don't have an opinion on the Chinese bringing their fiat "home" - given the dollar has been buying up land in other nations since it was printed, even the daily chat here compares notes on which nation to bail to with yer dollars, presumably to buy another nation's land & business - one thing I do find of interest is the foray into "special economic zones" for "manufacturing" profits:

And generating profits is certainly at the heart of these developments. Instead of U.S. companies solely going to China to develop, Chinese companies are now eager to build in the United States. This trend reversal is seen in the ambition of companies such as China National Machinery Industry Corp (also known as Sinomach), China's third largest contractor with projects in over 130 countries. 

Sinomach is one of the many companies that have expressed an interest in developing a 10,000 to 30,000-acre technology zone for "reinvigoration of the American industrial base." The company proposes to establish a special economic zone like Shenzhen where there would be preferential policies conducive to Chinese businesses such as tax incentives and easing of trade regulations. The Michigan and Idaho projects are still in their preliminary stages and have yet to be approved.

Michigan, Idaho, Ohio, Texas. . . so far. . . smacks of "globalisation" but then, so do most "news stories" nowadays. . .

ni hao.

Wed, 06/27/2012 - 22:09 | 2567130 kito
kito's picture

many wealthy businessmen have also been preparing exit strategies...

like jim rogers.......orrr...perhaps eduardo saverin??....wait im confused, which country are we talking about again??

Wed, 06/27/2012 - 23:06 | 2567156 earleflorida
earleflorida's picture

Shanghai is a city with ~24million people today... and the percentage living there have become quite 'Middle`d Class', so to say,... wealthy. It is a city that virtually over night created thousands of multi-millionaires with bucket-loads of billionaires on top. Why? The Chinese adapted to a hybrid capitalist system quite similar to the United States for one reason - having ~ 1.4 billion for a population, with 50% still living far below poverty level [and I'm talking Chinese yuan/renminbi wages] on the farms in rural china. But, ironically content with their false dichotomy,  communist/authoritarian party [with the countries new found prosperity at least they need not worry about the 'not-so-long-ago-past'] not enslaving them for as long as the good-times roll?

Indeed, the Chinese people would truely love free democracy, but their haunting blood lineage says different, so they go with the flow as they always have.

 Finally - the chinese authoritative premiers' weaver, unsheathes and readies his one last triumph... Yes! The last necessary yarn-needle-thread to be sewn into this fragile symbolic tapestry - breathing the taste of subtle deceptive freedom - that of a clumsy, melancholic and somewhat surreal abstinent reality... is the fact that twenty some-odd years ago, none of this prosperity ever existed. The Chinese people know this, as they also know that the capitalistic edifice is but a shallow graveyard for billions behind a god-less society! Indeed, once this illusive Goldie-lock's prosperity, used as a somnambulance technique controlling the masses runs its temporal zeitgeistic course, there will be blood. This is why the one's that can get out early, will make haste for greener pastures wherever freedom rings! Perhaps america?

Great read,   thankyou    

Wed, 06/27/2012 - 23:02 | 2567235 tradewithdave
tradewithdave's picture

"The effect on the value of the dollar is trivial", yes... like Edward Lorenz' butterfly and its trivial wing flap.


Wed, 06/27/2012 - 23:10 | 2567248 otto skorzeny
otto skorzeny's picture

"rule of law" "assets will not be appropriated here in US" SHEEEEEEEEEEEE-IT. just wait.

Thu, 06/28/2012 - 09:52 | 2568130 Bicycle Repairman
Bicycle Repairman's picture

Here is a cycle that has run its course a few times in US history:

1.  Asians (Chinese, Japanese, for example) work hard and accumulate wealth.

2.  Jealousy arises among "native" population.

3.  A pretext is created e.g. "immigration reform" or war.

4.  Native population seizes all assets that are "nailed down" e.g. land buildings, large equipment.

5.  Profit.


Wed, 06/27/2012 - 23:20 | 2567273 Bazooka
Bazooka's picture

I am Bazooka,

I'm running for President! I have no Bankster Criminals backing me! I've refused all PACs, all blow job offers from Dimon, Squid Face, Soros, Roubini and the lot.

I promise to cut medicare by 80%! That's right, 80 fucking percent I'll also cut social security by 90%! You got that right, because our near $16 trillion debt must be cut and budgets balanced! I'l also cut 50% of defense budgets...make that 100%. Fuck, we don't need defense!

All the unemployed? I'll cut Food Stamps by 100%!!!

Yeah! I've got the balls to tell the Americans that their free money binge is over!

Zero Hedge or anyone else, who offer only citicism, any offers of solutions?

Your validation of blogs and posts rest on not your critiques, but offers of solutions! What are they?

I challenge you all to offer solutions!

Fri, 06/29/2012 - 13:46 | 2573874 mkkby
mkkby's picture

You don't have a solution.  You only have a wish.  Even if you won, would the bankster-owned congress, courts and bureaucracy pass your "reforms"?  No, I thought not.  That's why Ron Paul, even if elected, would just occupy a chair for 4 years.  He wouldn't be able to do a damn thing.

Dreams are fun.  Reality, not so much.

Wed, 06/27/2012 - 23:26 | 2567279 slewie the pi-rat
slewie the pi-rat's picture

let's sell them the dodgers

Wed, 06/27/2012 - 23:42 | 2567313 JR
JR's picture

There are cultural differences involved in the situation to which the author refers, but this can hardly be called racism. The Japanese have a culture which heavily emphasizes the importance of the Japanese people and a Japanese culture to be preferable to other cultures in business. And in some circles that would be called a race bias but, instead, is only cultural preference.

The Chinese investments on the other hand are a different situation. China is a state-controlled tyranny operating under a single party which can subsidize, own, cancel or pass on any transaction it chooses.

To compare investments from these two areas to European-sourced investments is to compare distinctly different foreign cultures with the European culture that formed America in its early days and still finds itself to be more comfortable with conducting business in this culture. It’s wrong to call this racism.

This article appears to suggest that the American culture not only is not important to its people but it would benefit by being watered down, compromised and even overturned with other cultures; the big cities such as the Los Angeles basin are proving the fallacy of this. The Founders believed that a nation of people who had in common moral and Christian beliefs and the work ethic, family values and optimism for their futures was not only important in the founding of a new country but many said it was essential. Their warnings about changing these basic foundations were not heeded. And America as a moral force in the world has lost its way. One of the reasons for this  --  the devil-designed concept of multi-cultures melding into one single non-culture.

Immigration has to be a gradual process, not en masse invasions.

The rules on immigration originally were intended to gradually bring in peoples with skills and ambition to help with the progress of the American system; the immigrants were to be integrated into the culture, including working with aspects of the Constitution, the English language, learning America’s history, and a love for America, her people, her culture, her freedom and her open opportunities.

But a soft tyranny developed in this country and those immigration restrictions were abandoned in favor of unrestricted, en masse Third World immigration that brought with it alien beliefs and no appreciation of why America had prospered nor any interest whatsoever in cooperating in this progress. Many traditional values of the European culture were superseded by those of the waves of low-information, non-skilled, welfare-seeking, non-English speaking populations.

These new don’t-care “Americans” have allowed the radical left to have its way with society’s non-virtue trends by voting for them in exchange for promises of welfare largesse. The late Joe Sobran summarized:

“The progressives have found no substitute for virtue. They can offer only such morbid stop gaps as contraception, abortion, and euthanasia. The Dark Ages understood virtue and built a civilization; the progressive age doesn’t understand virtue and is tearing down the civilization it inherited. Euthanasia is a fitting symbol: the last sacrament of a society that cannot aspire to Heaven but only to painless annihilation.”

And racist old John Adams was so narrow minded he apparently would have preferred the European culture to abortion and annihilation.  

Thu, 06/28/2012 - 02:57 | 2567498 Lednbrass
Lednbrass's picture

Quite so, and the absorption of the third world isnt exactly going to help social cohesion when things get bad.

The statement that 98% of the US are immigrants the author makes is inherently stupid.

He might want to buy a dictionary and look up the word to see what it means, he doesnt seem to have much idea. It seems to be fashionable for the urban pointy heads to make this claim, but the fact that it sounds good at a wine and cheese party in LA or NY doesnt make it reality.

Thu, 06/28/2012 - 06:34 | 2567610 nmewn
nmewn's picture

Well stated JR...all of it.

Thu, 06/28/2012 - 11:11 | 2568886 earleflorida
earleflorida's picture

again, well said JR :-))

Thu, 06/28/2012 - 00:36 | 2567386 silverdragon
silverdragon's picture

Rich Chinese parents get "face" by sending their kids overseas to study English, finish High school or go to University. Most of these kids are the ones that weren't smart enough to get into the best Chinese Universities.

Rich Chinese also get face by becoming "Sea Turtles" or "Overses Chinese".  Family normally immigrates at the same time they send their kids overseas.  They buy a house and wifey gets sent over to keep an eye on the kid while they study.

The upside for husband is he gets to party harder than he has ever done.

Add to that property is cheap in the US so your Renminbi goes so much farther. By selling a RMB10,000,000 apartment which is about 250 sqm in a nice suburb, the USD1,500,000 it become can get you a nice place in the states.

Bottom line Chinese live, study and buy property overseas for "face"


Thu, 06/28/2012 - 07:07 | 2567650 Ghordius
Ghordius's picture

+1 for giving a hint to the Chinese concept of "face". That is somewhat different from the "keeping up with the Joneses"

Thu, 06/28/2012 - 00:41 | 2567394 Bansters-in-my-...
Bansters-in-my- feces's picture

Clean air....?????


Thu, 06/28/2012 - 00:45 | 2567397 Piranhanoia
Piranhanoia's picture

I am not sure it is xenophobia when each of us knows that our nation values the vulture as it's national symbol.  Because this land was built for the psychopath in me and u,  it values all kinds of vultures from all over the world.  It dresses up our national bird up in prettier feathers and doesn't mention it is a carrion eater, but it is.  It is just a glorified vulture.  But our psycho's bow down and kiss the ring of any two bit dictator because they love his money and will sell a few dozen countrymen for the quick buck.  Or a few thousand. Hey, they sold a few million jawbs the last few decades while promising the little people here that they would never do it.  And our psychos were well paid for their treason.  And since it is only a few billion billion in our money expropriated from the people to pay others to steal it from us in the great pay per view, we shouldn't get all bent out of shape when your favorite state is sold after forced insolvency because the federation sold us out.   

Folks are just going to have to decide if they want to be part of the machine or not.  The machine is a vulture too.


Thu, 06/28/2012 - 00:55 | 2567412 robertocarlos
robertocarlos's picture

A Maple Leaf patch should protect those Canadian snowbirds when the SHTF.

Thu, 06/28/2012 - 01:23 | 2567440 boeing747
boeing747's picture

Holy xxxx, 'the U.S. is exceedingly stable compared to other nations'. I thought major financial crises in last 30 years all broke out from US, plus  long term dollar devaluation, compound property-tax, high maintenance expenses... If you talk about 'exceedingly stale', maybe Swiss or Caymand Islands, even Canada is better.

Thu, 06/28/2012 - 01:30 | 2567446 rzero
rzero's picture

Sorry Charles, but I don't follow your logic. Yes of course there is a buyer and a seller for every transaction, whether it be stocks, futures, real estate, forex, etc. That doesn't mean the price of one asset can't go down relative to another! It's called a change in demand!

The 30-years of trade deficits the US has been running have been funded by foreigners buying into the boom in US assets (stocks, bonds, real estate) which began in 1982. If foreign DEMAND for these assets should fall, the DEMAND for dollars needed to buy these assets will fall relative to foreign currencies, and the dollar will WEAKEN.

When the stock market is down for the day, there are the SAME NUMBER OF BUYERS AS THERE ARE SELLERS, yes, and there are (usually) the SAME number of existing shares, but SOMEHOW the stock market is down. How can this be? LESS DEMAND!

Thu, 06/28/2012 - 01:49 | 2567459 reader2010
reader2010's picture

I know some still are inspired to become landlords because there are those that want to trade sex for rent.

Thu, 06/28/2012 - 02:01 | 2567466 lemonobrien
lemonobrien's picture

so we get the chineses to buy our land, then tax them to pay our bills; sure the chinese haven't thought of that. I think they learned from the japanese in the 90s; didn't they own rockerfella plaza; pebble beach?

Thu, 06/28/2012 - 02:04 | 2567470 reader2010
reader2010's picture


Thu, 06/28/2012 - 03:13 | 2567471 reader2010
reader2010's picture

The Chinese ruling elite have their families, kids, and grand kids planted in the US for some 30+ years already. Last time I heard each family is given $685K living assistance each month. And some are still not very happy about the Party's stinginess. 

Thu, 06/28/2012 - 08:24 | 2567837 sethstorm
sethstorm's picture

Then milk them until they leave.

Thu, 06/28/2012 - 03:08 | 2567509 Tic tock
Tic tock's picture

Plain wrong with the USD assessment - instead of USD reserves, foreign companies will hold Yuan accounts. There is no intermediary cost. Thinking about OIL? -Alright, say energy costs are done in USD. Thirty years from now, with no outright war, will the US economy be as relatively strong as it is now? What if nations produce their own oil substitute, then why hold USD? ...And you want to look at the US from an international perspective - no, you really don't. ...why, because of your CIA, and because you will not tolerate anything that does not bow to you. 

Thu, 06/28/2012 - 05:36 | 2567586 Eddy Vluggen
Eddy Vluggen's picture

There's the problem; assets should not be measured in a volatile fiat-currency, but in terms of something tangible.

Thu, 06/28/2012 - 05:42 | 2567587 Joshua Falken
Joshua Falken's picture

With the US$, GBP, EUR, JPY, CNY and INR all in a competitive round of continual devaluation to deflate debt that will never be repaid to nothing, it is impossible for investors choose which currency will devalue the most against their domicile and give the greatest return on physical assets, in this case property.


The USA has a longer history of relative social and political stability  than countries with large suppresed or oppressed sections of society like China, India and Russia and is geographical isolated from troubled neighbours unlike Europe, Africa, Asia and particularly the Middle east.


I suspect the USA will be one of the first countries to eventually emerge from this economic morasse, along with Australia, Canada, Brazil and Japan.


So US investors buying property overseas may not be their best option; they may be better served with a portfolio of urban rental properties in lower midddle income areas with stable demand.

Thu, 06/28/2012 - 05:55 | 2567592 Escapeclaws
Escapeclaws's picture

Hopefully the Chinese will buy US assets that we have no use for such as rare earths. I understand there is a recent trade agreement that allows them to purchase assets in secret. That sounds like a good way to go.

Thu, 06/28/2012 - 07:02 | 2567642 Optimusprime
Optimusprime's picture

Hey Charles--the "US" was not constituted until the END of the EIGHTEENTH century.  So where was this English investment?  No permanent English colony before 1607.

Thu, 06/28/2012 - 07:22 | 2567686 luckylongshot
luckylongshot's picture

While it is interesting to see what everyone has to say it seems that almost noone seems interested in talking about the value in US real estate. The problem with this is that historically fundamentals have shown a tendency to eventually matter. The next lesson from history is on the horizon.

Thu, 06/28/2012 - 08:22 | 2567832 sethstorm
sethstorm's picture

Milk the Chinese for cash and increase the rates - until they end up paying US citizens to take the property off their hands.

Thu, 06/28/2012 - 09:04 | 2567948 BinAround
BinAround's picture

A very thoughtful essay. I've seen my hometown, Vancouver, totally invaded by Asians.  My elementary school was 90% caucasian in the 1970s, is now 90% Chinese.  House prices of over $1mln for a modest three bedroom have disenfranchised the youth of Vancouver.  If you grew up near the city, too bad, you must make room for the Chinese who have bought your parent's house.  Vancouver is now a Bejing suburb.   The quaint beauty of the city is gone, goodbye gardens, bungalos and views...replaced by large pink houses, highrises and 20yr old Chinese boys in sports cars.

Why are Vancouver house prices more than DOUBLE those in Seattle, just two hours south?  Because of the tax system in US vs Canada makes Canada more attractive than the USA for wealthy foreigners.  In the USA, citizens pay tax on worldwide income, or go to jail.  In Canada, only residents, not citizens, pay tax on worldwide income;  and jail is rare.  Become a Canadian citizen, buy a house, but stay abroad for most of the year.  No Canadian tax. Can't do that in Seattle.  Then you get free healthcare, decent education, clean air, friendly people, safety.

Who would have guessed that Greenspan/Bernake money policies which stimulated consumption causing trade deficits and windfalls to those well placed in China, coupled with Canada's lax tax system and Trudeau's "multi-culturalism" would so dramatically alter the society of Vancouver?



uch safer for the Chinese whose income and assets are abroad to avoid the IRS dragnet by owing Vancouver.   

Thu, 06/28/2012 - 09:26 | 2568017 Oldwood
Oldwood's picture

Maybe i can sell them one of my kidneys to pay for that flat screen TV i've been wanting!

Yes, I'm a racist because I don't want foreigners selling me useless crap and then using those proceeds to buy up all of my natural resources. If they were spending that money to come here and buy property and live, it would be one thing, but they are not in many cases. These countries have massive amounts of our cash that they can only spend on dollar denominated goods. WE obviously don't have exports they are interested in so they come here and buy up property and resources that we can no longer afford. They buy manufacturing plants, many times bringing in their own people to run them. They automate even more than we do because they can afford the massive technology costs that many of us cannot without government "investment". They have no interest in loaning us money so we can be competitive with them. They can buy up our resources and plants on the cheap. A local manufacturing plant for one of the largest furniture manufacturers in the world shut down and moved most of their production to Mexico. They left behind a completely outfitted building of approximately 400,000 sqft, which a Korean company bought, with about 30 acres of land, for 5.5 million dollars. The land alone should have been worth half a million an acre. They installed a state of the art metal fab plant (all foreign made CNC type machinery) to manufacture refrigeration systems using all Korean people to do it. How is this possible and how is this good for American workers? This would not have happened if we had not been buying their cheap stuff. If being racist is caring for me and my own, then sign me up! I really don't give a dime about Koreans. We have spent vast dollars and human lives for them and what do we get in return? A Kia and a Korean plant boss? The western world has impoverished themselves by borrowing the money that they cannot earn in an unbalanced trade system, to maintain a high profile life style. Now we are broke. We owe everybody and are left to sell what little we have to foreigners, and not just any foreigners, but those who in our past (and some currently) have been our enemy. And I am a racist. Were we racists when we killed Germans and Japanese and Italians in WWII? Were we racists when we killed the British in the revolutionary war? So why are we racists because we see our enemy, in many cases, buying up our land, our factories and our resources? Is it because we have surrendered? Are we all socialists now and this is the equalization period that eliminates our right to property ownership for the benefit of the collective? Healthcare is a right but not the ownership of your labor?

Thu, 06/28/2012 - 10:05 | 2568169 devo
devo's picture

Have fun managing a depreciating (by nature) US property from China and paying the US government exponentially increasing property taxes. Oh, and nobody here has jobs to pay rent. Safe haven my ass.

Thu, 06/28/2012 - 10:12 | 2568237 geewhiz190
geewhiz190's picture

capital is trying to get out of china not into china. most currencies are declining vs. the dollar, some are crashing. china's debt to gdp is probably somewhere aorund 150%, much worse than the US. government officals in many chinese cities have gone so far as to order the sale of state owned limos to raise cash.  PBOC cds pay more interest than their US counterparts meaning the bank is willing to pay up for deposits-why? because they need dollars. if the euro continues to weaken and swiss central bank support lessens, the dollar will move much higher. none of this bodes well for commodities that have already discounted some of the dollar's advance. the analogy is immigration. i don't see anybody in the US packing their bags to move to Iran, Egypt, India, China, Russia, Brazil, and on and on. but thie are millions of peole in those countries who would love to move to the US. As far as real estate, Miami high end condos are being snapped up by rich Brazilians, West coast property by the Chinese, NY ptroperty by wealthy Russians and on and on, everybody wants to come here. it's good for the US.

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