Chinese Ghost Cities… property bubbles do not get any bigger than this.

China is not immune to the Austrian Business Cycle Theory.

Let’s not forget the real function of a house is to house people. These empty apartments which lay bare before our very eyes will in retrospect be evidenced as the most obvious indicator of the huge mis-allocation of resources.  Resources which have been mis-allocated cannot be reallocated back to its most efficient use easily and without pain. When concrete sets, it sets. Think of all the concrete, steel, machinery and equipment which has been built and utilised to necessitate the erection of these empty buildings. Now think of the opportunity cost, i.e. time and energy forgone that could have been used elsewhere if it had not been wasted on empty buildings. Opportunities forgone can never be measured, because they are by definition the things that didn’t happen. Wasted energy which could have been used to help cultivate more agricultural crops or spent on scientific research and development or used to manufacture improved technological products or spent to create better medicines. The extent to which we will not know.

China has a property bubble. Period. When it bursts there will be collateral damage outside of its borders. I for one would not like to be holding base metal mining companies – no matter how good the cashflow is, BHP included. The day of reckoning will come, you better hope you are on the right side of the ledger.

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About 1D

I've been fermenting in Canberra OZ for awhile now... Like all public servants I'm battling the cubicle nation... This blog will share my personal journey in which I am preparing to get out of cubicle jail... Time to be your own architect...
This entry was posted in Austrian Economics, Buy or Rent, Property Bubble and tagged , , . Bookmark the permalink.

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