10 ms·

The PRC has had a historical policy of linking the RMB to the dollar. That made sense when they were primarily reliant on exports to the US, but now that their

by jvm 11y ago

The PRC has had a historical policy of linking the RMB to the dollar. That made sense when they were primarily reliant on exports to the US, but now that their exports are diversified and they have massive domestic demand, a float and inflation peg like we have in the US is a much more sensible policy. The US dollar has an absurdly high valuation, so the sensible thing for the RMB (and most other currencies) is to devalue with respect to USD. Tyler Cowen has a broader and more pessimistic view, my point is captured in his point 6: http://marginalrevolution.com/marginalrevolution/2015/08/six-thoughts-about-the-yuan-devaluation.html http://marginalrevolution.com/marginalrevolution/2015/08/six...

pjc50 11y ago
I prefer ftalphaville's take: http://ftalphaville.ft.com/2015/08/11/2137067/this-one-time-at-band-camp-the-pboc-did-this-thing/ http://ftalphaville.ft.com/2015/08/11/2137067/this-one-time-... There is a massive but officially not permitted capital outflow from China that's pushing up real estate markets around the Western world. To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments.
- Zach_the_Lizard 11y ago
  I think the Chinese billionaire effect might be real, but really the chief reason housing prices are so high is because we make it difficult to build housing. This is especially true in the most economically productive metro areas, such as New York and the Bay Area. Even smaller cities such as DC are facing housing affordability crises. DC gained ~90K residents from 2005 to the present, but only gained ~12.5k new housing units in that time. If DC continues to grow, in the next 30 years DC will actually reach full buildout as allowed under current zoning and height restrictions. No additional units will be allowed.
  - go1979 11y ago
    Consider Toronto as a counter example. That city tore down parks to build condos. That didn't rein in prices. Now, the affluent foreigners have 3-4 condos to go along with that Maserati.
    - Zach_the_Lizard 11y ago
      DC has torn down a lot of things to build housing, and has converted former industrial properties into new neighborhoods (NoMA is an example). DC itself can't get rid of many of its parks because the National Park Service controls many of them, but neighboring jurisdictions certainly have gotten rid of parks in exchange for high rises (Arlington, for instance). What matters isn't what was replaced, but how many net new units are built vs. demand for new units. DC is falling behind. I'd imagine that Toronto has similarly fallen behind.
    - joelwilliamson 11y ago
      The obvious counter-argument is that home prices would have risen even faster without the construction boom.
  - noir_lord 11y ago
    In fact you could argue that if foreign investors have bought all your available housing then by building more housing you solve the problem of affordable housing and devalue the housing sold to others (but you got the income at the previous level). Here in the UK we need a massive concerted national effort to replace both the sold housing stock and the demand from an increased population - not going to happen though as neither major party is looking to be responsible for a house price fall (however beneficial in a net sense that would be) as the newspapers/media will beat them over the head with it. So we continue the wealth transfer from the poor/young to the rich/old.
  - TheCoelacanth 11y ago
    It would help if most of DC wasn't limited by zoning to 3 stories. Even allowing the legal maximum of 10ish stories would help a lot.
  - cma 11y ago
    >in the next 30 years DC will actually reach full buildout as allowed under current zoning and height restrictions Where there is a will: https://youtu.be/gjHo5BZM7V0 https://youtu.be/gjHo5BZM7V0
- go1979 11y ago
  I fully believe the capital outflow link to the rise in western real estate prices. As someone unlucky enough to be caught without any property, I am perplexed by the reasonable response. Friends have responded by taking insane loans (since property prices went up after said loans, these were really prudent financial decisions). I am at a loss. Will I be buying at the top? :(
  - lubos 11y ago
    Foreign investors buying up real-estate don't do it for the love of it. They seek returns by renting out. And even though real-estate value has increased a lot. Rental income from these properties didn't increase at the same rate. Tenants can't afford to pay rent landlords would like to charge so there is downwards pressure on returns these properties can generate. Not to mention, interest rates are at record low. What's going to happen when they go up? Not only demand for real-estate will be lower, there are borrowers who have accumulated too much debt to buy real-estate. They might be simply forced to sell as they wouldn't be able to service their loans anymore. Nobody can predict the future but I'm not going to be surprised if we witness another real-estate crash in 2-3 years.
    - pjc50 11y ago
      Lots of people suspect that the Chinese purchase of overseas property is mostly an expression of distrust at the Chinese government. Remember that China is still (very nominally) communist and not afraid to confiscate property of people who are sufficiently discredited. It happens occasionally in corruption crackdowns. For this purpose, it's a minimum-risk store of wealth with a potential for appreciation and any actual returns are less of a priority. Something similar applies to Saudi and Russian oil wealth; an escape from the possibility of SHTF.
    - mistermann 11y ago
      > Foreign investors buying up real-estate don't do it for the love of it. They seek returns by renting out. Except often they don't, rental income is almost like a rounding error to them (it's not really, but they can't be bothered - the main thing, it seems, is buying the asset.)
- Asbostos 11y ago
  What's wrong with paying rent to someone in another country? There's the argument that the money doesn't come back into the local economy, but in this case it clearly does - they bought the house by paying a local seller.
  - clavalle 11y ago
    Unless they bought it from a foreign investor. There is something to be said for not having another country control property that one's citizens need to live. What if another country started buying up farmland, for example? Beyond that they have no interest beyond financial to, say, keep things nice or affordable or to encourage sustainable growth or any of the other bonuses communities get when they have locals own property.
    - jpollock 11y ago
      Citizens (and occasionally residents) have ultimate control over the land, through control of taxation and regulation.
      - toomuchtodo 11y ago
        Only if said Citizens are keeping their government in check.
- bkeroack 11y ago
  Which is actually nice for the US, since Chinese buyers can't pick up a piece of real estate and bring it back home with them, and the ownership obligates them to pay taxes, etc. It hurts the domestic home buyer, though, who has to compete with inflated all-cash offers from these foreign investors.
  - toomuchtodo 11y ago
    This: > It hurts the domestic home buyer, though, who has to compete with inflated all-cash offers from these foreign investors. is much more hurtful then the benefits provided by foreign buyers paying taxes. If you don't believe me, look at London. Actual workers are pushed out by money launderers (yes, that is what they are).
    - ebiester 11y ago
      The big difference between the US and GB is how much more land there is in the US. We can always build a new city.
      - toomuchtodo 11y ago
        Its not where the land is. Its where the jobs are. Is everyone going to live in a tiny house in BFE Texas?
        zaccus 11y ago
        This wouldn't be as much of an issue if more companies embraced working remotely.
        toomuchtodo 11y ago
        Completely agree. It'll happen slowly. You already can see more companies willing to hire remote so you're not limited to candidates that fit your requirements within 0-50 miles of your office.
      - 11y ago
- toomuchtodo 11y ago
  > To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments. Warren Buffet warned us of this years ago (trade deficit causing real estate transfer between nations): https://www.youtube.com/watch?v=M-vMxKvYfVs https://www.youtube.com/watch?v=M-vMxKvYfVs
kuschku 11y ago
If you consider the dollar to have an absurdly high valuation, what do you think about the GBP and, until a year ago, the EUR?
- seanmcdirmid 11y ago
  Also CHF! Historically, the dollar isn't so high as other currencies are weak. The dollar is not overvalued by any measure.

by jvm 11y ago

pjc50 11y ago

I prefer ftalphaville's take: http://ftalphaville.ft.com/2015/08/11/2137067/this-one-time-at-band-camp-the-pboc-did-this-thing/ http://ftalphaville.ft.com/2015/08/11/2137067/this-one-time-... There is a massive but officially not permitted capital outflow from China that's pushing up real estate markets around the Western world. To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments.

Zach_the_Lizard 11y ago
I think the Chinese billionaire effect might be real, but really the chief reason housing prices are so high is because we make it difficult to build housing. This is especially true in the most economically productive metro areas, such as New York and the Bay Area. Even smaller cities such as DC are facing housing affordability crises. DC gained ~90K residents from 2005 to the present, but only gained ~12.5k new housing units in that time. If DC continues to grow, in the next 30 years DC will actually reach full buildout as allowed under current zoning and height restrictions. No additional units will be allowed.
- go1979 11y ago
  Consider Toronto as a counter example. That city tore down parks to build condos. That didn't rein in prices. Now, the affluent foreigners have 3-4 condos to go along with that Maserati.
  - Zach_the_Lizard 11y ago
    DC has torn down a lot of things to build housing, and has converted former industrial properties into new neighborhoods (NoMA is an example). DC itself can't get rid of many of its parks because the National Park Service controls many of them, but neighboring jurisdictions certainly have gotten rid of parks in exchange for high rises (Arlington, for instance). What matters isn't what was replaced, but how many net new units are built vs. demand for new units. DC is falling behind. I'd imagine that Toronto has similarly fallen behind.
  - joelwilliamson 11y ago
    The obvious counter-argument is that home prices would have risen even faster without the construction boom.
- noir_lord 11y ago
  In fact you could argue that if foreign investors have bought all your available housing then by building more housing you solve the problem of affordable housing and devalue the housing sold to others (but you got the income at the previous level). Here in the UK we need a massive concerted national effort to replace both the sold housing stock and the demand from an increased population - not going to happen though as neither major party is looking to be responsible for a house price fall (however beneficial in a net sense that would be) as the newspapers/media will beat them over the head with it. So we continue the wealth transfer from the poor/young to the rich/old.
- TheCoelacanth 11y ago
  It would help if most of DC wasn't limited by zoning to 3 stories. Even allowing the legal maximum of 10ish stories would help a lot.
- cma 11y ago
  >in the next 30 years DC will actually reach full buildout as allowed under current zoning and height restrictions Where there is a will: https://youtu.be/gjHo5BZM7V0 https://youtu.be/gjHo5BZM7V0
go1979 11y ago
I fully believe the capital outflow link to the rise in western real estate prices. As someone unlucky enough to be caught without any property, I am perplexed by the reasonable response. Friends have responded by taking insane loans (since property prices went up after said loans, these were really prudent financial decisions). I am at a loss. Will I be buying at the top? :(
- lubos 11y ago
  Foreign investors buying up real-estate don't do it for the love of it. They seek returns by renting out. And even though real-estate value has increased a lot. Rental income from these properties didn't increase at the same rate. Tenants can't afford to pay rent landlords would like to charge so there is downwards pressure on returns these properties can generate. Not to mention, interest rates are at record low. What's going to happen when they go up? Not only demand for real-estate will be lower, there are borrowers who have accumulated too much debt to buy real-estate. They might be simply forced to sell as they wouldn't be able to service their loans anymore. Nobody can predict the future but I'm not going to be surprised if we witness another real-estate crash in 2-3 years.
  - pjc50 11y ago
    Lots of people suspect that the Chinese purchase of overseas property is mostly an expression of distrust at the Chinese government. Remember that China is still (very nominally) communist and not afraid to confiscate property of people who are sufficiently discredited. It happens occasionally in corruption crackdowns. For this purpose, it's a minimum-risk store of wealth with a potential for appreciation and any actual returns are less of a priority. Something similar applies to Saudi and Russian oil wealth; an escape from the possibility of SHTF.
  - mistermann 11y ago
    > Foreign investors buying up real-estate don't do it for the love of it. They seek returns by renting out. Except often they don't, rental income is almost like a rounding error to them (it's not really, but they can't be bothered - the main thing, it seems, is buying the asset.)
Asbostos 11y ago
What's wrong with paying rent to someone in another country? There's the argument that the money doesn't come back into the local economy, but in this case it clearly does - they bought the house by paying a local seller.
- clavalle 11y ago
  Unless they bought it from a foreign investor. There is something to be said for not having another country control property that one's citizens need to live. What if another country started buying up farmland, for example? Beyond that they have no interest beyond financial to, say, keep things nice or affordable or to encourage sustainable growth or any of the other bonuses communities get when they have locals own property.
  - jpollock 11y ago
    Citizens (and occasionally residents) have ultimate control over the land, through control of taxation and regulation.
    - toomuchtodo 11y ago
      Only if said Citizens are keeping their government in check.
bkeroack 11y ago
Which is actually nice for the US, since Chinese buyers can't pick up a piece of real estate and bring it back home with them, and the ownership obligates them to pay taxes, etc. It hurts the domestic home buyer, though, who has to compete with inflated all-cash offers from these foreign investors.
- toomuchtodo 11y ago
  This: > It hurts the domestic home buyer, though, who has to compete with inflated all-cash offers from these foreign investors. is much more hurtful then the benefits provided by foreign buyers paying taxes. If you don't believe me, look at London. Actual workers are pushed out by money launderers (yes, that is what they are).
  - ebiester 11y ago
    The big difference between the US and GB is how much more land there is in the US. We can always build a new city.
    - toomuchtodo 11y ago
      Its not where the land is. Its where the jobs are. Is everyone going to live in a tiny house in BFE Texas?
      - zaccus 11y ago
        This wouldn't be as much of an issue if more companies embraced working remotely.
        toomuchtodo 11y ago
        Completely agree. It'll happen slowly. You already can see more companies willing to hire remote so you're not limited to candidates that fit your requirements within 0-50 miles of your office.
    - 11y ago
toomuchtodo 11y ago
> To some extent we're paying for our imported manufactured goods from China by exporting house ownership and rent payments. Warren Buffet warned us of this years ago (trade deficit causing real estate transfer between nations): https://www.youtube.com/watch?v=M-vMxKvYfVs https://www.youtube.com/watch?v=M-vMxKvYfVs

kuschku 11y ago

If you consider the dollar to have an absurdly high valuation, what do you think about the GBP and, until a year ago, the EUR?

seanmcdirmid 11y ago
Also CHF! Historically, the dollar isn't so high as other currencies are weak. The dollar is not overvalued by any measure.