Desi Tamasha

The Chinese "growth" story in recent months, it seems, is a total mirage, built upon reckless government spending that is about to come crashing down:

I thought I’d seen insane excess in the past – 200 thousand square meter malls completely empty next to apartment complexes with 40 thousand units and 30% occupancy rates, etc. etc. But what we saw over there is rather hard to fathom. It seems the Guiyang city mayor had the same idea as the Shenzhen mayor – to move the old downtown to a piece of undeveloped land.

Of course Guiyang has a quarter the population and probably a quarter the per capita income of Shenzhen. They built sprawling new government buildings about a 20-minute drive north of town. And then the residential high rise projects started going up. From driving around the area, Tom and I figured well over 100 20+ storey buildings.

What was most distressing was that the development has been totally uncoordinated – a project with 15 buildings here, in another field two miles away a project with one building, another mile in another direction three buildings, sprawled over what was easily over 30 square kms. of farmland well north of town. Every building we got close enough to see was either incomplete/under construction, or empty. Our tone gradually went from “Haha, another one!” to “Oh my God, another one.” We conservatively guesstimated that we saw US$10bn of NPLs in one afternoon. The only buildings that were occupied were six-storey towers built to accommodate the peasants who had been displaced by the construction.

The global economy, it seems, could be in for yet another major shock in the coming months and years.

PS: More on the Chinese "bubble"...

Labels: bailout, bubble, china

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The original 3 page TARP proposal from Hank Paulson was rightly criticized and was not passed by the US Congress. Now Mr. Obama has come up with his own big stimulus plan, which is almost equally slim on details. Hopefully it won't pass in its similar state either.

It reminds me of the dot-com days: they used to be slim business plans with outrageous demands for capital, based on absurd projections of returns. These plans from M/s Paulson and Obama are similar too -- slim, outrageous demands for capital, and absurd projections of returns. The dot-com days didn't end too well, and the current government adventures seem to have a very limited chance of success as well.

Obama and Paulson have access to awesome resources. They can flesh out their plans in much greater detail. Unlike the dot-com-dude-in-the-garage (or at Stanford), these guys have Nobel Prize winners on call, and yet this is what they come up with. How pathetic, but also how arrogant!

Labels: bailout

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Hopefully, Paulson & co will soon come to accept that their plan is dead and a more prudent solution, like the one recommended by Nouriel Roubini, is the way to go.

Labels: bailout

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This is awesome -- DailyKos and House Republicans are joining forces to help come up with a better bailout package. I love it... I don't care who's posturing and why. I am just hoping that they negotiate and come up with the best solution possible.

Labels: bailout

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