If you didn’t care what happened to me. And I didn’t care for you. We would zig zag our way through the boredom and pain. Occasionally glancing up through the rain. Wondering which of the buggars to blame. And watching for pigs on the wing.
– Pink Floyd, Animals
My co-author, Peter Navarro, had a rambunctious bout on CNBC this week with China apologist, Derek Sissors over the value of Chinese real estate investment to the U.S. economy. If you like a little of the ol’ verbal ultra-violence check it out. It’s a pretty good viddy. It’s notable that the title of the segment, “Can China Rescue U.S. Housing” embraces a couple of very questionable assumptions that are unfortunately common. Namely:
- The Real Estate Market is heading in the wrong direction
- China is a normal nation.
As to the first point, I fail to understand why 99% of Americans are brainwashed into believing that jacking up the price of housing is a desirable thing in a nation with falling real incomes. Do we want them to be more expensive so we can use them as ATMs again? As long as we insist on opening our markets to one-way trade with China we will continue to see reduced returns to our domestic labor and increased returns to our capital invested elsewhere and the 99% will find it harder and harder to buy into the market or even rent. So apparently, it just seems natural to the Washington elite that we should sell the homes repossessed from our dispossessed to the very foreigner slave drivers who put them out of work. Charles Schumer (D – NY) and Mike Lee (R – UT) would like to give foreign buyer’s visas to make that process easier.
As to the second point, the host actually compares China to Canada! Well, after all, both are large countries that start with the letter “C.” Maybe if you overlook the organ harvesting, flammable Tibetan monks, and the frightening military build up you could be confused with our noble neighbor to the North. Not.
While Peter takes on the large scale threat of $Trillions in Chinese hands ready to buy up America, an interesting backside of this issue is in the private housing market. The CNBC story notes, a third of KB home sales in a major subdivision might be going to Chinese. That’s pretty ironic, since KB is still recovering from eating millions of dollars in damages from hundreds of homes they built with dangerous Chinese drywall.
Friends in the real estate biz confirm this Chinese trend has been going on for a couple of years and I was told that in a recent quarter more than half of homes sold in my area of Orange County, California went to Chinese with cash.
What is really interesting is who these cash buyers are. Chinese American friends tell me that a LOT of these new buyers, are wealthy business people, corrupt officials, and Communist Party members moving their families to safety in America.
Apparently Wang Lijun isn’t the only one looking to get the heck out of Dodge before the bullets start flying.
Now, I don’t blame anyone who wants to flee the ironically misnamed “People’s Republic”, but the sad fact is that while Nobel Laureate Liu Xiaobo is still in jail and artist Ai Wei Wei is under virtual house arrest, many of the types that put them there are moving to California to keep their own sorry necks safe. Since China’s business environment runs from mildly corrupt to the utterly criminal it reasonable to believe that a decent percentage of anyone who can afford to pay cash for a million dollar home might be a shady character. The idea of using immigrants to “rescue” our housing market might not be as poetic as it seems. Attracting “high-end” immigration does offer a number of economic benefits, but importing a ready-made mafia is another song entirely.
– Greg Autry has taught business Strategy and Macroeconomics at the Merage School of Business,UC Irvine where he is now working on a PhD in Public Policy and Economics. He is co-author with Peter Navarro of Death by China and serves as Senior Economist for the American Jobs Alliance.