China is rebuilding America
Here’s the Los Angeles Times:
Winston Yan stood atop the largest real estate project of its kind in downtown Los Angeles, a monstrous patchwork of glass and concrete next to the 110 Freeway, and marveled at the bustle of workers, construction vehicles and cranes 38 stories below.
The scope of development in this mixed-use project, called Metropolis, is unprecedented for L.A. but quite familiar to Yan. As an architect and executive for Chinese real estate giant Greenland, he’s witnessed firsthand China’s dramatic urbanization in recent decades.
“It reminds me of what’s happening in Beijing and Shanghai,” said Yan, chief technical officer for Greenland’s U.S. subsidiary. “Now it’s happening here.” . . .
Chinese developers such as Greenland, Oceanwide and Shenzhen Hazens are pouring billions into the neighborhood, adding thousands of new residential units in soaring skyscrapers that will fundamentally change the city’s skyline. Since 2014, Chinese developers have been involved in at least seven of 18 land deals downtown in excess of $19 million, according to real estate firm Transwestern.
“When all these megaprojects are finished, they’re going to have to reshoot the postcard picture of downtown L.A.,” said Mark Tarczynski, executive vice president for Colliers International’s L.A. office.
This is the flip side of America’s CA deficit with China. When countries like China runs a CA surplus, their domestic saving exceeds their domestic investment. This excess saving flows overseas to finance investment projects in countries like America and Australia, where saving falls short of investment. Hence Chinese money is rebuilding America.
As you might expect, Trump is horribly confused on this point. Here’s Matt Yglesias, discussing the recent debate:
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He also said the Chinese “are using our country as a piggy bank to rebuild China,” which isn’t even how piggy banks work, much less the US-Chinese economic relationship.
Trump has it exactly backwards. Over at Econlog, I discuss the economist who has been feeding Trump this sort of misinformation about basic economic identities. Yglesias also points to lots of Trump lies. The phony stats are perhaps to be expected, but the bald faced denials of saying things that he actually did say, sets a new (low) bar for American politics:
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“Donald thinks that climate change is a hoax perpetrated by the Chinese,” Clinton said. He protested. “I did not. I do not say that.” But it turns out he did.
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“You even at one time suggested that you would try to negotiate down the national debt of the United States,” Clinton charged, to which Trump flatly replied, “Wrong.” But it turns out he did.
I actually recall him saying the second point, just a few months ago. As with his public support for the Iraq War, truth means absolutely nothing to Trump. In fairness, Clinton is also somewhat dishonest–Trump nailed her on the TPP.
As for Trump’s bizarre conspiracy theories on all sort of issues, I don’t even know what to say. (Chinese hoax? Seriously?) This sort of mental illness in a normal person might be viewed as amusing. When the man with his finger on the nuclear triggers suffers from bizarre irrational delusions that foreign countries are trying to hurt us . . . well that can’t be good, can it?
PS. It’s kind of sad that wealthy Americans cannot seem to put aside the savings required to finance our investment spending, and instead we need to rely on the savings of poor Chinese.
PPS. I didn’t watch the debate, because I find them unwatchable (and not just this one.) Let me give you an example. The press thought Trump did a mediocre job, but most agree that he was pretty strong during the first 15 minutes or so. But if you look at the transcript, his first 15 minutes were just appalling, one lie after another, one inane statement about trade after another. The piggy bank quote above. The claim that Mexico’s VAT is a trade barrier, etc., etc. Almost nothing he said was true, almost everything showed a complete lack of understanding of basic economics. And this is what the press considers a “strong” performance. It’s clear to me that the press is either too dumb to understand content, or cares only about style when making these judgments. And maybe style is all that matters. But in that case, why waste 90 minutes watching a debate? There are much more entertaining ways to pass one’s time, like watching paint dry.
PPPS. This caught my eye:
The Conference Board says that its consumer confidence index rose to 104.1, up from 101.8 in August. It was the strongest reading since the index stood at 105.6 in August 2007, four months before the beginning of the Great Recession of 2007-2009.
Not bad, for a country where “some great economists” think the unemployment rate is as high as 42%.
Seriously, we really need to stop talking like the US economy is still in “recession” and needs “stimulus”. We do need a new monetary policy regime, but not because the current unemployment rate is too high. We need a STABLE monetary regime. And supply-side policy reform (which neither candidate is advocating.)
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27. September 2016 at 10:10
I think US saving is widely misunderstood. US foreign investment always earns more than foreign investment in the US. We save much more if you estimate it with our income instead of trying to estimate it by measuring the inputs. Foreign savers are just trying to keep up with us.
27. September 2016 at 12:32
https://twitter.com/mcurryfelidae07/status/776101739300786176
“This sort of mental illness in a normal person might be viewed as amusing. When the woman with Her finger on the nuclear triggers suffers from bizarre irrational delusions that foreign countries are trying to hurt us . . . well that can’t be good, can it?”
“Almost nothing he said was true, almost everything showed a complete lack of understanding of basic economics.”
-We know. But Clinton couldn’t in any way refute it, so he sounded smart on that issue.
“And supply-side policy reform (which neither candidate is advocating.)”
-Fact check: false.
27. September 2016 at 13:30
Harding, It’s hopeless trying to defend Trump. Don’t you get tired putting perfume on a pig?
And no, you did not provide a single bizarre conspiracy theory.
27. September 2016 at 13:39
Alternate Reality nonsense from Trump and Tea Party types (there isn’t much of a difference) is why I’m no longer a republican.
Its only going to get worse from them; Hillary is going to govern from the center like a moderate-to-liberal Republican from the 1950s, 60s, or 70s, and Team Crazy will become more and more bizarre to draw a contrast. They’re going to become ever-more extreme until old, uneducated whites become a non-factor electorally in 2030 or whatever
Of course, we can always elect The Donald and commit national suicide.
27. September 2016 at 14:25
“And no, you did not provide a single bizarre conspiracy theory.”
-Fact check: false:
China’s government being behind proposals to reduce U.S. carbon dioxide emissions to force jobs to China has at least some plausibility to it. China’s government has the means, the motive, and the opportunity to do this. None of this is bizarre. Putin being “the great godfather” of Brexit and Trumpism has none. Stop smoking crack, Sumner. Your grasp on reality has rapidly faded since Trump started running.
“Of course, we can always elect The Donald and commit national suicide.”
-“National suicide” is opening the borders and granting the illegals citizenship, as well as leading America into a nuclear war. Her policies and rhetoric are consistent with that. Trump’s aren’t.
Make America Great Again!
“Hillary is going to govern from the center like a moderate-to-liberal Republican from the 1950s, 60s, or 70s,”
-Nope; that’s Trump. Hillary’s preferred Supreme Court picks
*support the establishment of mandatory affirmative action across the nation not by legislation, but by judicial fiat
*do you really need anything more?
Hillary did not “govern from the center” during Her time in the Senate; she combines the worst aspects of the Republican and the Democratic parties. That’s why I’m voting Trump.
“They’re going to become ever-more extreme until old, uneducated whites become a non-factor electorally in 2030 or whatever”
And who you gonna replace those Vermonters with?
27. September 2016 at 14:26
“It’s hopeless trying to defend Trump.”
-So you admit you’re a fundamentalist; that your beliefs are not even remotely based on evidence? When the evidence changes (as it will), will you change your mind?
27. September 2016 at 14:55
Still a lot of people are not looking for work. Unfortunately, Trump has latched onto this truth, and many Americans are disgruntled, being employed part time, or have given up, or have low paying jobs. Fed bankers don’t take this issue seriously enough. I don’t think Scott does either.
So, this recovery sucks, and Trump is what you get as a result. It is sad, because Trump is mentally off, and he is a perverse person and a hater. And, I agree with you, Scott, he just cannot have his finger on the nuke trigger.
China is bidding up real estate on the coasts. The office buildings and retail outlets are a good thing, but plowing into residential RE by Chinese citizens is not. I think that contributes to CLOSED ACCESS, but then, I only say stupid stuff so what do I know?
I have been following Kevin Erdmann and he has said some interesting things about closed access cities, made worse by Chinese investment, it appears. Pockets of poverty in closed access cities, where prices are affordable, are dreadful as to crime and quality of life.
This is an ongoing problem and Erdmann on page 2 of this article tells it like it is:
http://www.talkmarkets.com/content/real-estate–reits/the-real-problem-with-real-estate-understood-by-market-monetarists?post=97232&uid=4798
Tech and finance have destroyed income equality. That is bad news in the long run, for closed access cities. Trump has a plan for closed access cities, just get rid of the pockets of the poor and make it all closed.
He not only wants to march illegals out of the cities, he wants to march the poor out of the cities.
27. September 2016 at 16:00
Trump is a loonie.
On the other hand, Clinton ptoposes taxing and regulating busineeses into growing and creating more jobs.
It is true that Chinese nationals will buy North American West Coast properties as long as we run a trade deficit with them.
The rents from those assets could travel back to China in perpetuity, permanently reducing US incomes.
BTW: Just finished hitting standard Bangkok tourist spots. Packed with Chinese tours. Packed! If Thailand retains popularity I see good future for tourist trades….
27. September 2016 at 16:36
So, the US imports capital and labour. Historically, having two scarce factors of production out of three is the basis for an upsurge in protectionism.
A significant share of electorate dependent on the public sector (so they benefit from free trade), that a lot of US capital is cross-border and the complicated nature of modern trade flows, which tend to break up factor-coalitions militate against the two-scarce-factors-out-of-three effect. Still, a bit of a protectionist surge is not all that surprising.
27. September 2016 at 16:39
Also, have you seen this? Economist Danny Quah suggesting the East Asian model might be a serious competitor to democracy. (I would have thought South Korea and Taiwan in particular did not fit with his suggested re-framing.)
https://www.youtube.com/watch?v=tXfl-WksAWo
27. September 2016 at 18:09
Important to keep perspective how we got here:
Matt Yglesias 2/20/16
Why I’m more worried about Marco Rubio than Donald Trump
http://www.vox.com/2016/2/20/11067932/rubio-worse-than-trump
Mark Cuban 2/01/16
when you know Donald, he’s got a different personality than what he plays on TV, and it’s kind of a ‘don’t hate the player, hate the game’ type situation. But I haven’t made a decision yet – I’ll consider anybody but Ted Cruz…
the person who can come across the best and simplify things has the best chance. It’s the old ‘KISS” concept – keep it simple, stupid. And I think Donald has really dialed in on that, and understands it – and he’ll admit it.
http://sportsday.dallasnews.com/dallas-mavericks/mavericks/2016/02/01/mark-cuban-donald-trumps-hate-player-hate-game-tv-personality-keep-simple-stupid-strategy-voters
27. September 2016 at 20:37
Scott,
Are you still voting for Gary Johnson? I ask, because he’s obviously issued a series of ignorant and/or bizarre comments on a number of issues since you endorsed him in non-swing states.
It’s obvious to me that he doesn’t even consider himself a serious candidate and he’s perhaps blown some opportunities to try to boost his poll numbers.
So, are you behind him, is it a protest vote, is it a vote in what you hope is the long-term interest of the Libertarian Party, or some combination?
BTW, he’s still a lot better than Trump.
28. September 2016 at 00:37
Good post by Sumner, who, as I’ve said, makes sense when he sticks to micro. Also this, in today’s news, BBC: http://www.bbc.com/news/business-37491989
Business sense suggests you try to buy property at the lowest possible price, but that was not the case for one property in Sydney, Australia. It was just bought by Chinese buyers for A$88,888,888.88. The number eight is considered lucky in Chinese as it sounds like the word for “prosperity”. That luck might come in handy – the deal comes just as Sydney was awarded the fourth spot on UBS’s global housing bubble index.Sydney follows Vancouver, London and Stockholm in the ranking which seeks to identify the world’s most risky real estate markets. The lucky price of A$88,88m (US$68.2m; £52.5m) bought 333 Kent Street in Sydney’s Central Business District.
28. September 2016 at 05:02
[…] China is rebuilding America […]
28. September 2016 at 08:49
And Mexico is helping !
excerpt….”….At a time when few Mexicans are coming to the United States as immigrants, Mexican investors have started pouring billions of dollars into the U.S. economy. Today, Mexican companies are among the industry leaders …”
https://www.washingtonpost.com/posteverything/wp/2016/06/01/money-is-flowing-over-the-u-s-mexico-border-but-its-going-north/?utm_term=.f895f1ce7fb2
28. September 2016 at 12:00
Harding, You said:
“China’s government being behind proposals to reduce U.S. carbon dioxide emissions to force jobs to China has at least some plausibility to it. ”
Case closed.
Lorenzo, There are two East Asian models, the rich democratic countries (Japan, Taiwan, Singapore, South Korea) and the poor authoritarian ones (China, Thailand, North Korea, etc) Which one does he say is the model?
Steve, Yes, and add Krugman to the list of people who “normalized” Trump. I’m proud to say I was here from the beginning, (although I obviously underestimated his electoral strength.)
Scott, Johnson is by far the best candidate. The problem is what you consider “bizarre”. Let me guess, you don’t think Hillary favoring imprisoning 400,000 mostly minority drug “criminals” is bizarre. Do black lives matter?
28. September 2016 at 12:01
Scott, Of course if I lived in a swing state I’d vote for Hillary.
28. September 2016 at 12:35
The problem is what you consider “bizarre”. Let me guess, you don’t think Hillary favoring imprisoning 400,000 mostly minority drug “criminals” is bizarre.
They’re quite willfully in violation of the law. They are criminals.
28. September 2016 at 12:42
Hillary is going to govern from the center like a moderate-to-liberal Republican from the 1950s, 60s, or 70s, and Team Crazy w
Really? Well, lessee. Medicare and Medicaid did not exist until 1965, so I guess there is a 50-50 shot they’ll be abolished. Abortion was unsafe, illegal and rare, so I guess we’ll be getting a comprehensive prohibition. Legal proscription on pornography (other than nude shots) was the order of the day; that’s coming back. Rockefeller was tough on crime – he was especially associated with sharp penalties for drug possession and sale. There weren’t any VietNam war doves in the Republican Party until 1967, so the military budget will be doubled and will have boots on the ground in Syria, Iraq, and Libya.
28. September 2016 at 19:55
Scott,
How many examples of Gary Johnson’s bizarre behavior do you want?
https://www.youtube.com/watch?v=7m5MtsRZ-Fw
First 1:30. I’m not even referring here to Johnson’s kidding around about how the the sun eventually “encompass the earth”, but just the way he conducts himself in the interview. It is also odd for a Presidential candidate to talk about the need to inhabit other planets during his campaign, though presumably it’ll be a good idea one day.
https://www.youtube.com/watch?v=j_azcqlYC2s
Less than 2 minutes long. There’s nothing wrong with being silly, but it’s very odd to behave this way with the precious bits of national TV time he gets.
https://www.youtube.com/watch?v=nKb2oiJluLk
1:30. He didn’t know what Aleppo was. This is an example of extreme ignorance, and it’s also quite bizarre. Even if he knew little about Aleppo, to not have heard of a city in the news nearly daily?
https://www.youtube.com/watch?v=J3SNLPfVGt4
2:34. In fairness though, Johnson is very honest about his ignorance, which is certainly virtuous and refreshing, but how can we take a candidate seriously who doesn’t even follow the news?
https://www.youtube.com/watch?v=toaFfZ1S7UQ
First 1:15. Johnson runs a marijuana company with the brand name “hi”. I don’t think there should be anything legally wrong with this, but on the other hand, it’s not something a serious candidate for President would do. It’s unbecoming. It’s more becoming for a college kid or recent college grad.
http://theweek.com/speedreads/628460/samantha-bee-insane-interview-libertarian-candidate-gary-johnson
First 1:30 illustrates the point. The rest of the video just reinforces it. The guy is kooky.
He also favors eliminating child labor laws so that 13 year-old kids can help elderly adults solve their computer problems, which in moderation wouldn’t be bad, but does he also favor children working in mines?
Granted, Clinton has supported mass incarceration in a number of direct and indirect ways, supported the catastrophic invasion and occupation of Iraq and intervention in Libya, misread Putin when trying to reset relations, is an economic ignoramus who said very little that was correct in the last debate,… I could go on, but as P.J. O’Rouke said, she’s terrible within normal parameters.
Not knowing what Aleppo is means Johnson is unqualified to be President, full-stop. How could he possibly have a successful foreign policy, especially from the management of balances of power viewpoint?
All this said, Johnson would be better than Trump, for obvious reasons, and better than Stein, who is an even bigger kook than he is and is perhaps worse than ignorant on foreign policy.
29. September 2016 at 14:42
Scott: that’s the obvious problem with his talk, he talks as if there is just one model, with China as the stand out example.
Also, can’t remember whether I mentioned that I expanded my comment on ages of trade into a post.
https://lorenzo-thinkingoutaloud.blogspot.com.au/2016/09/are-we-heading-towards-peak.html
29. September 2016 at 15:43
Art, You said:
“They’re quite willfully in violation of the law. They are criminals.”
I see, and how would you apply this “logic” to North Korea? Life must be pretty simple for people like you. If you violate the law, you are a criminal.
Simple.
Scott, That’s all you got ?!?!?!
THIS is an impressive list:
http://www.slate.com/articles/news_and_politics/bidenisms/2009/09/the_complete_bidenisms.html
29. September 2016 at 15:47
Lorenzo, Odd that he would single out one of the poorest countries in East Asia as a model. But when people have their mind made up, I guess everything fits their model.
Nice post on the peak of globalization.
29. September 2016 at 22:32
Scott,
I’m glad you’re having fun with this, because it’s obvious that it isn’t that serious, given that Johnson essentially has zero chance to win. But, surely you would agree that not knowing what Aleppo is should be disqualifying? I agree with your points about Trump, and many of them about Hillary, but Johnson is no alternative. Perhaps the best qualified person in the race is Weld.
30. September 2016 at 11:23
Scott, You said:
“But, surely you would agree that not knowing what Aleppo is should be disqualifying?”
Not only do I not agree, but I think that assertion is silly. Every candidate says lots of things as bad, in the case of Trump he says worse things every 5 minutes.
By your standards no one could be president. And you didn’t respond to my Biden list. Shouldn’t Obama be disqualified for putting a buffoon a heartbeat away from the presidency?
30. September 2016 at 14:04
Scott,
I read the first 40 or so of those Biden quotes and don’t see the problem. Looks like some diarrhea of the mouth and some gaffes, but nothing disqualifying. Do you think Biden knows what Aleppo is? Who do you think is more knowledgeable about foreign policy, Biden or Johnson?
You are one of the most non-ideological bloggers I’ve read, even outside of economics, but I think here is an example of where you’re biased. In an ideal world, we would have better options than Clinton, Trump, or Johnson, but to say that by my standards no one is qualified is ludicrous. I’d bet money that Bill Weld knew what Aleppo was. One needn’t even look beyond that ticket.
It was you who helped point me to real Austrian economists, but you still treat the Austrian kooks as if they have more credibility than they should. You have a soft-spot for libertarians, no matter how ignorant or irrational. The mises.org types are flat-earthers, but you seem to favor them over the liberal flat earthers from the MMT, crude Keynesian, or Marxist camps, for example. To me, none of them are scientists and are a total waste of time.
We all gave biases, and you’ve occasionally made me aware of some of my own. I just point this out for the sake of consistency. While all of your criticisms if Trump, and most of those of Clinton are valid, you support a candidate who is simply obviously unqualified to be President, and who apparently doesn’t even take running for President seriously.
30. September 2016 at 14:10
I should clarify to say that Boetkke is an example of a non-kook. He seems to be a real scientist. The mises.org people literally have significant trouble with basic facts, like the worst Marxists.
30. September 2016 at 15:00
Scott,
To put this another way, what are the chances Johnson would have a successful policy vis-a-vis Russia and the middle east generally when he doesn’t even know what Aleppo is? Can you imagine that initial National Security Council meeting? He’s not exactly ready from day one.
Clinton has supported some disastrous foreign policy mistakes to be sure, but she claims to have learned from them and I think she’s a much better bet to be an effective advocate for our interests overseas than Gary Johnson. At least she’s aware of what the issues are, and understands that there’s diplomatic competition in the world.
That, along with the fact that Trump is her opponent, is what has virtually the entire foreign policy establishment behind her. Would the Council on Foreign Relations, or the rest of the establishment get behind Johnson under any circumstances?
I know foreign policy is not your expertise. It isn’t mine either, but I did take some classes in that area in college, and I learned enough to know that just about every economist I read discusses these issues completely outside of actual paradigms within the field. It’s basically the equivalent of the kinds of discussions that go on about economics among those who’ve no education in economics.
30. September 2016 at 15:27
Boetkke is an example of a non-kook. He seems to be a real scientist.
I don’t think he’s ever done any empirical work at all.
30. September 2016 at 15:33
I see, and how would you apply this “logic” to North Korea? Life must be pretty simple for people like you. If you violate the law, you are a criminal.
The laws you object to have been exercises of the state’s police power and have been on the books (in some cases) for a century. It’s not some addled and transient response, but an abiding expression of community standards.
You couldn’t bother one ounce of sympathy for an ordinary merchant who’d rather not be roped into the decadence of the age, but put some dissipate up there who wants to shoot heroin, and you’re outraged the law inhibits that. Well, there’s a reason people do not take academics seriously.
1. October 2016 at 07:43
Scott, Yes, Hillary knows lots of things that Johnson does not, and vice versa. Johnson knows that the laws making pot illegal have been a disaster, and Hillary thinks they are just fine. Is some who believes that nonsense qualified to be president?
She thinks pot should be illegal because drug pushers are bad people. I’m not making that up—I sat 20 feet from her when she made that ludicrous remark. That’s far worse than not knowing Aleppo.
She said the Bush tax cuts led to the housing crisis. I could create a long list of her inane comments, but I don’t want to waste my time.
Art, You said:
“but an abiding expression of community standards.”
Well then you must love the Saudi Arabian laws, which reflect their “community standards”
1. October 2016 at 10:11
Scott,
Get real. I favor drug legalization too, but no serious candidate for President has favored legalization for decades, not least probably because it would be political suicide. Who was the last serious candidate to favor legalization? Did Goldwater? That didn’t turn out well.
The fact is that Hillary has moved some on drug decriminalization, saying that marijuana should no longer be a schedule 1 drug.
This comes from Hillary’s website:
“Focus federal enforcement resources on violent crime, not simple marijuana possession. Marijuana arrests, including for simple possession, account for a huge number of drug arrests. Further, significant racial disparities exist in marijuana enforcement, with black men significantly more likely to be arrested for marijuana possession than their white counterparts, even though usage rates are similar.
“Hillary believes we need an approach to marijuana that includes:
Allowing states that have enacted marijuana laws to act as laboratories of democracy, as long as they adhere to certain federal priorities such as not selling to minors, preventing intoxicated driving, and keeping organized crime out of the industry.
Rescheduling marijuana from a Schedule I to a Schedule II substance. Hillary supports medical marijuana and would reschedule marijuana to advance research into its health benefits.”
That’s not legalization, but it’s significant progress. It’s the best offer yet from a serious candidate on this issue in many decades.
Besides, even if Johnson could get elected, could he decriminalize drugs? No, of course not. He could pardon and commute some sentences, but he couldn’t decriminalize on his own.
If the political climate allowed for it, perhaps Clinton would support full legalization, but she’s smart enough to understand that one must get elected to make a difference. Remember that, like Obama, the Clintons were publicly against gay marriage until polls they trusted started showing a majority of voters in favor of it.