Eminent Domain
Chinese local governments seize land from peasants at harvest rates, rezone the land and dispose of it fifteen times higher to developers to developers.
The proceeds from the sale, those that make it into official coffers, are applied to repay the $1.7 trillion in state government borrowing because the States are unable to levy a property tax. Financial probity of the States and solvency of the country is at the mercy of demand for property.
Property demand is funded by banks and speculators flush with Chinese current account surpluses. One estimate is that
Interesting news that manufacturing activity unrelated to sex toys is declining with the Chinese purchasing manager’s index below 50, a leading indicator that removing 200,000 Greeks from government payroll, 10 million of the 55 million in US mortgages underwater, and other fiscal restraint reduces demand for everything.
The US Treasury Secretary thinks the ECB should guarantee sovereign bonds of EU countries without regard for modest regulation that prevents “monetizing” debt of constituents. The ECB will presumably suggest the Fed offer to guarantee the ECB guarantee which will be met with the passing of wind in a closed room. The margin call has come for shifting $2.5 trillion in assets to the Fed balance sheet on the prayer that US housing prices and employment would increase.
European debt comes in various disguise when household, non financial, and government debt as a percentage of GDP are summed.
The Irish (374%), Portuguese (328%), Belgians (315%) make the Greeks (264%) and Italians (233%) models of financial discipline. Dutch households (127%) of GDP have borrowed what the Dutch Government has not (27.5%). And the Finns are to be envied with a government net surplus of 56% of GDP. For the record the US (233%) is suggesting the Germans (188%) belly up to the bar.
Long dollar and short equities until the sovereign defaulters are permitted to be hoist by their own petard.
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