The Property Trap: What If Your Home Isn't Really Wealth?

The Property Trap: What If Your Home Isn't Really Wealth?

Good morning, everyone. Welcome to a new week on Join the Dots. This is being recorded Saturday morning, but it doesn’t matter because I’m talking about Chinese property.

There are some very — and I use the word properly — ignorant people who comment on my site. You’ve seen them regularly, I’m sure, who have no concept of the Chinese property market and what it means to all our investments, all our safety. And indeed, if you think it through, what could happen to our property markets? Let me come on to that in the end.

But let’s start at the beginning. I was sent a very good piece, a Jimmy Dore Show excerpt, by a very good friend of mine who doesn’t have the same view on China as me, and that’s fine. I don’t mind if people have different views, as long as they quote facts. Most people just quote narrative because they don’t know the facts — because they’re ignorant.

As is Blind Bag, or whatever his name is, on our site, who comments every day. Ignorant. No facts, just hype narrative BS. So, I’m going to play you two clips from this Jimmy Dore opening, because it’s so important to understand again how this narrative, this ignorant narrative, is getting spread by Western media. So, let’s have a look.

First clip (30 seconds to 1 minute 33):

>> In a speech back in 2017. Housing should be for living in, not for speculation. And they literally made it government policy to bring down the price of housing, to collapse the bubble, and to do it in a gradual way, so it wouldn’t take the economy with it, the way it did in the United States. So, as Unusual Whales, China’s residential property prices have effectively dropped back to roughly 2006 levels in real terms, wiping out an estimated 18 to 20 trillion dollars in US dollars in perceived household wealth since the 2021 peak.

Second clip (1 minute 57 to 3 minutes 21):

>> The sorriest losers of China’s real estate crash is the Western bourgeoisie, including firms like Blackstone. Indeed, they were some of its main targets. They spent decades investing in China’s housing boom, salivating over the prospect that China’s housing market would financialize, that China would ultimately do to itself what they had already done to the US, treat houses like a tradeable commodity, and benefit from the endless cycle of buying and selling, to turn people’s homes into casino chips, to be endlessly bought, sold, inflated, leveraged, and over-leveraged until the end of time. Instead, they discovered the hard way who actually governs China. In all countries, the property market is an important facet of class. And almost everywhere, the wrong class wins. In China, the right one won. The state controls finance capital, not the other way around. The Western mind cannot comprehend this. This also explains why Western media and economists have been decrying China’s crash so viciously. They are simply expressing the frustrations and hysteria of the class they serve, the class whose dreams now lie in ruins. That’s the real crack.

So, here, these Western people who don’t like the system in the West — and there are reasons not to like the system in the West, and don’t get me wrong — they are shouting that Xi punished the Western bourgeoisie by collapsing the Chinese property market on mortgage holders and people who’ve bought a home thinking it’s going to be their home.

They haven’t collapsed the Western bourgeoisie, they’ve collapsed the Chinese population’s wealth. That market was 62 trillion dollars at its peak, Goldman Sachs number. What’s happened now? Well, let’s run through it.

So, what has happened now that that is only 40 trillion? We’ve lost 22 trillion dollars of wealth. Who’s lost the wealth? It’s not Blackstone. Yes, they may have lost a bit. Yes, of course they did. Who’s lost the most? The Chinese population.

Okay, so you’ve got massive wealth destruction. You’ve got massive developer bankruptcies, and obviously people had shares in the developers, didn’t they? Yes, Blackstone might have had some, but the Chinese people had the majority.

So, the price is now at a 20-year low. 15 million empty homes. Residential property was 70% of urban Chinese household wealth. The population have lost their money.

Why? Well, think about it. Who is buying the unsold homes now? Oh, it’s the government. Who is buying the banks’ foreclosed homes? Ah, it’s the government. And what are they saying? Ah, we’re going to create affordable accommodation. Owned by whom? Who gets the rents? Who gets the value of the property? Government.

Just as an aside, I saw a piece this morning, Canada. Carney, ah, WEF Carney. Those should be his initials. They’re buying condos. They’re buying condos that can’t be sold.

Now, this brings us on to the end game, doesn’t it? What is the end game here? Have a think about it. WEF Carney, you will own nothing and be happy.

And just go back to China for a minute. Let’s you heard that they’ve lost 20 trillion. Let me give you another 20 trillion they’ve lost. Because the local government investment vehicles in China, okay? These are the people who have relied for 20 years on selling land to build stations in the middle of mountains, fast railway trains, huge buildings, fantastic motorway scenes. Using what money? They have got 18 trillion of debt. And you know what? They weren’t allowed to borrow. The government said, “You can’t borrow.” So, if I can get my phone to come alive, let me tell you what local government vehicles are. Local government financial vehicles are quasi-public companies. Local governments use them to borrow money. They build roads and buildings. Because China previously banned local governments from borrowing directly, they used these hidden companies called investment vehicles.

So, you might say, “Well, the government doesn’t know about it.” Well, of course they know about it. It’s 18 trillion of debt. Of course the government know they got this debt. They’re just not allowed to have it. What? The debt is dangerous. LGIVs make very little money on their own. Oh, yes, okay. So, how are they going to service this 18 trillion of debt that they’ve created to build these motorways to nowhere and space rocket trains? Ah, they rely on government bailouts and land sales. Well, there’s no land sales now, are there? Let’s go back to the price of falling prices of houses. Let’s go back. Tier one cities, last year 6.95% still falling. Second tier, 8.21%. Third and fourth tier, 7.48%. So, if we look at that and we say, okay, so last year we’ve lost another average 7.5% on the reduced amount of 42 trillion. We’ve lost another 3 trillion. That’s the same as subprime in the West. 3 trillion, 3.4 was the final bill for subprime in the West 2008. China’s lost it last year. No, not China, the population, the people who own the properties have lost it.

And who’s going to buy those properties? Oh, the government. Well, well. Now, think about this cuz I hadn’t actually connected these dots or joined these dots when I first started doing this peaceful walk for you today. And thought about it. But, if you think about what’s logically happening in the West now, and if you see all the property markets which are massively overvalued on an earnings basis. When I was young, when I bought my first property, you could borrow 2 and 1/2 times the biggest salary and 1 times the small salary or 3 times the biggest. That was the rules, 2 and 1/2 and 1 or 3. Now, people are buying seven times, eight times. Why? Why has it been allowed? Why has financialization been allowed to get totally, totally, totally out of any sense of proportion to people’s ability to repay? Why?

I’m not saying this for sure, but I’m saying if you wanted to trap everyone almost in debt and therefore rescue them from their problems by buying their property off them at a cheap price but clearing their debt, how would you do it? How would you do that? So I’m only putting this up as a thought process at the moment. Okay? Because we need to understand what’s going on here and China is your guide. These morons on the Jimmy Dore Show see it one way. But that’s ignorant. Because they say that the Western world has lost from the Chinese property collapse. No, they didn’t. The Chinese people got slaughtered.

Remember under Mao 30 to 55 million Chinese people died from famine. I think that was between 1959 and 1961. 15 to 55 million Chinese people died. And I saw Xi speaking at one of the conferences and he wore a Mao top. It was one of the plenums, I think, one of the big occasions every 5 years. And there he was wearing a Mao top. So 55 million people died and now not 55 trillion has been lost but certainly 20 23 24 trillion in value has been lost by people who bought their homes wanting a certain lifestyle. And these idiots on the Jimmy Dore Show say that it’s Blackstone who’s lost the money. It is not Blackstone that’s lost the money. It’s the Chinese population.

Okay? I want to leave you with a saying that I saw this week this weekend and I thought it was absolutely fantastic. And to me, it sums up Join the Dots. Okay? When you want to help people, you tell them the truth. When you want to help yourself, you tell them what they want to hear. That is YouTube summed up, isn’t it? People who get massive subscribers tell you what you want to hear. And people who get a lot less subscribers, me and others, tell you the truth cuz we want to help. And the whole purpose of Join the Dots is to help you. This is a massive issue. Please start to think about it. That’s the point. Let’s get to think about it. Let’s talk about it. Send me your messages. Put the comments below. Let’s discuss it. But let’s discuss it with facts, not with narrative and not with stupid ideology, which seems to be everywhere at the moment.

Thank you very much from Join the Dots, from Anne Craig and me. Cheers to the truth.

Property isn't a good inflation hedge and this is why, because while your property is going up numerically with inflation so are other properties. You may be able to sell at a great profit but if you want to buy another property those other properties have generally gone up just as much as yours which means you aren't any better off if you are looking at the same market.