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We returned from a grand tour of China nearly two years ago, and the one overwhelming economic perspective I’d gained was that China was experiencing a housing bubble that was near the bursting point. Today’s headlines indicate this is still true, and an explosion of the Chinese housing bubble could have economic repercussions for the U.S. every bit as great, or greater, than the risks of European economic meltdown. I’m not sure there is much we could do about it — the bricks and mortar in China are set in place, and the shelves at U.S. Walmarts are currently crammed with Chinese goods.
Here’s my first-hand observations upon returning from China in 2010, as reported in my blog then:
The Chinese Housing Bubble Could Burst
October 26, 2010 in China, housing bust | Tags: Beijing, China, housing bust,Milwaukee, purchasing power parity, Shanghai, Swiss franc | Leave a comment(Edit)
Just back from 2 weeks in China, I came away with one overwhelming impression: China is temporarily hyping its economy building millions of urban residences that won’t be filled, creating a housing bubble that will make the one in the U.S. pale into insignificance. This brand new city of high rises along the Yangtze River in central China, for example, is just 5 years old and has a population of 600,000, larger than Milwaukee. Everywhere we went, from Shanghai and Beijing to cities in the interior, construction cranes span the horizon and modern highrises crop up in clusters that could house another 20,000 here or 50,000 there. 80% of the Chinese are rural, and 15 million a year move into cities in search of jobs in new and growing industries. By 2004, China had 108 cities with populations over one million, and that will swell to 221 such cities by 2025, vs. 35 in all of Europe. My feeling is that jobs won’t grow fast enough to keep up with the housing boom, and I understand from a recent article (http://www.zerohedge.com/article/next-chinas-property-bubble-step-function-explosion-vacant-inland-cities) that there are already 65 million vacant new urban homes in China. Building all these homes employs a lot of people, generates a lot of investment in construction and artificially makes the economy seem more active and prosperous than it is. But how long can China get away with a currency with buying power 40% below the dollar, and nearly 70% below the Swiss franc? As purchasing power tries to balance out, the demand for cheap Chinese goods may falter, industrial growth may slow, and China will have a housing bust to end all busts. Then what will the central planners do — manage another people’s revolution? My sense is that China’s growth is going too fast, and is being forced beyond what markets will absorb. China’s urbanization is impressive, but in my book, excessive.
When Rodney King was dragged from his vehicle and mercilessly beat by south LA police in 1992, he triggered riots that tore apart that area of the city. King will be remembered for his plaintive admonition in the wake of the riots, “Can we all get along?”
One of the few positive things to take away from those horrible riots was the value of proactive community relations, as had been practiced by the minority entrepreneurs who owned the five McDonald’s restaurants in the riot and fire zone, which escaped unscathed, because those franchisees followed Ray Kroc‘s adage to give back to the communities they served, and put regular deposits of goodwill into the “trust bank” of social investing that McDonald’s has long followed.
I was director of corporate communications for McDonald’s in the 80s and 90s, and we told and retold the LA riots survival story to company employees and franchisees around the world. The philosophy survives today, just as those five restaurants did in 1992. Here’s the story:
In the area of South Central LA, a five square miles radius of devastation, the outcome was like a bomb. It resembled Nagasaki. Buildings had been looted and set alight. It was martial law. The streets were dangerous. Many people were killed in the frenzy, either as a statement of opposition between the established powers and the disenfranchised or as a gateway for much deeper held sentiments regarding race, class, poverty, and divisions between the entitled and disentitled.
In the wasted landscape of South Central LA, everything had been destroyed. Everything except for five buildings. In the post-apocalyptic aftermath, surrounded by smoldering ruins and debris, there were five buildings which had been untouched. Not a broken window. Not a slash of spray paint. All flooded in their usual operable fluoro lights.
These five buildings all had one thing in common. They were all McDonalds.
‘When the smoke cleared after the mobs burned through South Central Los Angeles in April, hundreds of businesses, many of them black owned, had been destroyed. Yet not a single McDonald’s restaurant had been torched.’
Edwin M. Reingold, June 29, 1992, TIME
Months later, Sociologists at Stanford University came aross this data. They were also intrigued. They sent teams into the field some time later. They went in to interview many involved in the riots. They went in to discover what the story was here – not why the devastation had taken place, but why they hadn’t taken place at McDonalds.
Now it must be said, these were not the crème de la crème of society. They organized meetings and interviews with those who had pulled people out of cars and beaten them to death. When asked why McDonalds was spared, the answers were unanimous across all the interview centres. The general conversation went something like this.
“They are one of us.”
“What do you mean?”
“They ‘re looking after us.”
‘How could McDonalds ‘be looking after you’?
“Because we like to play basketball. There’s nothing else to do except get high and shit. McDonald gives us balls.”
It turned out that McDonalds had in fact supplied a number of basketballs to youth groups and basketball centres in these low socio-economic areas. Not thousand of balls. A few hundred.
“And the old men. My old man. They don’t have jobs or nothin. They don’t have nowher eto live. McDonalds gives them free coffee.”
It was true. In that area, McDonalds suppied several hundred free cups of coffee each morning. In terms of its profitability, a piss in the ocean,
Learnings
In a purely commercial sense, McDonalds gained years over Pizza Hut, Wendy’s, Denny’s, Taco Bell, Burger King, and every other fast food restaurant in the area that was razed to the ground. Each had to undertake major rebuilds and ascertain their strategic direction to decide whether South Central LA would be part of the strategic plan.
Even today, Tesco the supermarket leader of the UK is launching a ‘grocery gap’ stores in the same aea. Most of the old stores have disappeared. Wal-Mart fears to tread due to union barriers. Residents suffer lack of renewed investment.
Emotionally, financially and psychologically, McDonalds’ competitive advantage after the LA iots was vast. Lest we forget. Marketing is not about producing advertisements. It’s the battle for the heart and mind of the consumer.
I recently obtained a new Fujifilm X10 compact camera. It is small enough to carry easily, unlike bulky DSLRs, yet seems to offer the potential to take high quality images under a wide range of conditions.
The little jewel comes with a detailed instruction manual that explains “what” the multitude of controls do, but not “how” to use them together to take great photos.
I’ve looked online and found a few partial stabs at strategies for using the smart but complex features, but nowhere yet have I found an even partially complete and understandable guide to getting the most out of this technological marvel.
Help!
Just found the very guide I was looking for at Amazon.com, and downloaded it to my IPad. Cost just $9.99. It contains the coaching I was looking for. Well worth it. http://www.photographyblog.com/news/photographers_guide_to_the_fujifilm_x10/
Ran across the item below on the launch of FM radio, and now I understand the etymology of why FM stations are where one finds classical music stations, though we all know FM broadcasts are clearer and have less crackle than AM stations, where we typically find sports and news. When I was a student at the University of Chicago, my grand parents bought me my first new car, a red VW Beatle. It was the early 60s and most people had AM car radios, but I pleaded for them to allow me to have an FM/AM model, because I wanted to listen to jazz and classical music while commuting to and from class. That upgrade also upgraded the quality of my life. Thanks, FM, and grand parents, too.
“It was on this day in 1935 that listeners first heard FM radio, when the American inventor Edwin Howard Armstrong gave a demonstration in Alpine, New Jersey. Armstrong demonstrated the clarity of FM compared to AM radio by playing classical music and the sound of water being poured.”
Today’s Washington Post contains a reflective article by Woodward and Bernstein on issues around the Watergate breakin. On Meet The Press this morning, discussing that story, the authors commented that President Ford‘s decision to pardon Nixon was made in the best interests of the country, so we could “move on.”
I totally disagree.
I’ve always believed that the country would have been well-served, even if it would have been somewhat disruptive, to prosecute Nixon, like the 40 others were were convicted and served time over Watergate. Why? Because if everyday American‘s views of our Presidency had been further compromised by such a trial, we might have instilled a greater sense of humility in those subsequently elected or appointed to high office, hopefully including Congress. Substituting accountability for a “too big to fail” mentality when it comes to our nation’s political leadership would have provided a good object lesson on the value of honesty and the price of deceit for all those who came after.
President Johnson made a similar error when he failed to expose Nixon and Kissinger’s cynical overtures to the Thieu regime in South Vietnam before the election of ’68. Johnson learned that Nixon’s people had encouraged Thieu to back out of the Paris peace talks, which he did, promising that his government would get a better deal under a Nixon Presidency than a Johnson one. The result was that the war in Vietnam went on for another 5 years, with 22,000 more American fatalities. Johnson’s tapes revealed that he learned of the Nixon moves, but didn’t go public with what he called “traitorous acts” because Johnson was too concerned the revelation of these political machinations would have been disruptive to the American people. It might have been, and we might have saved many of the 22,000 American deaths that occurred because of Nixon’s election maneuverings.
Look at the economic disaster that the perverted governmental “too big to fail” economic strategies regarding Wall Street have created. I believe that people can stand to benefit from more truth, transparency and accountability in government, and that the sense of humility those attributes would inculcate in our leadership is worth whatever temporary disruptions our society might incur.
It is high time to bring the era of Big Lies to an end.
In 1995, Vicki and I boarded the famed Cunnarder, the QEII (1969-2008) at the Port of New York and set sail on my 10-year sabbatical from McDonald’s for a crossing to England. Aboard was famed science fiction writer Ray Bradbury, then in his mid-70s, who died just yesterday. I’d always been a science fiction fan, having grown up glued to Flash Gordon (the original) on TV, so was delighted to have the opportunity to spend 2 hours with him in the theatre, and hear him talk about writing the Martian Chronicles and Fahrenheit 451. He told great stories, as we all know. That classic ocean liner crossing, with its black-tie dinners in the Queen‘s Grill and long sunny afternoons looking out to sea, was a memorable experience for someone like me, who had grown up cruising on small boats on inland lakes with my family.
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