Sun, May 18, 2014 - Page 8 News List

[ LETTER ]

The skyscraper index

What do you think? Will China ever complete the Shanghai tower? The rarely discussed “skyscraper index” is highly correlative with a nation’s hubris and failed monetary policy.

Although the cyclic nature of construction is described as “whimsical,” Wikipedia says: “Business cycles and skyscraper construction correlate in such a way that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession.”

Look back to the then-tallest Singer Building following the panic crash of 1907. Later, the Empire State Building and others should have been red flags that these new super-tall buildings were part of an overheating economy.

The market crash of 1929 followed soon thereafter.

From the Sears Tower in 1997 to the Petronas Towers in Malaysia during the middle of the Asian financial crisis, the world’s tallest buildings do not exactly have a sterling reputation.

Even the current-tallest Burj Dubai is facing criticism for being wasteful and extravagant.

Property markets around the world are collapsing. It is a minefield for investors.

Sadly, at the same time there are many homeless, displaced people and refugees with nowhere to call home on this Earth, whether they are on the border with Lebanon, Christmas Island, or trafficked refugees dying on boats in perilous waters.

These are the downsides of bank financing and unsound money. Hubris will be the demise of mankind.

That said, what does the skyscraper index say about our iconic Taipei 101? Has Taiwan dodged a bullet? So far, yes.

However, property values in Taiwan are over-valued by at least 65 percent and the biggest problem is most of the new apartments are palaces for the super-rich. Investors should sell at this current peak in property prices.

Young workers are advised to rent the cheapest place they can while saving and wait for the inevitable price correction. Gold is the recommended savings vehicle of choice, especially because it is still on sale thanks to price manipulation.

If you experienced vertigo watching the “Shanghai Tower Climb” on YouTube, you will understand my dread that the inevitable disaster-in-waiting that mankind has built over our finite planet is more precarious than ever.

China’s economy is just as fragile. Look at the preposterous corporate debt-to-GDP ratio, which is much higher than Taiwan’s, which is also a shocking figure.

Japanese Prime Minister Shinzo Abe’s policies are financially insane from any balance-sheet viewpoint.

The US is devolving into terminal decline, and the rest of the planet is so ridden with gangsters, crime, nepotism, corruption, outright sectarian warfare and environmental pollution that it’s hard to see a light at the end of the tunnel.

What makes me sad is that all of Taiwan’s political parties seem to be willfully ignoring the macro factors amid partisan squabbling over minutiae. What gives me hope is that I live in Taiwan amid the energetic students here.

Any worst-case scenario means that Taiwan needs to produce its own food and energy in preparation for crisis, including typhoons, earthquakes and other unavoidable disasters.

The dominoes are lined up on a house of cards that is balancing on the backs of a circle of black swans. Invest wisely out there.

Torch Pratt

Yonghe, New Taipei City

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