Uma história da Grande Depressão nos EUA: Richard Vague (DelanceyPlace)

 

Dear DelanceyPlace Subscribers: Two years ago, my second book, A Brief History of Doom, was published. Many of you were kind enough to read and buy it. Recently, our good friends over at History Making Productions were helpful in putting together a video, which highlighted some of the key points in the book. I would love to share it with you and include it below. Thanks as always for your interest.  -- Richard The 2008 Global Financial Crisis meltdown affected millions world-wide. Could it have been prevented? This question has been endlessly examined, all the more so with the current COVID crisis. A study of the history of financial crises from the early 1800s to the present—including the Great Depression and Japan’s 1990s crisis—gives us answers. In this video, author Richard Vague walks us through the causes of global financial crises from his book A Brief History of Doom and uncovers the keys on how they can be predicted and prevented, saving millions from financial distress and heartache. Today's encore selection -- from A Brief History of Doom by Richard Vague. Contrary to the explanation found in many histories of the Great Depression, that calamity was a massive real estate boom gone bust. Residential construction more than tripled, and the housing boom was every bit as large as in the Great Recession on a per capita basis. In Manhattan, more skyscrapers were built in the late 1920s than during any other comparable span in its history, and the skylines of most major U.S. cities are still testimony to the excesses of that era: "The Great Depression brought a level of misery rarely seen in American history ... [and] was a massive residential and commercial real estate crisis. The financial records of the 1920s, which have largely been overlooked, indelibly show this. During the 1920s, annual housing and commercial real estate construc­tion almost tripled -- and nearly all of it was financed by debt. "This explosion in residential and commercial construction lending, aug­mented by lending for utilities and stock purchases, created the euphoria of the Roaring Twenties, the jazz age of robust spending and celebration. Com­panies used the new money from loans to expand and employ more people. "The acceleration in construction resulted in such extensive overbuilding that by the final years of the decade, before the stock market crash, thousands of newly erected office buildings, houses, and apartments sat empty. Office vacancy rates rose, and residential mortgage foreclosures nearly doubled in the final years of the decade. As in other cases, this crisis was inevitable be­fore it was obvious. The only question, and the only area where the president and the Federal Reserve could still have a discretionary impact, was the length and severity of that correction. ... "The iconic structures of American skylines form the silhouette of the Great Depression: New York's Chrysler Building, Empire State Building, and RCA Building; Chicago's Merchandise Mart, Wrigley Building, and Tribune Tower; Philadelphia's PSFS Building; Los Angeles's City Hall; Dallas's Cotton Exchange Building; Detroit's Fischer Building; and Houston's Gulf Building. These are enduring architectural feats of the 1920s, vestiges of the real estate eruption that came before the fall. Many were speculative projects, unsupported by actual real estate demand; begun toward the end of the 1920s, when loans were still available; and finished after the crash, when lenders had little choice but to make funds available to complete construction or else see their entire loan go bad. None was financially successful for its original investors. They remained partly or largely empty for a decade or more after completion, as would hundreds of others." BUY THE BOOK    author: Richard Vague   title: A Brief History of Doom   publisher: University of Pennsylvania Press   date: Copyright 2019, University of Pennsylvania Press   page(s): 17-19, 132, 135, 46, 63-64

China: o proximo desastre? - Richard Vague

To all the many great friends of delanceyplace.com,

Last July, Penn Press published my book, The Next Economic Disaster, which has done very well in no small part due to the wonderful support of delanceyplace.com readers.  I have now extended the research of that book in an article released this week in the quarterly journal Democracy titled  "The Coming Crises in China," which delves deeper into concerns regarding China's economic future.  Today's selection is from that article and here is a link to the full article:  http://www.democracyjournal.org.

I would add that Democracy has long been an important resource for me, and its editor, Michael Tomasky, is a highly regarded progressive political voice. It was a privilege to be included in this issue.

As always, thanks for your interest and support. Here's the excerpt:

"China is now sitting on top of the greatest accumulation of bad debt and overcapacity in history. According to the Survey and Research Center for China Household Finance, more than one in five homes in China's urban areas is vacant, with 49 million sold but vacant units, and 3.5 million homes that remain unsold. Behind those vacant and unsold units is private debt, both loans to developers and mortgage debt. Housing values in China increased on the same perilous trajectory as in the United States before 2008 and Japan before 1991--and they have now started a similar decline. Meanwhile, real estate was 6 percent of U.S. GDP at the peak in 2005; today, it is as much as 20 percent of China's GDP.

"There are other red flags. China produced 8 percent of the world's furnace iron in 1980; it now produces 61 percent, even though the rest of the world still continues to produce every bit as much as it has in the past. As China's iron production accelerated in the period from 2002 to 2011, iron prices increased twelvefold in response to debt-fueled demand. (Increases in debt cause increases in prices.) But now that iron capacity has piled up beyond need, prices have tumbled by over 50 percent, and the excess capacity is so great that even the demand generated by rapid credit growth can no longer prop prices up. Also, China used more cement in the period from 2011 to 2013 (6.6 gigatons) than the United States did in the entire twentieth century (4.5 gigatons).

"These are but a few of many examples. Researchers at a Chinese state planning agency said recently that China has 'wasted' $6.8 trillion in investment. Overcapacity is so significant in many sectors that it will take years for it to be absorbed by organic demand. Ironically, this problem is compounded by China's own continued high growth rates, since high GDP growth is a measure of the creation of additional capacity even if that capacity is not needed.

"Good and sound loans, by definition, result in commensurate GDP growth. So when private-loan growth outstrips GDP growth, much of that excess -- from one-quarter to one-half, based on evidence from other crises -- will be problem loans. Based on this formula, China today is likely to have an estimated $1.75 trillion to $3.5 trillion in problem loans -- a figure well in excess of the $1.5 trillion of total capital in China's banking system.

"Of course, China's banks and shadow lenders are not reporting bad loans close to this amount. But neither did U.S. banks: On the eve of the U.S. crisis, banks were making loan-loss provisions at very low levels. Lending booms create the false appearance of prosperity, and fraud and corruption can make the picture even prettier.

"Some dismiss these warning signs, noting that many economic prophets wrongly made the same dire predictions for China during the late 1990s. But there's a big difference: In 1999, China's overall level of private debt was 111 percent of GDP; today, it's almost double that, at 211 percent. In 1999, it had plenty of room to power growth through continued private-debt expansion, and the debt boom in the West fueled unprecedented export demand. The opposite is true today."

Author: Richard Vague
Title: The Coming Crises in China

Publisher: Democracy A Journal of Ideas
Date: Spring 2015

And here is the book:
 
The Next Economic Disaster: Why It's Coming and How to Avoid It
Author: Richard Vague
Publisher: University of Pennsylvania Press
Copyright 2014 University of Pennsylvania Press