zigglepiggle

Carney's China Real Estate Scam

19 posts in this topic

Hi long time lurker, but I couldn't resist sharing this as it is truly fascinating.

I've recently been of the opinion that the slowdown in housing is China related; it's the only thing that can feasibly explain so many bubbles popping at once (London, Canada, Auz).

Then today I found this thread by what looks like UK real estate insider about Carney's China Scam:

https://seekingalpha.com/article/4079881-british-land-brexit-created-opportunity-still-exists#comment-75441254

Quote

 

Mark Carney (Governor of UK Central Bank) did a trick when he was Governor of the Canadian Central Bank to ramp the Canadian RE market. He allowed Canadian Banks to accept Chinese RE collateral for Canadian RE loans.

Example:

a. Say a Chinese buys a Canadian property for CDN 20m.
b. He gets a back-to-back loan from Royal Bank of Canada for CDN 20m.
c. RBC take security over the Canadian property (100% LTV loan).
d. RBC also get security over CDN 10m equivalent in Chinese property.
e. RBC can then book the deal as a 50% LTV loan (under Basel rules).

 

Further down:

Quote

 

Thus London has the same toxic setup as Canada - it's UK banks are starting to build up a dangerous exposure to the Yuan (and Yuan based collateral). If (when) China collapses, not only will UK banks (like Canadian Banks) be badly exposed (the Yuan Collateral will evaporate), but the marginal buyer driving all UK Commercial RE will also disappear (i.e. Chinese), further reducing UK RE prices and damaging UK bank loan books.


Carney is a bubble banker like no other.

Everybody in London Commercial RE is wondering what will happen when Chinese buyers evaporate. This is why a lot of UK Commercial RE is selling at such depressed valuations. It wasn't BREXIT that really did it (although the shock extended it), the real slide started in mid 2015 when China started to crack, and accelerated in Q1 2016 when China started giving the first signs of its demise.

 

 

But you say... "China only constituted < 10% of the demand, how can their exit cause a crash?". Well.... he/she continues further down with this gem:

Quote

Also, in relation to asset size vs Chinese flows, always remember that it is the marginal buyer / flow, that drives the price.
The S&P is worth over $25trn however about $15bn is all that is needed to make it open up 1% (i.e. add $250bn in value).
The disappearance of a very extreme marginal buyer, is the driver of the greatest falls in market pricing.

2

 

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This subject came up recently in ZH:

Quote

 

As Cooper notes, "as a result of the flood of money pouring from Mainland China into Vancouver real estate in recent years, some financial experts say they believe Canadian banks are directly exposed to shadow lending in China and the risks of so-called “ghost collateral”, collateral that may not exist or is used continuously to secure loans for multiple borrowers."

And the stunner: "Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B.C."

 

And it sounds a lot like London:

Quote

 

This is where the China connection emerges: in China, “linkages between the banking and shadow banking systems are also becoming more complex and opaque, increasing the underlying credit risk,” the Bank of Canada’s December 2016 risk report says. “The experience of the 2007-09 global financial crisis showed that financial stability can be threatened by vulnerabilities originating in the shadow banking sector.”

As noted above, due to influx of money pouring from China into Vancouver real estate in recent years in an attempt to evade exposure to the local banking system, and bypass China's capital controls, Canadian banks have become directly exposed to shadow lending in China and the risks of so-called “ghost collateral.”

Cooper quoted a U.S. hedge fund manager who said that “we all know that the ghost collateral is a huge deal, and we all know that the shadow banking and other Chinese influence in Vancouver is profound. The issue is that the ghost collateral ends up re-hypothecated and laundered. So by the time it shows up in Vancouver, it will likely just look like a rich Chinese cash buyer with a suitcase of money.“

 

http://www.zerohedge.com/news/2017-06-18/chinas-ghost-collateral-arrives-canada-heralding-crisis

It's been around for a while too, here's a 2014 article:

Quote

Local Laws

Customers deposit yuan with HSBC’s mainland unit or purchase its wealth-management products, and the bank’s overseas branch then issues a foreign-currency denominated mortgage using the China deposits as collateral, the person said.

“We seek to abide by the rules and laws of the jurisdictions and geographies in which we operate,” said Gareth Hewett, a Hong Kong-based HSBC spokesman.

 

http://business.financialpost.com/personal-finance/mortgages-real-estate/secret-path-revealed-that-allows-wealthy-chinese-to-transfer-billions-overseas-buying-pricey-property-in-vancouver-new-york-and-sydney/wcm/dabd0299-4265-4597-9f1a-a592b6fc29ad

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I am hoping for a Sydney/Melbourne HPC, but I pray that Australia's regulators could not possibly have been misguided enough to approve something like this: effectively linking their domestic banking sector to an opaque, corrupt, distant country over whose banking system or government we do not have a trace of influence. 

And Carney, while being a ****, is not stupid.

Is he consciously evil ? Or some kind of gambling junkie ? 

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2 hours ago, Society of fools said:

Is he consciously evil ? Or some kind of gambling junkie ? 

Once a member of the Goldman-Sachs cult, always a member. Makes Scientology look like Avon ladies.

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2 hours ago, Society of fools said:

I am hoping for a Sydney/Melbourne HPC, but I pray that Australia's regulators could not possibly have been misguided enough to approve something like this: effectively linking their domestic banking sector to an opaque, corrupt, distant country over whose banking system or government we do not have a trace of influence. 

And Carney, while being a ****, is not stupid.

Is he consciously evil ? Or some kind of gambling junkie ? 

Well like a lot of these guys he's a product of a totalitarian economic regime - he's wedded to a set of economic ideas which have come to be so rigidly set they have become dogmatic and utterly unquestionable (compare 'debt is wealth' to 'war is peace').

People like this will cling to these ideas even when they're quite evidently leading to disaster. We can see this 'group unthink' at work amongst these ex-Goldman Sachs Friedman disciples all the time.

The tyranny of consensus.

So when you say he's not stupid, I would counter maybe not but that he is basically brainwashed.

They'll keep piling on the debt and it derivatives until the whole global edifice unwinds spectacularly IMO.

And yes you are right - I do own gold...

Edited by zilly

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9 hours ago, zigglepiggle said:

Everybody in London Commercial RE is wondering what will happen when Chinese buyers evaporate. This is why a lot of UK Commercial RE is selling at such depressed valuations. It wasn't BREXIT that really did it (although the shock extended it), the real slide started in mid 2015 when China started to crack, and accelerated in Q1 2016 when China started giving the first signs of its demise.

 

That's why the institutional investors are piling into Residential now. The bubble's in full inflation mode as we speak and I'm betting they wouldn't be putting this sort of money into it without certain assurances. i.e. Bring those immigrant numbers in and stack em high.

If you ask me I suspect the economy is in for an adjustment as are house prices but their answer is to ramp up the volume. 

Plus when I hear of the housing development plans for the M1 corridor around Bucks and Northants is staggering whats in the pipeline. We're talking doubling the population of Milton Keynes from 200,000 to 400,000. 

I'll hopefully be able to accumulate enough of my own wealth to leave this rat race by then and find a quiet corner of England back up north. 

 

 

 

 

 

Edited by casual_squash

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2 hours ago, zilly said:

And yes you are right - I do own gold...

Me 2. Just Gold, no other precious metals? just curious.

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6 hours ago, Society of fools said:

 

Is he consciously evil ?

Yes I think so...he is cognisant that his polices shift wealth from the poor and young to the rich and old and create real human misery...

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4 hours ago, casual_squash said:

That's why the institutional investors are piling into Residential now. The bubble's in full inflation mode as we speak and I'm betting they wouldn't be putting this sort of money into it without certain assurances. i.e. Bring those immigrant numbers in and stack em high.

If you ask me I suspect the economy is in for an adjustment as are house prices but their answer is to ramp up the volume. 

Plus when I hear of the housing development plans for the M1 corridor around Bucks and Northants is staggering whats in the pipeline. We're talking doubling the population of Milton Keynes from 200,000 to 400,000. 

I'll hopefully be able to accumulate enough of my own wealth to leave this rat race by then and find a quiet corner of England back up north. 

 

Institutional investors are piling into resi build to rent because they are looking for income cash cows...they can hardly go wrong...at worst they can be filled with foreigners and the state will pay the rents.

 

 

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12 minutes ago, Wayward said:

Institutional investors are piling into resi build to rent because they are looking for income cash cows...they can hardly go wrong...at worst they can be filled with foreigners and the state will pay the rents.

 

 

The Tories have always wanted to make the UK into a European Hong Kong.

Hong-Kong-Inside.jpg

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22 hours ago, Arpeggio said:

Me 2. Just Gold, no other precious metals? just curious.

Hi no no other metals - possibly others may have potential for larger returns but I've got gold as an insurance policy rather than an investment TBH, because I can't see how this weight of global debt can ever be sorted out without some kind of systemic reset. Gold and patience!

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21 hours ago, zugzwang said:

The Tories have always wanted to make the UK into a European Hong Kong.

Hong-Kong-Inside.jpg

Next TV series "I can't believe it's not clutter" about how to maximize storage in ever decreasing living space during the housing market bubble with Kirsty All-pop.

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1 hour ago, zilly said:

Hi no no other metals - possibly others may have potential for larger returns but I've got gold as an insurance policy rather than an investment TBH, because I can't see how this weight of global debt can ever be sorted out without some kind of systemic reset. Gold and patience!

Same here with patience. Gold, Platinum and Silver. All bought low.

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2 hours ago, zilly said:

Hi no no other metals - possibly others may have potential for larger returns but I've got gold as an insurance policy rather than an investment TBH, because I can't see how this weight of global debt can ever be sorted out without some kind of systemic reset. Gold and patience!

gold will be confiscated

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On 7/14/2017 at 5:49 AM, Society of fools said:

I am hoping for a Sydney/Melbourne HPC, but I pray that Australia's regulators could not possibly have been misguided enough to approve something like this: effectively linking their domestic banking sector to an opaque, corrupt, distant country over whose banking system or government we do not have a trace of influence. 

And Carney, while being a ****, is not stupid.

Is he consciously evil ? Or some kind of gambling junkie ? 

He must know exactly what it's doing to the average person and to ordinary people.

Many would call that knowingly downright evil.  Wicked, evil, vile, malevolent call it what you will.

For that reason he should have been sacked long ago - and because he wasn't sacked many would consider those who continued to support him as knowingly downright evil as well.

The governors before him were in their own way just as evil and that evil has been encouraged under every political party constituting the LibLabCon.

Edited by billybong

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4 hours ago, billybong said:

He must know exactly what it's doing to the average person and to ordinary people.

Many would call that knowingly downright evil.  Wicked, evil, vile, malevolent call it what you will.

For that reason he should have been sacked long ago - and because he wasn't sacked many would consider those who continued to support him as knowingly downright evil as we

Fascinatingly, I have just been reading a book by a guy named Tim Shipman ( All OUT WAR, The Story of how Brexit sank the British Political Class), and there was a paragraph in there that almost made me choke on my evening coffee.

Words to the effect of " Osborne was keen for Carney to weigh in on the subject of Brexit during the campaign as internal polling had shown that the British Public trusted his opinion on economic matters much more than they did Authorities such as Osborne's Treasury pronouncements , or the analysis of the IMF or OECD

If that is actually true, and the Great unwashed British Public actually regard Carney as a wise old sage with their best interests at heart then the UK truly is deservedly righteously f**ked. 

 

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The Shipman Book is excellent by the way.

Though it was published at the tail end of 2016 and the difference in its political prognostications for the future and what has transpired in the 7 months since is fascinating: it basically posits Theresa May as the Mistress of all she surveys, and Labour under Corbyn as having to wait until his death before it becomes remotely influential or electable.

I'd love to see his opinion on the situation now.

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On 7/16/2017 at 3:19 AM, Society of fools said:

Fascinatingly, I have just been reading a book by a guy named Tim Shipman ( All OUT WAR, The Story of how Brexit sank the British Political Class), and there was a paragraph in there that almost made me choke on my evening coffee.

Words to the effect of " Osborne was keen for Carney to weigh in on the subject of Brexit during the campaign as internal polling had shown that the British Public trusted his opinion on economic matters much more than they did Authorities such as Osborne's Treasury pronouncements , or the analysis of the IMF or OECD

If that is actually true, and the Great unwashed British Public actually regard Carney as a wise old sage with their best interests at heart then the UK truly is deservedly righteously f**ked. 

 

Interesting.

Incidentally the last word of my post you quoted should be "well" and not "we" - it changes the meaning.

That is:

Quote

For that reason he should have been sacked long ago - and because he wasn't sacked many would consider those who continued to support him as knowingly downright evil as well.

I'm sure plenty of we on HPC have good reason to be extremely aggrieved at the BoE policies but that doesn't translate into evil - whereas I think it's fair to say that many of the BoE's policies are. 

Edited by billybong

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