The housing sector in Irvine, California is booming, partly due to an inflow of investment from China. When I ask Chinese acquaintances where the money comes from, they suggest that it is transferred to the US through mysterious channels.
Commenter Ahmed Fares directed me to a Daily Mail story that sheds light on one such channel:
First, [Mexican] cartel money-men in the US arrange to deliver an amount of cash with a courier working for the triads, who message their bosses to confirm when the drop has been made.
As soon as the message is received, Chinese gangsters transfer the same amount of money in Mexican pesos to the cartels – which they are then free to spend as they like.
At the same time, the triads arrange for a wealthy person in China to buy the drug dollars by transferring the same amount of Chinese currency into accounts the gangsters control.
There is huge demand for this service in China, as the government prevents people from transferring more than $50,000 out of the country each year in an effort to stop people offshoring their wealth.
This gets around the system because the money never moves across a border. The Chinese currency only moves between banks in China, and the dollars never leave the US. . . .
Once the wealthy buyer has control of the dollars, they are free to spend them as they would like within America – typically on college tuition or real estate.
The US tries to ban drugs, while the Chinese government tries to ban large currency outflows. Both types of restrictions on freedom have the effect of creating black markets. I would expect various governments to respond with even further restrictions on freedom. And I expect people to find ways of evading those additional restrictions.
Governments will then respond with even further restrictions on freedom, and more black markets will develop.
Rinse and repeat.
PS. The article provided another example of the recent surge in anti-Chinese bias:
US officials believe it is highly unlikely that such a large volume of money could be moving through Chinese banks unnoticed by Beijing’s all-seeing bureaucrats, and so reason they are either choosing to turn a blind eye or are involved in it.
And yet American officials seem to have no trouble believing that vast quantities of illegal money could move through the US financial system without the authorities being aware of it. I wonder why?
The attitude of American politicians (of both parties) seems to be: “Why doesn’t China fix America’s drug problem!”
READER COMMENTS
Craig
Apr 4 2024 at 5:14pm
People in the US think of places like the Caymans as a ‘tax haven’ but to many foreigners, Chinese included, the US itself is a tax haven. I’d pay a Chinese supplier USD and mail the check to an RBC bank in NC. Beyond that I wouldn’t be privy to what happened to the money but led to believe many get credit cards which they use for purchases and then trigger a payment from the US account.
Scott Sumner
Apr 4 2024 at 6:17pm
The US repeatedly accuses little countries of being tax havens, even as we are the world’s largest tax haven.
Warren Platts
Apr 5 2024 at 7:05pm
Cayman Islands is one of the biggest “investors” in USA. No doubt most of this “foreign” investment consists of American tax cheats, because as nominal foreigners, they can invest in the U.S. stock market all they want and not have to pay U.S. capital gains taxes.
Philo
Apr 4 2024 at 5:16pm
Where do the Chinese gangsters get the pesos that they transfer to the Mexican cartels? Do they have operations in Mexico, that generate profits in pesos which they want to change into renminbi?
Scott Sumner
Apr 4 2024 at 6:27pm
I left out this final step:
“Finally, the gangsters sell the Chinese currency to a Mexican business which operates within China so they can buy goods using the local currency.”
Warren Platts
Apr 6 2024 at 5:54am
lol! You mean so they can buy fentanyl precursors! There’s still more missing pieces of the puzzle. So the wealthy Chinese elite now owns a satchel filled with half a million USD in cash. Now what? Does he or she literally take possession of the cash, and then what? Just walk into the Bursar’s Office at Stanford and pay cash for the $100,000 tuition bill, or walk into the real estate closure meeting with $500,000? Or does the triad in Chinatown somehow filter it through cash businesses or other means into actual bank accounts? Then also, where do the triads obtain the MXN to wire transfer to the cartels? I guess the triads have their bank accounts in China that have just received the transfers of CNY from the wealthy Chinese elites. Do they buy MXN on foreign exchange markets and then wire the MXN to Mexico? But what about CCP capital controls? Do they wire it out of Hong Kong perhaps?
Komori
Apr 4 2024 at 5:36pm
Or the officials are getting their cut and don’t want to look (10% for the big guy all around).
It’s not like the big banks aren’t constantly getting investigated for money laundering.
BC
Apr 5 2024 at 3:39am
I think it’s pretty obvious that the money laundering has tacit Chinese govt approval. The “wealthy person in China” is likely a corrupt govt official, or at least someone with ties to corrupt govt officials. How do you think the person became wealthy to begin with? It’s an open secret that Communist Party officials hide their ill-gotten wealth outside of China because they know the threat that the Communist regime poses to their (and everyone else’s) wealth. To be fair, they also face a threat if the Communist regime should ever be toppled, which is another reason to move some of their wealth out of the country. The wealthy Chinese person is also likely someone with enough political influence that they are willing to trust the Chinese gangsters. Otherwise, what would that person do if the gangsters didn’t actually turn over the USD in America after receiving the Chinese currency in China? A corrupt govt official that has other dealings with the gangsters, e.g., looking the other way regarding the gangsters’ other illegal activities, would have enough leverage over the gangsters to trust them.
I do share skepticism about the purported “ideological and strategic motivation” to support fentanyl trade in the US. Individual greed and corruption seem like more than sufficient motivation…
Jon Murphy
Apr 5 2024 at 7:21am
I’m confused. You start by saying the money laundering has tacit government approval but the rest of your comment is all about how the government doesn’t approve of laundering.
BC
Apr 5 2024 at 5:45pm
Maybe, it’s just semantics. If corruption is endemic and just accepted among high ranking government officials (other than Xi’s political opponents) as a normal way of life, then I call that “tacit govt approval”. You might call that disapproved because it’s not official policy?
Jon Murphy
Apr 6 2024 at 8:18am
I wouldn’t call it semantics. Again, the Chinese government is actively pursuing these people for prosecution. That’s why they’re hiding their money over here (and why the CCP supports the crackdown the Republicans have proposed on foreign land ownership)
BC
Apr 7 2024 at 4:38am
“Again, the Chinese government is actively pursuing these people for prosecution.”
No, they are not pursuing these people if they belong to the right political faction. They are hiding their money here in case the political winds shift and they find themselves on the outs one day.
Scott Sumner
Apr 5 2024 at 1:35pm
With all due respect, I don’t think you know very much about modern China. There’s been a big crackdown on government corruption. It still exists, but certainly is not approved of by the central government.
BC
Apr 5 2024 at 5:39pm
Ok, so how do these totally non-corrupt wealthy people with no ties whatsoever to govt manage to meet these Chinese gangsters and establish relationships with enough trust that they are willing to hand over say $1M USD worth of Chinese currency and trust that they will gain control over equivalent USD in an account on the other side of the world?
BC
Apr 5 2024 at 6:40pm
For what it’s worth, this ProPublica article seems to be talking about the same scheme involving Chinese gangsters and Mexican drug cartels [https://www.propublica.org/article/china-cartels-xizhi-li-money-laundering]: “U.S. agents came across evidence indicating that his money laundering schemes involved Chinese government officials and the Communist Party elite.” But, maybe that’s just more American anti-Chinese propaganda and the so-called “evidence” is fake.
They do bring up the fentanyl/strategic angle, but others think it’s more about endemic corruption: “‘There is so much corruption today in mainland China it becomes hard to distinguish a policy or campaign from generalized criminality,’ said an Asian American former intelligence official with long experience on Chinese crime and espionage.”
As I responded to Jon Murphy, I guess it’s a matter of semantics whether endemic corruption involving Communist Party elites is “govt approved”. My thinking is that Communist Party elites are the govt and, if the corrupt practices are endemic enough so as to constitute common practice, then it’s effectively govt approved. I guess it also depends on whether the so-called crackdown on corruption is limited by law enforcement efficacy or political considerations. If the latter, then I call that tacit govt approval: corruption allowed as a matter of politics.
Scott Sumner
Apr 6 2024 at 12:45am
China has 1.4 billion people. You really ought to be more careful in making insulting ethnic generalizations.
Warren Platts
Apr 6 2024 at 6:30am
No need to make insulting ethnic generalizations regarding 1.4 billion people. The blame rests solely with the Head Drug Dealer in Chief Emperor Xi. You try to sell fentanyl within China to Chinese citizens, you get the death penalty. But sell fentanyl to the Americans? Sure, no problemo!
Scott Sumner
Apr 6 2024 at 11:19am
So the US government cannot stop drugs from being sold here, but the Chinese government can? And simply chooses not to? Interesting theory.
Here’s another theory. The US government’s crackdown on legal Oxycontin created a huge market for (far more dangerous) illegal fentanyl. Drug deaths skyrocketed after we ramped up the “war on drugs”.
Jon Murphy
Apr 6 2024 at 2:36pm
One thing I find interesting about the anti-Chinese mentality is how the Chinese government is projected as this omniscient and omnipotent entity, akin to some villain from a James Bond movie or a Tom Clancy novel, and yet the US government is weak and incompetent. I find the contradiction amazing.
Warren Platts
Apr 6 2024 at 3:59pm
Scott, I don’t think you understand what is going on. This stuff isn’t being made in mountain jungles in Yunnan next to the Laotian border. We know the addresses where the stuff is made. How? Because American journalists have traveled to those addresses and interviewed the chemists making the stuff! They give interviews and are nice guys. Therefore, the CCP authorities also know these addresses.
But here’s the deal: it’s true that General Secretary Xi has made manufacture of actual fentanyl illegal as a bone to toss to American complainers. So the chemists just make precursors instead. I’ll bet I’ve had a hundred paid wumaos on twitter tell me this is all completely legal. So everyone in the People’s Republic knows what’s going on, but to their way of thinking it’s all completely legal because it is legal under their system.
And it’s not a case that Libertarian Communists are serving the legitimate market desires of American individuals. The reality is it’s a deliberate act of war. How do I know this? Because they say so themselves! Here is the quotation from Qiao and Liang (1999) Unrestricted Warfare (p. 55):
If you’ve never read this document, you will never be able to understand the mindset of the CCP leadership. They understand that the rise of the People’s Republic is causing a Thucydides Trap dynamic with the United States, and as Graham Allison has pointed out, this results in war most of the time. But the CCP are smart enough to know that military conflict with the U.S. in a nuclear age is out of the question. (Qiao and Wang describe nuclear weapons as “frightening mantlepiece decorations that are losing their real operational value with each passing day.” p. 53)
So they’ve developed a brand new theory of warfighting, 超限战, literally translated as “war without bounds,” the only rule of which is that there are no rules. Unrestricted Warfare keeps the same political strategic goal of ordinary warfare: forcing one’s opponent to submit to one’s national interests, but strives to do so through non-military means. Practically anything you can think of short of all-out nuclear war is not beyond the pale. Therefore, why should General Secretary Xi end the export of fentanyl precursors? Because, after all, it’s working!
Drug overdoses are now north of 120,000 deaths per year. The Joint Economic Committee estimates the resultant economic costs to be $1.5 trillion in 2020 alone. That’s 6.8% of the 2020 GDP. For comparison, CCN says the economic costs last year to the U.S. because of climate change was a whopping $150 billion. So the goal of achieving vast illicit profits while spreading chaos by wholesale destruction of American human capital is succeeding swimmingly. The economic defects of trade deficits and unfair trade practices pale in comparison. It’s a problem. And frankly another reason we need to reelect Trump.
Jon Murphy
Apr 6 2024 at 5:03pm
So, a few journalists publish stories about drug kingpins and some randos in Twitter tell you it’s legal and that’s all the evidence you need? That explains a lot.
Warren Platts
Apr 6 2024 at 5:44pm
My point regarding Mainland twitter users claiming to know that manufacturing and exporting fentanyl precursors is entirely legal is to demonstrate that everyone one in the People’s Republic knows what you don’t know: that the manufacturing and exporting of fentanyl precursors is entirely legal within the People’s Republic. And I’ll say this, the only citizens of the People’s Republic that I’ve talked to that find the slightest thing wrong with fentanyl precursor exports are bona fide dissidents living in exile overseas. Maybe try doing a little research next time before shooting from the hip. This took me all of 10 seconds to find:
https://crsreports.congress.gov/product/pdf/IF/IF10890
BC
Apr 7 2024 at 4:48am
Insulting is when you downplay the corruption that people have to live under. I will take the side of Chinese people over their corrupt government every day.
“An Asian American former intelligence official with long experience on Chinese crime and espionage says, ‘There is so much corruption today in mainland China it becomes hard to distinguish a policy or campaign from generalized criminality,’” but what does he know…
BC
Apr 7 2024 at 4:59am
Jon Murphy: “One thing I find interesting about the anti-Chinese mentality is how the Chinese government is projected as this omniscient and omnipotent entity, akin to some villain from a James Bond movie or a Tom Clancy novel, and yet the US government is weak and incompetent. I find the contradiction amazing.”
What’s the point of having constitutionally limited government if it doesn’t result in a less powerful government? I don’t think the Chinese govt can stop drugs from being sold in the US but, of course, it has much stronger surveillance powers over Chinese than the US govt has over Americans. And, it’s not anti-Chinese to point out the Super Big Brother nature of the Communist regime. It’s anti-Chinese (anti-Chinese people) to downplay it.
Jim Glass
Apr 5 2024 at 11:51am
Perhaps because over the last decade voters (especially Republican, and Libertarian for sure) have knocked down the real-$ budget of the IRS by 20% while the real economy has grown by 25%?
Are the libertarians here in favor of a big boost to the IRS budget? At least to just catch up to where it was? Are you?
Gut the resources of the people doing a job. Then complain they aren’t doing it. Then insinuate “Oooh, I wonder what their real motives for not doing it are.”
Scott Sumner
Apr 5 2024 at 1:41pm
You are attributing to me ideas that I do not hold and have never expressed. Please stick to what I actually say, not what your fevered imagination assumes I believe.
https://www.themoneyillusion.com/2020-and-2022/
Jim Glass
Apr 5 2024 at 8:49pm
You are attributing to me ideas that I do not hold and have never expressed. Please stick to what I actually say, not what your fevered imagination assumes I believe…
Applying an ice pack to my fevered forehead, I try to figure out what ideas I attributed to you that you don’t believe…
“Perhaps because over the last decade voters (especially Republican, and Libertarian for sure) have knocked down the real-$ budget of the IRS by 20% while the real economy has grown by 25%?”That? You don’t believe it? I thought you’d agree.
“Are the libertarians here in favor of a big boost to the IRS budget? At least to just catch up to where it was?”This question of the many libertarians here attributes nothing to you. (Any who agree with you that tax evasion here in the USA is a bad thing might answer “yes”. I note that none have. But that’s on them.)
“Are you?” Far from attributing anything to you, this asks your opinion. I thought you’d answer ‘Yes’, or ‘Yes, obviously’. Or even ‘no’, or whatever. Asking your opinion offends you? Nah. So, now as to your…
… there certainly seems to be a snarky insinuation of something in that. As you didn’t specify what, one must speculate. Anti-Chinese bias? Something else??
Maybe cutting the IRS by 35% relative to the size of the economy is enough to explain the “why”. Occam’s Razor. That attributes nothing to you, and I see nothing to offend you in it. So it seems the offensive culprit must be my last line — which wouldn’t have been there if you had explained your ‘wonder why’…
“Gut the resources of the people doing a job”. Fact. “Then complain they aren’t doing it.” Fact, you did. “Then insinuate ‘Oooh, I wonder what their real motives for not doing it are.'”OK, I sit corrected. I should have written, “Then insinuate, ‘I wonder why'”. With nothing attributed to you but your own words.
I don’t see that I attributed to you any idea that you don’t believe. If I did, please explain. If you’re objection is that I disrespected your “I wonder why”, well, if you’d been concrete instead of snarky-enigmatic I would have been too. I still don’t know what you meant by that.
I apologize for the offense given. Not intended. Maybe Haidt is right: the internet is destroying all civil communication and our civilization is doomed.
Scott Sumner
Apr 6 2024 at 12:49am
“Anti-Chinese bias? ”
Yes.
“Gut the resources of the people doing a job. Then complain they aren’t doing it.”
I assumed you were referring to my comment.
Warren Platts
Apr 6 2024 at 6:37am
No sir. You couldn’t be more wrong. It’s not “Anti-Chinese bias.” It’s Anti-Communist bias. Big difference!
Jon Murphy
Apr 6 2024 at 11:11am
No, it cannot be anti communist party bias because the behavior being discussed is deliberately being done to thumb their nose at the CCP.
Unless, of course, we’re assuming the Chinese government has their fingers in every pie (including illegal ones), in which case the distinction you mention is irrelevant.
Warren Platts
Apr 6 2024 at 2:49pm
No, it’s your comment that is irrelevant. Scott here is accusing anyone who dares complain about the People’s Republic as guilty of racism. That is very unfair, and doesn’t even make sense. For example, most people living in Taiwan are Chinese, yet I would support direct U.S. military intervention in case the People’s Republic dares to invade Taiwan. Why would I support that if I dislike Chinese people merely for being Chinese? I have Chinese-American friends I’ve kept in touch with for decades (unfortunately, one of whom died of a drug overdose last October). I’ve entertained vistors from the People’s Republic in my own house. My wife played mahjong with them. I am not a racist and I highly doubt that Jim Glass is one either. I am, however, fervently anti-Communist.
Scott Sumner
Apr 7 2024 at 1:00am
” Scott here is accusing anyone who dares complain about the People’s Republic as guilty of racism.”
That seems rather unlikely, given that I’ve done many posts criticizing the PRC. Next time, take a deep breath and reconsider before making a baseless charge.
If you have a different explanation for why people have a double standard when judging the two governments, I’d like to hear it. Why doesn’t the US government prevent criminals from using our financial system to launder money?
Warren Platts
Apr 7 2024 at 2:42am
Sorry. I apologize, Scott. I thought by anti-Chinese you meant anti- all people on Planet Earth who identify as Chinese, whereas you were really simply referring to the PRC.
As for why people have a double standard when judging the two governments, I’m afraid I agree with you. Yes, the U.S. government is corrupt as hell. Sometimes, things are exactly the way they look like they are…
vince
Apr 5 2024 at 2:10pm
Here’s an example of how our strapped IRS spends its scarce funding:
https://www.irs.gov/pub/irs-pdf/f1040lep.pdf
Jim Glass
Apr 5 2024 at 8:58pm
You object to the IRS sending tax instructions to you in the language you speak?
Think of all the money that costs!
The HORROR! 🙂
vince
Apr 6 2024 at 1:35pm
Wrong, Jim. I respect my country enough to accept forms written in the official language.
Jon Murphy
Apr 6 2024 at 2:26pm
Two quick points:
First: there is no offical language of the United States
Second: why the objection to making compliance with law intelligible?
vince
Apr 6 2024 at 2:49pm
True, but English is, of course, our primary language. It’s the official language in the majority of states. Is any other language an official language in any state?
Straw man. I didn’t say the law should be unintelligible.
vince
Apr 5 2024 at 2:14pm
As a safe haven, then, our real estate markets get distorted by foreign money. Sounds familiar.
Jon Murphy
Apr 5 2024 at 5:11pm
An increase in demand isn’t a distortion. It’s a normal market process. The distortions lie in NIMBY, zoning, and other actions that prevent the market from adjusting.
Jose Pablo
Apr 6 2024 at 1:09am
our real estate markets get distorted by foreign money.
I am confused. I assume that this “our” makes reference to the real estate properties than you (and your family or partners) own. But it is not clear to me what “foreign money” means, since I am pretty sure that you and your family only accept American dollars in the selling of your American properties.
And I am also confused by the meaning of “distort”. How come the process of selling and buying “distorts” markets? When Americans go to Paris, are they distorting the Parisian tourist market? Pour souls.
Aren’t we all “distorting markets” consumers? Father, I confess I have distorted so many markets today!
vince
Apr 6 2024 at 1:11pm
Jose and Jon: Tell those who can’t afford a home in California that the extra demand–and higher prices–are not a distortion, despite coming from illegal money looking not necessarily for real estate but instead for a safe place to dump or park it.
Jon Murphy
Apr 6 2024 at 1:24pm
If it’s illegal money, then it can be ve seized. But wild speculation gets us nowhere. Call me old fashioned, but I believe there should be evidence and rule of law.
Now, again, increasing demand is not a market distortion. The problem, again, is the government restrictions on the market. I have no problem telling people that. Indeed, i do all the time. In fact, i recently testified before the NC Legislature on exactly that point.
Whether some people want to hear it or not is irrelevant. But facts are facts.
Jose Pablo
Apr 7 2024 at 9:49am
Vince, there is no “extra” demand. And if what you want to say is that these money launderers are marginal buyers, real estate is tricky in that regard. There are many “markets”, and I am pretty sure that these evil Chinese money launderers are not chasing the same real estate properties that “those who can’t afford a home in California”.
So, Chinese criminal influence in the market of “those who can’t afford a home” is, very likely, negligible.
And, again, if fentanyl consumers were buying Hello Kitty Lollypops instead* the (negligible) effects on the “housing affordability”** crisis would be the same.
By, I agree, with you, try to explain this subtleties to the Trump voters the story is catered to!
* This would mean that, due to a police crackdown on the Chinese run money laundering scheme, Mexican cartels stop the selling of fentanyl which all but disappear from the streets. And that fentanyl consumers don’t switch to another substance supplied by equally American real estate loving thugs. This is an extremely unlikely chain of events!
** Looking at real estate in terms of “affordability” is a mistake and not very helpful. Every single house in California that has residents in it is “affordable” because “reality” is, necessarily, a subset of the “possible” and the “possible” needs to be “affordable”. Houses consume a higher part of people’s income in California, “because” there are a lot of people “affording” their houses in California. Prices can’t never be “unaffordable” for a given level of offer. Market prices are precisely what makes that level of offer “affordable”, for real estate and for Ferraris.
vince
Apr 7 2024 at 1:52pm
TLDR. Back to the article, here’s the first sentence again:
Jose Pablo
Apr 6 2024 at 12:45am
The whole money laundering scheme is irrelevant. At the end of the day, what happens is that money goes from fentanyl consumers to “person A” and “person A” uses this to buy “real estate.
Some conclusions, looking at it this way:
* Whether person A is Chinese or Martian has no bearing on the influence of the scheme in real estate prices
* Whether person A got the money directly from fentanyl consumers or trough sophisticate money laundering schemes has no bearing on the influence of the scheme in real estate prices
* Whether the money goes to person A due to the selling of fentanyl or due to the selling of solar panels, food in supermarkets, logistic services or whatever has no bearing on the influence of the scheme in real estate prices
* If real estate prices had gone up because of this, the prices of some other goods and services would have had to go down because of this. Namely the prices of goods and services that fentanyl buyers would have consumed instead of the drug.
So, the whole story could be summarized:
* Real estate prices are going up because some people are buying Real Estate. In a scenario with fentanyl and Chinese involved in money laundering the “people” are the Chinese and in a scenario with fentanyl consumers buying Hello Kitty Lollypops instead, the “people” will be the Hello Kitty Lollypops makers.
* Somebody is running an illegal money laundering scheme. This is a problem to be handle by the police irrespective of the nationality of the people running the money laundering scheme.
Mixing all the ingredients: Chinese involved, fentanyl and house pricing increases, has the only purpose of manipulate people feelings but helps nothing to address the underlying problems. Regulatory distortions in the real estate market and police inefficiency.
And what is not reported in the article (not seen) is the drop in prices (compare with a scenario without money laundering) of the goods and services that fentanyl consumers are not buying.
Warren Platts
Apr 6 2024 at 6:17am
Well, one thing the junkies aren’t buying is California real estate that they might otherwise be buying if they had their act together and were real participants in the economy instead of being a prisoner to a poison exported by the CCP. Shouldn’t that put downward pressure on real estate prices? Indeed on everything? Maybe we should be grateful to the CCP for the overall deflation caused by their fentanyl exports!
Jose Pablo
Apr 6 2024 at 10:38am
Nobody is arguing that the whole scheme causes “inflation”. Inflation is always and everywhere a monetary phenomenon. And neither fentanyl consumers nor Chinese money launderers are “creating money”.
If there is a change in relative prices due to this (which I very much doubt, I am just following the whole nonsensical argument) then, some other prices should be going down because of this. Otherwise, the scheme will be, indeed, causing inflation.
And the same increase in relative prices would be caused by Amazon or Nvidia. What is the difference between the effects of selling microchips or fentanyl on the housing market?
And the CCP was never exporting fentanyl. This was still procured by the Mexican cartels (you should improve your comprehensive reading). They are just playing the role of “financial enablers”. Certainly, a minor one in the whole supply-demand equilibria of this market.
But the problem is that they are Chinese and that the Trumpian red-neck voters love this kind of “evil Chinese poisoning the naive American young and making housing less affordable as a conspiracy to rule the world”.
You could expect that since Trumpian red-neck nonsense is, after all, quite tautological.
Warren Platts
Apr 6 2024 at 3:05pm
No, I’m saying that if there was no fentanyl crisis, California real estate would be even more expensive, because there would be even more productive people with money in their pockets looking to buy real estate.
Kenneth Duda
Apr 7 2024 at 7:04am
Warren, I appreciate your lucid writing. In another thread here, you wrote, “And frankly another reason we need to reelect Trump.” I am puzzled by that comment. How does reelecting Trump help with anything? My view is that Trump made a serious and nearly successful attempt to replace US democracy with Russia-style authoritarianism (https://www.youtube.com/watch?v=Y44fyh4ap7k) and that should be disqualifying, but I am curious if there is any upside to Trump. If you’ve written anything on this subject, I’d appreciate if you sent a link to kjd@duda.org, I may not find any response to this comment.
Thanks.
vince
Apr 7 2024 at 1:49pm
Here’s one: Biden won’t be president. Those are our choices unfortunately. If you want to vote for Biden, fine. But let’s not get into the silly, petty potentially endless game of hurling childish insults at voters who have a different opinion.
Jose Pablo
Apr 7 2024 at 2:58pm
Vince, there is a “normative” side regarding voting preferences. And you are right, any “normative” discussion is, mostly, a waste of time (although it is also true that normative positions are like abs, everybody has them, but some are much more interesting than others).
But there is also a “positive” side to the voting preferences discussion. Kenneth claim seems quite “positive” to me. And no similar claim can be done regarding the other candidate. Whether you “normatively” like him or not.
And discussions involving the unapologetic Trumpian attempt to subvert the legitimate results of the 2020 elections are anything but “childish”. This is, very likely, the most serious aggression against American democracy since FDR’s threat of packing the Supreme Court. Kenneth’s question is all relevant.
Jose Pablo
Apr 7 2024 at 9:19am
California real estate would be even more expensive,
Maybe, but not necessarily, the evolution of relative prices will depend on this new consumer preferences and their relative contribution to supply, and the evolution of general prices on the difference between nominal and real growth of the Californian economy due to this effect.
But whatever the effect of avoiding the fentanyl crisis on Californian real estate it would be the same no matter who is supplying the fentanyl and no matter what the reason for the increase in productivity of the “avoided” yunkies (the avoidance of the fentanyl crisis due to police intervention, a ban on trade unions, the elimination of regulation …).
Warren Platts
Apr 7 2024 at 11:48am
Regarding the fentanyl thing, the argument here seems to boil down to two sides: (1) the PRC is the surveillance state from hell, therefore, anything that happens must be because the CCP government wants it to happen; versus (2) Why should we expect the PRC to be more efficient at law enforcement than the corrupt and incompetent USA? Both arguments are totally wrong. PRC exports the PRECURSORS to fentanyl and this is completely legal in China. It’s as if they were to export Coca Cola syrup and then say with a straight face, Coca Cola may be illegal, but we’re not exporting Coca Cola… God’s truth.
Warren Platts
Apr 7 2024 at 11:56am
https://crsreports.congress.gov/product/pdf/IF/IF10890
Scott Sumner
Apr 7 2024 at 12:49pm
So China is evil because they export chemicals that can be used to make fentanyl? Does the US produce chemicals that can be used to make meth?
We’ve been fighting the war on drugs for 100 years. It’s never worked, and it never will work. Cut off one source of supply and another pops up. Even worse, the replacement drugs are often far more dangerous than the ones we cracked down on.
Warren Platts
Apr 7 2024 at 1:06pm
“So China is evil because they export chemicals that can be used to make fentanyl?”
No. What makes something evil is intent. If you were to kill someone in a hunting accident, that would be highly regrettable, perhaps even punishable manslaughter, but it wouldn’t be evil. Evil requires premeditation. That is why the CCP government is evil.
Jose Pablo
Apr 7 2024 at 3:14pm
The intent of Chinese individual citizens in all this is, very likely, smuggling money out of mainland China.
What “intent” do you attribute to the Chinese government in all this?
It is not a statistically representative sample, but I know (knew in one case) three fentanyl consumers. The three of them were tattooed die-hard Trump supporters (after all, mental illness rarely manifest itself through just one symptom). So, maybe you are right, and the Chinese government intent is to decimate Trump supporters in the US.
If this is the intent the attempt is intellectually ridiculous (to say the least). To this end it would be much more efficient, for instance, to engineer a deadly virus in a laboratory in Wuhan and allow it to spread in the US. Everybody knows by now that Trump’s supporters are way less likely to vaccinate.
Warren Platts
Apr 8 2024 at 10:52am
See my replay to Scott Sumner above from Apr 6 2024 at 3:59pm
Jose Pablo
Apr 8 2024 at 6:07pm
So, this is the Chinese way of waging war against America?! Well, if this is the case, we should be grateful. This is way better than nuking us!!
Drug overdoses are now north of 120,000 deaths per year
And you are attributing all these deaths to the Chinese government intervention in the US fentanyl market?
Not all these deaths are caused by fentanyl (less than half are). And I thought we were talking about the Chinese role in money laundering, not the actual supply. Now that the truth has been revealed, I am much more worried.
Wasn’t the actual supply coming from Mexican cartels? Sure, with the connivance of the Mexican government. Should we consider the Mexican government an ally of China in this “total war”?
Now that I think about it, the smuggling of people through the Southern border to dilute and destroy American culture, sure is also part of this “total war” that Mexico and China are waging against the United States.
In any case, we are lucky that the Chinese are so dumb when it comes to waging total wars. They could have used alcohol instead of fentanyl. Alcohol has some advantages: a) it is legal and b) it kills 180,000 people every year in the States. Much more efficient than fentanyl.
Or they should engineer a virus that transmits only among people attending football matches (maybe the Chinese are confused by the fact that football in America is mostly played with the hands) or, even better, among people attending baseball matches. After all, given the inexplicable fondness of baseball fans for boredom, the Mexican and Chinese governments could try to disguise these killings on US soil as a compassionate death assistance program.
And frankly, another reason we need to reelect Trump.
Here we totally agree. Trump’s reelection will immediately end the 120,000 fentanyl yearly deaths and also all the illegal crossings of the Southern border sponsored by the Mexican government (this cunning ally of China in this “total war” against the States).
Jose Pablo
Apr 8 2024 at 9:18pm
“DEA alleges that PRC-based chemical companies advertise and sell online fentanyl precursor chemicals, including some that are not internationally controlled and are correspondingly legal to export out of China
Wait, Warren, I think we got all this wrong! Maybe it is us, the Americans, the ones waging a total war against China!
Think about it, we are using our drug addicts to detract Chinese resources (the resources dedicated to producing these drugs) from being devoted to better use (developing new weapons, building roads, manufacturing solar panels … you name it!).
And we are also helping Chinese money launderers to smuggle money out of the Chinese Republic, contravening the CCP’s desires. And then, we are using this Chinese money to enrich Californian property owners! This is just genius!
And not only that, we are also using our drug addicts to create a law enforcement problem in Mexico. The Mexican government should now devote significant resources to fight drug cartels empowered by American drug addicts’ money.
Certainly, we are making the best use of our drug addicts in this war against Chinese communists and their Mexican allies. Detracting Chinese resources to the very socially unproductive business of producing fentanyl and forcing Mexico to fight a very expensive war against organized crime.
Genius!
Warren Platts
Apr 7 2024 at 1:22pm
“We’ve been fighting the war on drugs for 100 years. It’s never worked, and it never will work.”
What about the old Opium Wars in China? That’s what’s happening, but in reverse. (And many Mainlanders not only feel this is justified revenge, they also find it quite risible.) Question: How did China end mass opium addiction?
Miles
Apr 8 2024 at 4:36am
Seems that the Chinese gangsters are providing a service that their customers want, not unlike Al Capone during Prohibition. The gangsters themselves appear to operate multinational enterprises, and control local currency in various foreign countries. Not unlike US multinationals, they have found a way to use these overseas funds without running afoul of their home country’s laws. Sounds like normal international finance, of which American and Western companies are the leading practitioners.
Thomas Strenge
Apr 9 2024 at 9:36am
This is a fascinating insight. Thank you! I am curious to know what the discounting is. You know that every step in this transaction takes a haircut. I wouldn’t be surprised if the Chinese businessman at the end of this chain spends 100k in China to get 50k in the US.
It also speaks to the profitability of this trade. First, you make money on the drugs, and then you possibly double your money by making money on the money!
T Boyle
Apr 9 2024 at 1:18pm
The Daily Mail example doesn’t work. Money is absolutely crossing borders. The Daily Mail obscures that, like a game of 3-card Monty.
Let’s break it down.
We have A, the wealthy person, in China, who has Yuan in China but wants USD in the US.We have B, the Mexican cartel member, in the US.We have C, a Chinese gangster, in Mexico.We have D, a Mexican cartel member, in Mexico.And we have E, another Chinese gangster, in China.According to the Daily Mail’s outline (and accepting the order of events, which seems improbable),B gives USD to A, in the USA.Then C gives an equivalent, matching amount in Pesos to D, in Mexico.Then A gives Yuan to E, in China, again in a matching amount.So, A has effectively converted Yuan in China to USD in the US. So far, so good. But… E has to reimburse C. Do do that, E has to convert Yuan in China into Pesos in Mexico.And D has to reimburse B, which requires converting Pesos in Mexico into USD in the US. Although the Daily Mail claims that “money never moves across a border” it actually does – not once, but twice. And one of those movements is OUT OF CHINA, which is the very thing that is so difficult in the first place.
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