The Bigger The Skyscraper The Harder It Falls

Jan 17 2012

There is nothing more poetic and terrible than the skyscrapers' battle with the heavens that cover them.

--Federico Garcia Lorca

Last week, Barclays Equity Research released its Skyscraper Index (PDF)—an annual index that shows the stunning correlation between building big towers and financial bubbles.

It’s no secret that, historically, big financial bubbles inevitably lead to hubris-fueled orgies of skyscraper building. In the biblical age, the first skyscraper was the Tower of Babel, but in a time span of over one century, Barclays discovers an alarming correlation between the hubris of tower-building and the fall of the mighty. Mike Maloney pointed out the correlation in a trip to Singapore last year

 

Here’s Barclays on the ultimate architecture of capitalism:

As the Skyscraper Index (first published in 1999) shows, the link between construction of the world’s tallest building and an economic crisis has proved remarkably accurate. It may have started with the Tower of Babel, but over the past 140 years an unhealthy correlation exists between the building of the world’s the next tallest building and an impending financial crisis: New York 1930, Chicago 1974, Kuala Lumpur 1997, Dubai 2010. 
Skyscraper construction has been characterized by long periods of inactivity intersected by short periods of erratically timed, intense activity typically coinciding with excessive monetary expansion in the global economy. Skyscrapers are perhaps the ultimate architecture of capitalism.

While Dubai’s Burj Khalifa (2,717 feet) is not expected to be surpassed in height anytime soon, the number of skyscrapers being built has jumped—with the Middle East, India, and especially China building the most.  

Looking forward, using skyscrapers under construction, it is evident that the skyscraper boom in China continues to grow. China will complete 53% of the 124 skyscrapers under construction over the next six years, expanding the number of skyscrapers in Chinese cities by a staggering 87%. China’s skyscrapers are not only increasing in number – it now has 75 completed skyscrapers above 240m in height - but the average height of the skyscrapers that it is building is also increasing as past liquidity fuels the construction boom.

What sets China apart from failed societies of the past is its enormous population, its potential as a market for the world’s goods, and how very desperately the rest of civilization is depending upon it and its consumption-hungry masses to fuel the dying engines of the global economy. If history is any authority—and we believe it is—China’s tower-building frenzy may signal an economic crisis like none before it. As Barclay’s highlights, this could simply be a misallocation of capital—a product of a flawed monetary system where easy credit flows to unproductive investments.

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Submitted by vongleichent on January 19th, 2012.

hmm nice article

»
Submitted by Anonymous on January 17th, 2012.

still waiting....

»

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