For a long while now I have developed Svend's two rules for looming disaster. The first is that whereever investment bankers are flocking to, a disaster is not far behind. The second is that the erection of large numbers of large buildings also suggests a crash looming.
In the case of Dubai, we have a test of both ideas.
First, from Lew Rockwell (forgive the source please) an article that articulates my idea better than could I:
http://www.lewrockwell.com/podcast/?p=e ... cycles.mp3
http://www.lewrockwell.com/french/french69.html
I’ve traveled to many cities the past 12 months for work and play, and if there was one sight viewed virtually every place I went it was the high-rise construction crane. They are everywhere, all over the world: from housing projects under construction in Jerusalem to casino resorts underway in Macao.
Even in mega-sprawl Phoenix, cranes are in high demand commanding rents of $25,000 to $65,000 per day, according to the Arizona Republic. Those looking to buy one must wait 18 months. Over 60 cranes dot the Las Vegas skyline with two-dozen on MGM’s CityCenter project alone.
A recent article in the Las Vegas Review Journal dubbed the high-rise crane Nevada’s state bird. At the same time, while in Beijing, our guide quipped that the national bird of China is officially the Red-Crowned Crane, but that it should really be the construction crane. According to the Beijing Lonely Planet City Guide there are 2,000 high-rise buildings under construction in the city. It looked to be all of that and then some.
However, the tallest building we saw has been the tallest in the world since its completion in 2004 – the Taipei 101 in downtown Taipei, Taiwan. Taipei 101 will lose its tallest title when the 164-floor Burj Dubai is completed in 2009. James Grant wrote in The Trouble With Prosperity, "Skyscrapers were the architectural expression of optimism." Indeed, standing on the 88th-floor observation deck of the Jin Mao Tower in Shanghai, any capitalist gets an exhilarating rush, looking down upon over 5,000 high-rise buildings (all built over the past two decades) in a teeming city of 18 million people. But, the building under construction next door, the Shanghai World Financial Center, must be looked up at – it will be 101 floors and features a distinctive hole near the top to allow "dragons to pass through." That building is finally scheduled for completion next year after the foundation stone was laid over a decade ago, on August 27, 1997.
Another mega-skyscraper that is under construction is the 102-floor Union Square Phase 7 building in Hong Kong, due for completion in 2010. Another six buildings, each over 90 stories are in the planning stages to be built in Russia, Korea, Taiwan and China.
So what does all this skyscraper building tell us? Mark Thornton of the Mises Institute examined the connection between the completion of the next tallest-building and the business cycle in "Skyscrapers And Business Cycles" which appeared in the Spring 2005 edition of The Quarterly Journal of Austrian Economics. Using economist Andrew Lawrence’s skyscraper index, combined with Austrian Business Cycle Theory, Thornton finds that the skyscraper index is a good predictor of economic crisis and "that both the cause of skyscrapers reaching new heights and severe business cycles are related to instability in debt financing…"
The first skyscraper cycle began in 1904 in New York when the 47-story Singer Building and 50-story Metropolitan Life buildings began construction. This building boom was quickly followed by the Panic of 1907. In the late 1920’s with Wall Street booming three record-setting towers – 40 Wall Street, Chrysler Building, and the Empire State Building – were started, only to be completed after the stock market crash of 1929 and the onset of the Great Depression.
The third cycle began with the commencement of construction of the Sears Tower in Chicago in 1970 and the World Trade Center in New York, which broke ground in 1966. By the time these projects were completed the US economy was mired in stagflation.
The 88-story Petronas Tower in Kuala Lumpur, features twin "cosmic pillars" spiraling endlessly towards the heavens. Petronas was completed in 1997, the same year as the Asian Financial Crisis.
These four cycles, Thornton points out, share common characteristics: A period of cheap, easy money, leading to stock market booms and increases in capital expenditures. This new capital leads to technological advances and employment growth. During the booms, the next tallest building is planned and construction begins. But, prior to completion, negative information leads to market panics and the value of capital goods falls.
The coordinated and constant creation of liquidity by the world’s central banks, especially since the Greenspan era, has led to not only more contenders for the tallest building title all over the world, but also frenzied high-rise construction everywhere.
Thornton’s work shows us that before the construction party ends, the economy wakes up with a bad hangover. Better stock up on aspirin, there is a lot of pain coming.
January 7, 2008
Despite the various problems in markets, Dubai is going to top their absurd tallest building with another.
http://www.thesun.co.uk/sol/homepage/ne ... 772769.ece
World's tallest building plan
It is not clear exactly how high or how expensive the Nakheel Tower will be but it will have “more than 200 floors” and be part of “a multi-billion pound development”.
Dubai developer Nakheel – the company behind the man-made islands in the shapes of a palm tree and the world – said the structure would be the centre-piece of an inner-city harbour, set to become the emirates’ new, unofficial capital.
Debates about what counts includes whether buildings under construction should be considered and whether roof-top antennas count.
What is certain is that the tower will climb above what is said to be current holder of the “world’s tallest building” position – the emirates' own Burj Dubai.
Speaking at a press conference yesterday, a cautious Nakheel chief executive officer, Christopher O’Donnell, said: “From our perspective, we are building a tower that’s going to be over 1km in height.
"This is a complete iconic development. It may be the tallest. Someone may build something taller.”
The Nakheel Tower will have around 150 lifts and be built with some 500,000m3 of concrete.
If the reinforcing bars planned were laid end to end, they would stretch from Dubai to New York.
The building will have enough cooling capacity to air-condition more than 14,000 modern homes.
The temperature in the atmosphere at the top of the building could be as much as ten degrees cooler than the bottom.
Planned high speed shuttle lifts will allow people to see the sunset twice – from the bottom and again from the top of the building.
Asked if Nakheel was concerned about embarking on such a development during a banking crisis, Mr O’Donnell said: “It was always going to be a project that would take ten years-plus.
"When you go about trying to fund a project like this, you have to take account of the economic cycles.”
The tower and harbour project will take more than ten years to complete.
Apart from the landmark structure, there will also be another 40 towers, ranging in height from 20 floors to 90 floors.
The entire development will be home to more than 55,000 people and a work place for more than 45,000 people.
Nakheel executive chairman, His Excellency Sultan Ahmed bin Sulayem, said: “There is nothing like it in Dubai.
"Nakheel Harbour and Tower is located in the heart of ’new Dubai’, where we have focused on creating a true community, a location for living, working, relaxing and entertaining, for art and culture.
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"All of this is concentrated in one area.”
Nakheem said the designs of the planned harbour and tower were inspired by landmarks of Islamic design – including the gardens of Alhambra in Spain, the harbour of Alexandria in Egypt, the promenade of Tangier in Morocco and the bridges of Isfahan in Iran.
“With the Islamic influences governing its design, Nakheel Tower has been able to reach its height of more than a kilometre,” said His Excellency.
“This inspired approach has enabled us to achieve a number of amazing feats of engineering, for example the tower will be the world’s tallest concrete structure.”
In addition to this, the FT has reported several times about how laid off ibankers from the US and UK are flocking (or trying to) to Dubai in search of "work".
So, am I on to something? Is Dubai en route to an epic, legendary crash? Property accounts for 34% of their GDP. What does this tell us about the future of Vancouver, Calgary, Singapore, Seoul, Shanghai et al, all of whom have had massive housing booms in recent.
(Many apologies if this exact topic -Dubai housing- has been covered to death).
![[smilie=BangHead.gif]](https://www.peakoil.com/forums/images/smilies/BangHead.gif "BangHead")
Then stop driving to work, duh..... 
