Tulips

Remember the tulips? Back in 1637, Dutch tulip contracts sold for ten times the wages of a skilled craftsman, and a tulip speculator offered twelve acres of land in exchange for a single tulip bulb. The ensuing crash of the Dutch tulip market often serves as an example of asset bubbles like the one that the United States recently experienced in real estate.

Now comes Michael Auslin of conservative think tank AEI warning that China may be in the midst of its own tulipmania-style asset bubble. His key reference? That a bottle of wine sold for $93,000 in Hong Kong at a recent auction. To Auslin, this bottle of wine serves as indirect evidence of China's impending economic collapse, as evidenced by a series of previously-made points that he trots out for all to see.

I am not sure that I buy Auslin's argument, although he does make some interesting, albeit resuscitated points: that China has a increasingly nasty gap between rich and poor (it does) that is engendering increasing levels of social unrest, that the Communist Party of China bears striking resemblance to the overly confident Japanese leadership in the 1990s (it does) that likewise seemed infallible just before the bottom fell out, that the United States would be screwed if the Chinese stopped buying U.S. treasury bonds to maintain an artificially low currency (it would), and that a lot of wealth in China is on paper (it is, albeit stuffed in the leaky bathrooms of certain corrupt officials).

That being said, I am somewhat biased, having staked my career in part on China's rise. And I do have some nice wine in the closet.

To quote Dan Harris, "what do you think?"