Politicians Are Encouraged To Be Idiots By The Public17 October, 2011, 2:38. Posted by Zarathustra
Tags: Hong Kong, Housing, Politics
Politicians, I believe, are invariably behind the curve not only because they are mostly idiots, but also because politicians are incentivised to be behind the curve.
Politicians are not incentivised to foresee problems and prevent unfavourable consequences, because had they acted early to prevent problems that only they could foresee, the public might very well think that their politicians were doing something really silly to prevent something which the public could not foresee. Rather, politicians are incentivised to fix the problems nicely after unfavourable consequences arise, and to spin furiously to fool the press and the public, so that they would not appear to have actually missed the problem 5 years ago, for example. And when they failed that bit, they would look like idiots. But that’s alright: by the time they look really like an idiot, their terms are finished.
As a result, Donald Tsang, the Chief Executive of Hong Kong, is once again behind the curve in tackling the housing bubble in Hong Kong, and he has probably picked the worse possible timing to act. Economic trends are slow to develop, so most people did not realise that the property market has been on a major correction for half a year or so. Many were committed to buy expensive apartments in the primary market with extended transaction periods, only to find that they could not get a mortgage as credits have been tightened considerably over the past 7 or 8 months, and are currently finding themselves trapped in a precarious situation.
What Donald Tsang & Co. are going to do does not really matter, but they are doing something to appear to be tackling the problem. Soon, he would be able to claim some success to cooling the property market. But then, disgruntled property owners who did not realise that the property market has been teetering on the brink of bear market would blame the government.
Just imagine what would happen if the government decided to do something like resuming HOS plan a year earlier. As I repeatedly said and firmly believed, most of the time there is very little the government can really do in the short-run to stop the trend. It would not have worked, just as many of other dramatic measures have failed. Had the government announced to resume HOS a year ago, it would not really stop the up-trend. Property owners would have cheerfully claimed, as they have in the past 2 years, that government measures would not work. They have been cheering on that last year when even the dramatic measure of 15% stamp duty failed to stop the uptrend. Now, the same group of people who have been claiming that no government measures can work are now furiously protesting that the government is so involved in the market such that it is embracing socialism, while they are probably more worried about the values of their homes.
If the property market does correct more significantly over the coming months and quarters as I expected, I am sure that the Donald Tsang’s “well-timed” decision to resume HOS will be blamed by the previously overly bullish property owners. But the cause-and-effect relationship between HOS and the future correction of property market is a mere coincidence, as money and credit data have long suggested that bulls were wrong. Just as the fund manager who blamed the
Royal Air Force short-seller for screwing up her portfolio, property bulls will blame the government for screwing them up, not their own poor judgment.