Burj Khalifa is the world’s tallest building. At 2,722 feet, it’s over half a mile tall.
But there’s something very few know about it.
While the Burj Khalifa still holds the record for the world’s tallest building since it opened in 2010, many forget the fact the world economy was still on life support… thanks to the fallout of the Global Financial Crisis.
What if I told you that this building is not only the tallest ever but could have told you precisely when the very worst of the 2008 to 2012 recession would happen?
All in advance!
But it’s true, and it’s all thanks to an Irish banker…
Read on now as I explain what is more commonly called the “Cantillon Effect.”
The “Cantillon Effect” and the “Skyscraper Index”
First things first, what is the Cantillon Effect?
This phenomenon is named after Richard Cantillon, an Irish banker who lived from 1680-1734.
He is generally credited today as the first economist to suggest that a change in the supply of money and credit will affect the economy by changing prices.
Cantillon recognized that an increase in the availability of credit would result in economic expansion but that, ultimately, this would be overdone as prices rose and imports increased.
As it happens, the world’s tallest buildings have had a distinct and consistent habit of being completed right at the end of the real estate cycle… producing an extremely reliable indicator.
Nowadays, we label the tallest buildings in the world as skyscrapers.
This has led to a newer way to describe the Cantillon effect – the Skyscraper Index.
Few know about it… but most skyscrapers are speculative projects built mostly by developers with other people’s money.
Such buildings are built when credit conditions are easing or at their easiest, the time when developers are most flush with funds: hence the link with credit and Richard Cantillon.
This is why they tend to be finished at the top of the cycle… they are vanity projects done by corporations and governments when money is abundant… which happens exactly at the market top.
Now all we need is the timing to put this picture together. And what provides us with that timing is the 18.6-year real estate cycle.
In the next article in this series, I’ll explain how the Cantillon Effect works with the 18.6-year real estate cycle and what the flurry of recent “tallest,” “highest,” “largest,” and other “-est” projects tells me about what to do with my investment capital.
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson
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