Only if the BOC reacts by making the same reification error as the Fed did and adds bazillions of reserve balances “to lend out!”….
China’s Lehman moment is today with Evergrande down 90%.
— Endless Capital w/ no pullbacks (@endless_frank) August 28, 2023
If that follows the 2008 contagion path, markets collapse within 3-4 weeks.
15 comments:
China’s Lehman moment was in late 2021.
The people of China love to gamble, but over the years they suffered through so many scams and crashes that after 2010 they fell into the habit of gambling in housing, thinking it would be safer and less volatile. However the housing bubble became insane. Chinese people took out massive loans to buy shares in commercial and residential properties that remained empty or partially built.
As the bubble continued to inflate, people sold those empty or partially built properties to buy new empty or partially built properties. It was a housing market gold rush, because hundreds of millions of Chinese didn’t want to “miss out.”
By late 2021 China Evergrande Group, one of the country's biggest property developers, was so over-leveraged that it defaulted on $340 billion in debt and declared bankruptcy. Among other things, this wiped out $81 billion in shareholder money. At that time Evergrande had more than 1,300 real estate projects going in more than 280 cities.
The disaster continued to hemorrhage for many months, dwarfing the 1987 crash in the West, and sending the Chinese economy into total shock.
I have no proof of this, but I suspect that China’s “zero Covid” policy was a government attempt to control the financial panic caused by the mammoth housing crash. Everyone was locked down. No one could leave his house, let alone protest in front of banks and financial institutions. This continued until early Jan 2023.
Today the Chinese are still in shock, which is one reason (among many) why the Chinese economy has not rebounded after “zero Covid.”
“ Among other things, this wiped out $81 billion in shareholder money. ”
That’s not relatively much…
Because of the Evergrande crash, the Chinese government suspended Evergrande trading for 17 months, and finally allowed it to resume today, whereon everyone dumped his Evergrande stock, causing a 70% plunge in share price.
Evergrande is still $328 billion in debt. Total assets are about $253 billion.
The Evergrande fiasco was so severe that the Chinese real estate sector remains at a standstill, which is one of several drags on the Chinese economy. The government and the Bank of China are trying to get the real estate sector going by changing the laws and regulations in ways that will boost home buying.
Meanwhile in America the Fed doesn’t care about the real estate sector, and is not accountable to the government or the people. The Fed is threatening to raise these insane interest rates even higher.
Local lenders are trying all kinds of financing gimmicks to get the real estate sector moving, but these tricks are incredibly risky for borrowers. They are borderline scams predicated on the illusion of “Don’t worry, you can refinance later.” Except with these gimmicks you will have no equity in the house, and with this economy you will have no money to pay the refinancing fee.
Thus. a lot more of us will be renting for life, or living in tents, or in campers. But at least we will be defending “democracy” in Ukraine. :-)
“ Fed doesn’t care about the real estate sector, and is not accountable to the government”
lol they are trying to help the Biden people with their “inflation” problem…
If Trump gets back in he will direct his Fed to cut the rate to 3% immediately…
“ Evergrande is still $328 billion in debt. Total assets are about $253 billion.”
So lenders take ownership of the real estate at their basis… no biggie,,,
https://www.reuters.com/world/us/economic-worries-could-cost-biden-some-his-2020-supporters-reutersipsos-2023-08-04/
“ Among those who don't approve of his performance, respondents were roughly twice as likely to say inflation was America's biggest problem, compared with the 2020 Biden voters who said the president is doing a good job. Those who approve of Biden put relatively more emphasis on the dangers of political extremism.
"The difference is the focus on inflation and the cost of living," said Chris Jackson, a public opinion researcher at polling firm Ipsos, which conducts polls for Reuters and other media organizations. He added there was still time for Biden to court his wayward supporters.
"They are not off the board. They materially need to be feeling better and they have to think Biden is doing something," Jackson said.
Biden Fed is simply supporting the Pedocrats political agenda…
Pedocrats. I like it. That's why I refer to the woke crowd as LGBTQ(P).
And yes, Fed policies are 100% political.
You’d think that today’s inflation, housing costs, runaway credit card debt, and other financial problems would sour Americans on the pedocrats. But evidently it makes woke liberals focus more than ever on blaming all their problems on straight white males. And Russia.
Meanwhile conservatives are programmed to blame all their problems on China. Some conservatives withdraw into UFO mania as a form of escapism.
Well they think the Fed can do something about it they are all pedo-Monetarists…
And even if Fed can’t do anything at least it looks like they are trying..
Trump has been critical of the Biden people’s Fed policy…
I think at some point Trump will add specific rate cut policy to his campaign platform…
“I think at some point Trump will add specific rate cut policy to his campaign platform…”
If Trump does that, then liberals will scream that he is a buffoon who knows nothing about money, and he should leave Fed policy to “experts” (i.e. to liberals).
On 9 May 2016 when Trump was first running for US president, Trump correctly told Chris Cuomo of CNN that the U.S. government’s “national debt” is not a problem.
“First of all, you never have to default because you print the money, I hate to tell you, OK?”
Trump was correct, but because he exposed one of America’s lies, he was flamed for weeks afterward.
What? The US government’s debt is not a crisis? BLASPHEMY!
Private debt is a crisis. We deny this reality by screaming about the “national debt,” which is not a crisis.
No executions for running a real-estate Ponzi scheme in China, so the fix is in?
Which means ordinary mortgage holders are out.
“ If Trump does that, then liberals will scream that he is a buffoon who knows nothing about money”
Well yeah they will but here’s the thing: MMT PEOPLE will agree with them!
Lock it.
MMT people are academics. Therefore if you ask them if Trump is correct about the "national debt," they will say that Trump is evil. Therefore Trump is "wrong."
Q. Really? Trump is wrong about the national debt?
A. The matter does not merit dicussion.
Q. But I thought that MMT --
A. Trump is evil.
Q. But --
A. Period.
Exactly
https://twitter.com/crossbordercap/status/1696470439730573668
Looks like they are doing more injections.
Does the fact they are repos negate their affect on commercial bank balance sheets since it will be reversed shortly?
They will probably roll Over the repos…
That’s a good chart shows you the problem they are causing…
Still not a “Lehman moment “ but could get there I suppose if they accelerate…..
All western liberal Art educated USD zombies running it too over there..
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