Posted on 09/20/2021 8:59:22 AM PDT by blam
"Something historic will happen this week" was how we started to explain the process by which the collapse of Evergrande could spread contagiously across the world this week.
One glance at global markets this morning suggests, at a minimum, that risk is being de-grossed across everything from European utilities to cryptos to US materials stocks.
However, the biggest – and ultimate-est – contagion is that of China's sovereign risk itself… and that is starting to blow out…
This sudden surge in default risk on China's sovereign debt is very significant in the context of China's constant reassurance to the rest of the world that it is solid-as-a-rock (just as Larry fink, but don't ask George Soros). However, we do note that China CDS spiked to around 90bps in March 2020 (as the COVID crisis hit) and around 150bps in early 2016 (accelerating after China devalued the yuan in late 2015).
The question is, of course, where will this stop this time? How much 'risk' is China willing to take with its sovereign risk?
"Evergrande operates and develops 1,300 real estate projects across China and employs 200,000 people. The company financed its breakneck expansion with credit and bond issues. But the pandemic has paralyzed its operations. Its debt equates to two percent of Chinese Gross Domestic Product."
No doubt Joe will help them out, because they’re “too big to fail”.
The Chinese economy is the industrial powerhouse of the world.
It will come through the current decade as surely as the USA did in the 1930’s.
However, the Chinese government response will be costly. But bear in mind that the US national debt has soared in the past two years.
Don’t expect the Chinese government to squander $3.5 trillion though.
A friend of mine at Franklin Templeton says the Chicom real estate market lost over $1 trillion in value in the past business day. It would be even worse but their government stopped trading.
Meanwhile our own markets are starting to get squirrely.
Bubbles everywhere, Worldwide. Will this be the big trigger for popping the bubbles??
It's been over a century since China paid American holders of Chinese treasuries for the "railroad" debt of the Qing dynasty. The unpaid debt with interest is over $1 trillion. Obviously the original owners have passed away, but China still owes their heirs. Those unpaid notes are so worthless they've been selling on ebay as historic mementos.
I believe China has 3X the government debt to GDP ratio that we have. They also have a massive real estate bubble. Xi’s crack down on billionaires almost certainly will stifle capital expansion. This could be the perfect storm for China.
There are massive financial problems on both sides of the Pacific involving unimaginable amounts of money. Isn’t the usual course of action in these cases a nice attention-diverting war?
Gold, silver, brass, lead.
Screw the rest.
So the Wall Street geniuses almost destroyed the world in 2008 with their Credit Default Swaps, and now they are still playing the same game.
Unfortunately you are absolutely correct.
Problems at home? Divert the foolish masses attention. Create a national threat and have a nice war.
Them nasty Americans have caused ALL our domestic problems, let’s invade Taiwan. Dementia Joe won’t make a move.
China is red
Soylent is green
They want us all dead
So COVID-19
China called the Whitehouse and left a message:
They want their 10% back...
Note to Deep State: Put Trump back.
NOW.
WWII production and the rest of the world being devastated by the war.
China sees this as a clear path to being the world's only surviving superpower...
That is excellent Null.
Most don’t know these but the CHICOMS printed money at a much, much higer rate than the FED in 2008 to 2010.
Amazing how fast we went from “China is going to own the USA and everything in it” to “China is in collapse”.
“Will this be the big trigger for popping the bubbles??”
No, the ultimate wet dream of all non-investors will not come true.
Maybe the Central Committee of the CCP will decide Xi needs to go stand beside a ditch. Or at least get the Kruschev treatment and be “retired” under house arrest.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.