From Birch Gold Group
“Evergrande, a real-estate colossus in China, is collapsing. Don’t expect the collapse to be contained to China. The global macro implications are huge.” – Mike Shedlock
The U.S. economy is staring down the barrel of a financial shotgun thanks to the Chinese real estate bubble that just popped.
The trouble started at a developer called Evergrande, which is suffering a major crisis. One Wall Street Journal article sharply summarized the company’s problems:
The party has ended. Years of aggressive borrowing have collided with Beijing’s crackdown on debt, leaving the giant developer on the brink of collapse. Construction of Evergrande’s projects in many cities has stopped.
The Guardian referred to it as “China’s Lehman Brothers moment.” Of course, Lehman Brothers collapsed during the U.S.’s own 2008 financial crisis.
“The mess in China does not stop with Evergrande,” according to Mike Shedlock.
How huge? Well, we’ve seen this before in the U.S. (the Great Recession) and in Japan, where the real estate bubble of the late 1980s led to a “lost decade.” These economic events don’t respect national borders. They go global.
With that in mind, here’s how bad it might get…
China officials asked to get “ready for the possible storm”
Get ready for the possible storm ahead…
That’s exactly what the Chinese leadership warned local authorities after the Evergrande collapse became apparent. According to a Kitco report:
[Chinese] officials noted they are being asked to get “ready for the possible storm,” including all the potential economic and social consequences that could come along if Evergrande fails to meet its financial obligations.
And fail the company did, as reported by Market Rebellion in a tweet on September 23: “Evergrande reportedly missed its $83.53 million March 2022 bond payment that was due today.”
Here’s why this isn’t a “run of the mill” economic crisis for China:
Chinese banks make up four out of the five largest banks globally, with the “big four” having around $14T in total assets. Evergrande’s shock is significant, but it pales in comparison to the total amount of potential debt implosion we may soon see across China’s highly intertwined real estate and banking industry.
The same article highlighted the risk factors for the U.S. economy if a financial “contagion” were to develop and spread to the U.S.:
Near-record equity valuations, minimal remaining individual investor “sidelined cash,” goods and labor shortages, immense recent corporate debt growth, record (yet slipping) investor margin debt, and falling expected economic growth. All that’s missing is a catalyst that will bring these issues to light. In my view, the problems facing China’s property sector are large enough to do so, as implied by the widespread declines on Monday.
Fed Chairman Powell tried to downplay this massive development and its potential as a catalyst for a U.S. economic crisis:
The Evergrande situation seems very particular to China, which has very high debt for an emerging economy. Corporate defaults in the U.S. are very low right now … You would worry that it would affect global financial conditions through confidence channels.
Which might strike you as unexpected. (Wouldn’t you think Powell would be happy for any economic news that isn’t talking about our 30-year-high inflation?)
Well, no. Powell knows his market history. And he knows the “everything bubble” in the U.S. is an already-precarious house of cards, and the last thing he wants is tremors from a collapse on the other side of the world destabilizing his carefully-engineered illusion of prosperity.
Powell is whistling past the graveyard.
Jim Rickards sees things quite differently, writing the following on Twitter:
Evergrande is going down. Expect financial contagion. Don’t believe the happy talk. Interesting contrast in how U.S. and China deal with crises. China will ‘set up law-enforcement teams to monitor public anger, a euphemism for protests.’ No bailout for you.
Could the “financial contagion” that Rickards and others expect trigger the “big one” in the U.S.? Unfortunately, we won’t know for sure until it’s too late.
But market uncertainty alone can become a catalyst for panic that triggers a market meltdown. There’s plenty of uncertainty already, and another dose of reality just isn’t what today’s faith-and-hope-based stock bulls need.
Are you ready for the possible storm?
At some point in the near future, constant interventions by the Federal Reserve and Treasury won’t be able to stave off a major crisis. Stimulus must eventually dry up, and the Fed can only “print money” for so long before the dollar becomes worthless. If they decide to taper, the relentless flood of easy money, markets could panic. And as we can see from even a cursory glance at the Evergrande situation, the fragile state of the U.S. economy just can’t withstand any shocks.
Now is a great time to consider your exposure to financial risk. If you haven’t taken back control of your own retirement savings, now is the time to think about diversifying into assets that can withstand the storm we can clearly see is coming.
Physical precious metals are one of those asset types. Gold and silver have both specifically provided a hedge during past market uncertainty, and could help you add the blessing of stability to your portfolio if things go sideways in the near future.
With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.
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I did not read past the lead. I will now arrogantly give my analysis, and it’s not bragging if I’m correct.
Just as the Japanese were molded and propped up into a Western economy after WWII, the Chinese have been cajoled and molded and propped up into a Western economy after the death of Mao (1893-1976). I smell Gheouuzzzaaahhh.
I also smell the funk of three fully lost Japanese decades and still counting. The Chinese are an artificial construct. Dangerous and not necessarily going to self-implode, but I’d say it’s very likely. If they want to take Taiwan, the window is closing as far as I can tell. Taiwan can also be had if the Communist system falls first. They will reunify like Germany one way or another barring inexorable outside interference.
I don’t know when mainland China goes into the funk, but I expect they will. Probably only a grassroots revolution could end that funk too. The Chinese invented the wheelbarrow, paper, inflation, and gunpowder. The British invented gunboat diplomacy. The Jews invented generational inside-out warfare. Praise Jesus, you have a better understanding of China than what you’d get from Paul Krugman and Jim Kunstler, both New York Jews, which is merely an interesting trivium.
“The Shah of Iran speaks bluntly about the Jewish Lobby – 33 yrs ago.mp4”
“The Growing Israel-China Economic Partnership”
“China-Israel Relations: Chinese Universities Teaching Israel Studies”
https://www.youtube.com/watch?v=XKGtD9fa-Uk
“Taliban takeover: Afghan women face uncertain future | DW News”
As a commenter here said, “We get the Jews we deserve.”
If you think this comment is insightful and the OP (original post/article) is not, vote up.
If you think I should have read the OP to be better informed, vote down.
Now that I have amused myself and secondarily attempted to edify the lost who can be found (who can unplug themselves with some solid insight), I will go do something today. What the hell.
>the Japanese were molded and propped up into a Western economy after WWII [by (((them))), I presume]
>the Chinese have been cajoled and molded and propped up into a Western economy after the death of Mao [ditto]
but you fail to mention
-the UK was not propped up and molded into a psychopathic regime since at least the start of the British Empire?
-the US hasn’t had the same happen to it, at least since 1914 and probably much earlier??
(And the US hasn’t experienced two lost decades, so far, because… our stock market says differently???)
Oh, and the enlightenment -i.e. putting rationality over morality (which sounds nice until you realize that requires everyone to become a superman, or in religious terms ‘to become God’)- was not such a construct, so that’s completely out of the question and one is not allowed to even think about such a possibility!!
>if the Communist system falls first
You don’t explicitly state who you mean by “communist system”, but I have to assume you mean China.
If you’d really understood what communism actually means, you’d wanted to sink into the ground and disappear from shame, as the US and the whole West are more communist than China or Russia, these days.
Finally I said it here before: China doesn’t need to do anything except wait, and Taiwan will fall into their lap like an overripe fruit. Without threats or violence involved.
Evergrande isn’t the same as Lehman Brothers. The Chinese markets don’t work the same way as the rest of the world. Evergrande never owned any of the land they developed on because you can’t buy land in China. All developers can only lease the land for rough 70 years from the government. While the Evergrande will collapse the Chinese real estate market it’s not going to have the same domino effect on the rest of the world as Lehman Brothers. China’s financial system is cut off from the rest of the world.
You may be right but Americans “eat” from the hands of the Chinese.
We’ll probably experience cause and effect from Evergrande’s default but it’s not going to follow the same pattern as Lehman Brothers.
Steph – you underestimate the issue. That conglomerate buys, on credit, enormous amounts of resources from around the world. It could crater the resources sector world-wide, will affect shipping, transport, govt revenues, etc. It is not a local issue at all.
“Never let a good crisis go to waste,” says Every Oligarch Ever.
So America can flush trillions of dollars and nothing happens but $300 billion with a Chinese company will destroy the world’s economy?
I don’t understand why people insist on assigning usurious values to collectivist China. They don’t even call themselves communists.
The international banking cartel, and that includes China’s central bank, will continue to create monetary units in order to collapse the system they created so that they can “save” us with new CBDCs.
The CBDC will come with UBI.
The stupids, the ignorant, and those who have chosen to wander in the darkness, will fall for it.
Those of us who resist are to be starved / slaughtered.
The humans who control the central banking systems throughout the world are pure evil, and their minions are legion.
We must fight them daily.
JB, I expect most here don’t figure the UBI can be forced upon us after an economic collapse, deconstruction, transfer, however it may be best styled. It’s to the point that a major hackzeen depopulation is the only way to stop their evil plans, unless they have it all figured out. I know the prolific dumbasses will give their full support one way or another. Did you catch the latest sportsball? Man, what a reality narrative for muh team!
They won’t be “forcing” the UBI on people like us. They will be giving it to the soulless zombies, so to speak, who are being, and have been, programmed to kill people who resist evil.
Some of them will be waving American flags and chanting USA!!! USA!!! USA!!! while they slaughter their fellow man.
Everyone outside of Europe is either riding the European banking tiger or exploiting it. China does the latter. They are not of it, they just play dirty against a dirty system. Real assets with fake currency.
The only thing that collapsing now is sanity.