THE WOLF STREET REPORT: China’s Crackdown on Debt, Tech & Evergrande Sends Frazzled Wall Street Titans to China

The property sector and its debts are possibly the biggest financial mess in China’s history. (You can also download the WOLF STREET REPORT wherever you get your podcasts).

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  237 comments for “THE WOLF STREET REPORT: China’s Crackdown on Debt, Tech & Evergrande Sends Frazzled Wall Street Titans to China

  1. Dan says:

    Seem like China is more capitalistic than our governments in the West. Over here, billionaires are our gods, over there, they clip their wings before they become too big to fail.

    I support China’s move; there is no hope that US government will stop con artists and scammers such as as crypto creeps or Cathie Weed; at least over there, they stop them.

    • Mike says:

      Over hear we bail them out and the facade goes on. Over there they bail them out until they speak out of turn and then CCP arrest them or start to break their monopolies.

      If the west was smart, we’d blacklist all the CCP elites and kick them / their family members out of our countries and freeze their assets.

      At the end of the day the communists are our enemies and there is no long term benifits to western countries to let them live and have their money here while controlling China and oppressing the plebs at the same time.

      • Dan says:

        That’s because you love cronnie capitalism rather than real capitalism. You are benefiting from cronnie capitalism and want this to go on despite the fact that real economy and the poor and the middle class are suffering and are getting poorer and poorer. I’m hoping China’s move would cause so much mayhem that all gamblers get wiped out. For 11 years, the FED has constantly rewarded stupid gamblers with the FED put.

        And note the Chinese people are amongst the worse gamblers; they’ll get wiped out just like you will get wiped out for gambling.

        • Dan says:

          worst

        • Dan says:

          I shouldn’t have said Chinese people, but the rich Chinese.

        • The Real Tony says:

          I’ve noticed over all the decades the Chinese are very poor at handicapping a horse race.

        • Thomas Roberts says:

          Dan,

          In China, all medium and large “businesses” are CCP owned and controlled.

          The way the CCP works is that the top members typically try to keep any one member from getting too big, for fear of they themselves becoming powerless. Also, there are rival factions, Evergrande (and many of the tech companies) belongs to the Jiang faction. That is the main reason, it likely won’t be bailed out. The individual CCP members, will tear China apart for their own self interest. What benefits did destroying the international status of Hong Kong, bring to China?

          They messed up with Xi, who is struggling to try to become an absolute ruler.

          There is nothing capitalist about China, and implying that it’s somehow handling things better than America is laughable. America has serious problems and serious strengths, China is in a far worse situation.

        • RH says:

          Thomas Roberts is right. Inter-CCP-gang warfare means Evergrande will NOT get a rapid enough bailout. This is like the collapse of the tutoring industry whose owners also opposed Xi reportedly.

        • shandy says:

          You be looking for the wrong enemy son.
          So never mind.

      • Mark says:

        FIFY

        “If the west was smart, we’d blacklist all the CCP elites and kick them / their family members out of our countries and freeze their assets.”

        “If the west was smart, we’d blacklist all the USA elites and kick them / their family members out of our countries and freeze their assets.”

        • Wisdom Seeker says:

          FIFY

          “If the World was smart, they’d blacklist all the global cronyist rentier elites, redistribute their assets to charity, and put them all on …”

          You can’t “kick them out” because they’ve globalized; no country is safe. But maybe we could find a remote island whose limited resources they could learn to share with each other?

        • General Strike says:

          Boycott, divest from and sanction the United corporations of AmeriKKKa.

        • Lynn says:

          I’d imagine that’s not an either or proposition..

        • Lynn says:

          Actually, having even a limited extradition agreement with China would solve some of that.

      • Darius says:

        Nonsense. The U.S. is communistic (not entirely, but getting close), while China is a capitalist society with responsible treatment of billionaires. Things have changed and you snoozed for about 20 years or so.

        If communists are our enemies as you say (and I agree), then we should focus on the home-grown ones, and not the ones half-way across the planet.

        The difference in free speech boils down to whether you lose your job and your shirt if you speak out of turn in the U.S. or you lose your job and your shirt if you speak out of turn in China. Get it? The only real difference is that here, big corporations will do all that. In China, the government will do that.

        I’ve immigrated from a communist country in the early ’90s. For 30 years I’ve watched America slide into communism.

        Sick and tired of people chest thumping and flag-waving about how grand capitalism and freedom is in the U.S. It used to be. But get used to the fact that it used to be. If I were younger, I’d emigrate out of the U.S.

        Well, covid19 finally broke everything. The U.S. nullified property rights by the eviction moratorium. The billionaires amassed another 350 billion. Crony and corrupt U.S government, on all levels, has shown to be nothing but a bunch of communist buffoons.

        China is far from perfect, but we make China look good.

        • Masked Ghost says:

          George Carlin really nailed it. “When you are born you get a free ticket to the freak show, in America you get a front row seat”

        • Trailer Trash says:

          “For 30 years I’ve watched America slide into communism”

          There’s another label that better describes today’s Uncle Sam Land: fascism or friendly fascism. (see: “Friendly Fascism” by Bertram Gross, 1980, South End Press)

          Benito Mussolini, an acknowledged expert on these matters, stated that “Fascism should more properly be called “corporatism” because it is the merger of state and corporate power.”

          “China is far from perfect, but we make China look good.”

          I agree with this 100%.

        • Wisdom Seeker says:

          Darius, I hear you. I grew up in the USA and what we have today is far different from what I grew up with.

          But, when corporations have all the power and control the state, that isn’t communism, it’s fascism (in the classic definition of the term).

          But whatever you call it, it’s still bad.

          Freedom and prosperity require strictly limiting the power of both the corporations AND the government. (Limiting, not eliminating.)

          If enough of us act locally to reduce the power others have over us, things will get better.

    • JGarbo says:

      The Chinese govt is doing “old style capitalism”, ie “you take the risk, you take the fall.” The Titanic effect, the captain goes home a hero, or down with his ship (the British captain did). Play along with socialism, toe the line and you’re safe, well-fed and happy.
      Chinese govt sees the insane US corporate socialism as a terminal disease, stops it dead. That’s why they’ll win.

      • Old School says:

        Don’t think so. China centralized planning allowed too much bricks and mortar debt funded investment and trying to stop excesses now. It’s a little late. Was just reading they had over built EV production by a factor of 4. Instead of market pulling product they seem to let regional governments over build capacity with debt. Running economy top down causes huge misallocation.

    • Frederick says:

      Crypto trolls have totally infested every YouTube channel I frequent Trying to get unsuspecting fools to contact them on WhatsApp for great deals on Bitcoin, etc It’s so obviously a fraud But I’m sure like they say, there’s a sucker born every day The whole Crypto mania gives me the creeps

      • Harrold says:

        The Wall Street sell off is effecting the cryptos today.

        Bitcoin is down 10% this morning.

        • Turtle says:

          What, stocks and crypto are connected now?

        • MonkeyBusiness says:

          They are all connected, and since this post’s topic is related to China, it’s time to review one of the lessons from the Battle of Red Cliff. In this real life historical battle, the attacking army had an overwhelming advantage in numbers but they weren’t very good at fighting on water/rivers. So what did the attacking forces do? They chained all their boats together thus allowing even their horses to walk around on boats with no problem.

          Then one day, the defending forces set the boats on the periphery on fire. And the rest is history as they say.

        • Depth Charge says:

          “What, stocks and crypto are connected now?”

          Of course. The Wall St. algos are running crypto now.

      • General Strike says:

        “ Crypto “ currency is the latest capitalist scam to separate fools from their money.

    • Turtle says:

      They stop a lot of things in China.

      Can’t even access your Gmail while there. That’s illegal. And using a VPN to get around it? That’s illegal too.

      Be careful about the things you hope for. Strings are attached.

      • roddy6667 says:

        China blocks all things Google. And Facebook. And somehow they live! How does this happen?
        /sarc

    • raxadian says:

      As they say, they get the guy who steals a cow, not the guy who steals a million cows.

    • Not a CCP troll says:

      roddy6667,

      In an post on another article you states that “you owned an apartment in China”.

      Therefore:

      1. This makes you a Chinese citizen or,
      2 A foreigner married to a Chinese citizen or
      3 A liar.

      Foreigners are not allowed to own real estate in China.

      And as far as your posts are concerned regarding China are concerned I look at them as nothing more than as you being a a tool of the CCP

      The average life of a common person under the communists has no doubt improved, but at a terrible cost. How much has it improved in the countryside compared to 50 years ago? Was it worth the loss of life, art, and freedom?

      Mao is history’s worst mass murderer and destroyer of national history and treasure.

      In terms of simple economics when you get rid of 60 to 90 million people and thus reduce the supply of labor and increase the amount of foodstuffs for the remaining people, of course life will improve….for those that are still alive.

      • Turtle says:

        Thank you, sir. I’m half-surprised and half-amused by some of the praise for CCP-controlled China that shows up in these comments. I can’t tell if it’s just ignorance or if I’m actually witnessing government-directed propaganda. It looks so similar.

        It’s not hard to find Chinese people in America who will tell you what the deal is. Or just go and taste some “Evian” at PEK for yourself. ;)

  2. Lynn says:

    Wow, nice article Wolf. Lots of info.

    I’m stuck at home till my car is fixed and have been looking at raw footage and reports from China. Of course all needs a grain of salt, but what I am seeing is a good amount of discontent from workers. There have already been protests (!) in the streets and slow downs. Workers are not being paid, especially in the construction industry and coal mining. People are hurting from inflation and housing costs and are resenting the rich in a society that is ideologically Communist. One person actually said out loud “I thought our country was for the workers, but I have eventually come to the conclusion it isn’t so” (translated). That’s a big statement in China.. Footage of a migrant worker carting away his sole possessions on the street after a recent demolishment of his migrant worker neighborhood in Beijing went viral and created an outrage on social media. The residents who rented there were given very short notice to leave. Those residents worked in car repair, maid services etc. The neighborhood was demolished to make room for luxury condos. Yes, all is a good predictor for civil unrest.

    Wealth redistribution, or at least a partial redistribution, may happen in order for the CCP to save face. Otherwise, what is a communist ideology?

    Let’s hope the West follows China IF China *actually* follows through. It has already followed the Chinese upper class in creating ghost housing and ultra ruthless financing. China copied US, who then copied China’s extreme version of US..

    • Peter says:

      Wow Lynn thanks for the great insight.

    • Paulo says:

      Great comment. I have also read that the C Govt lives in real fear of flash protests at the drop of a hat, that will eventually lead to real action. We have seen this in mob trucker strikes/protests when costs increase or fuel supplies are restricted.

      The total surveillance state exists for a reason.

      Maybe Roddy 6667 can comment

      • MCH says:

        Paulo,

        The surveillance state exist for the reason of identifying potential ring leaders and agitators. The biggest worry is a Mao equivalent stirring up malcontents, of that happens, things will be very difficult to control.

        The old cadre who remember those times are mostly dead, but the institutional memory hasn’t faded entirely just yet.

        So any potential agitators are identified swiftly and dealt with, while the masses are given some retribution, I would not be surprised to see a few show trials coming out of this with a 9 mm solution. The real worry is that there is a real agitator out there who will evade the surveillance and stir things up… especially in the country side, that’s why the pervasive dissemination of technology today. A better way to enslave people with smartphones than to do it with guns.

    • Rcohn says:

      The Gini coefficient ( a measure of wealth inequality ) was recently the highest or close to the highest in US history and among the highest of all countries .The FED is going to be forced to tighten or else this wealth inequality will worsen and riots will become omnipresent

      • Old School says:

        Profit margins had been the highest in history as well. More laborers than business owners and managers and they are going to vote themselves some goodies.

    • Roger Pedactor says:

      The CCP is just as much a concentration of wealth and largesse as the Politburo was when the Kremlin fell. I have no idea how ANYBODY could buy the exact same hypocritical rhetoric that we get pumped into our heads here by their propaganda machine.

      Strategically, letting Evergrande collapse is a shallow gesture that the CCP cares domestically, while simultaneously being yet more evidence that the CCP does not care at all about participating in the global economy.

      And they have a point, why bother when you literally make everything?

      They have the entire western world by the balls. They don’t care about anything but the welfare of their own power brokers. Except it’s even worse when the government can literally do whatever it wants with no recourse.

      • Wisdom Seeker says:

        The western societies are vulnerable to the CCP propaganda because their elites have looted their own middle and lower classes to the point where, to those on the wrong side of the wealth inequality, almost anything looks better than the status quo.

      • Nick Kelly says:

        ‘as much a concentration of wealth and largesse as the Politburo was when the Kremlin fell.’

        The concentration of Russian wealth then was nothing compared to now. The large industrial complexes, mostly then as now, resource extraction or related: oil, aluminum, nickel etc. or the ports to ship them, were state owned. After the rise of Putin these were initially shaken down by former KGB cronies, then taken over.

        You can date the exponential rise in Russian PERSONAL wealth of a very few individuals very closely by plotting it against the rise in Russian purchases of trophy London property. These were non-existent pre-Putin.

  3. Lynn says:

    Also have to laugh at wall st going to China to negotiate. I hope they left thoroughly downhearted. Serves them right. Maybe they’ll be more inclined to invest in the US, even if just a little bit.

    • Frederick says:

      Doubt that He banksters have very little if any patriotic thoughts

    • Petunia says:

      Lynn,

      You are underestimating the risk western investors have taken to get their foot in the door in China. Most think C will just screw the west but they can’t afford to do that and remain a credible global market participant. The western investors will take assets in return for debt, and that was always in the cards.

      • Sams says:

        I doubt vestern investors would be able to take assets in China on favourable terms. The largest obstacle is the Chinese restrictions on capital outflow. The creditors may take some assets, but the assets and incoe stay in China.

        • Petunia says:

          It’s not about the assets, it’s about getting a significant foothold cheap.

        • Turtle says:

          It’s not about any of that. It’s about getting an Evian water at the Beijing airport that doesn’t taste like toilet water. Why are people so comfortable with China these days? They have a “president for life” and everything is fake. Good luck.

        • Thomas Roberts says:

          There was good reasons for western companies to enter China; cheap land and labor, a favorable government for business, and by producing there, you would have access to their market. By placing your factories in China, as opposed to a smaller country, you got the additional benefit of getting access to the market of the world’s largest population (at that time) and could possibly build up brand recognition for the future.

          None of these things are true anymore. Land is expensive, you have to bribe CCP officials countless times, they might abduct your employees at any time, the general cost of doing business there for western companies has grown immensely and keeps growing, the CCP can take over your business or the land it sits on at any time, and the CCP can force the Chinese population to boycott you or to buy Chinese brands, instead of you at any time.

          They have even started dictating how your products are made (for products meant for sale outside China). In one of the more famous examples, many globes and maps made in China, started to have the “nine dash line” which exerts the CCP’s claim to the south china sea, printed on them. This was a surprise to many western companies, who weren’t told this would happen. Suddenly your shipments have arrived and they have an altered map, that is better suited to the interests of the CCP printed on it. Many textbooks containing historical maps, can no longer be made in China either. There are more and more rules, most arbitrary, that can damage you at any time.

          Many “eastern” companies have been pulling out of china, especially Japanese and South Korean ones, the fact that the CCP forced the Chinese population to hate on them, was counterproductive. Samsung seems to be pulling out completely in particular, Samsung is far more massive than people think and makes everything from electronics to ships. The CCP basically banned it’s Citizens from buying Samsung phones, in favor of phones such as Huawei, this was one of the deciding factors for Samsung to pull out.

        • Thomas Roberts says:

          Many “western” companies have given up on the Chinese market dream. Hollywood might be next, China only allows some obscure number (34?) of foreign films to enter China a year and more and more big Hollywood films haven’t made the cut. None have been approved in several months, which might be temporary, because of the CCP’s “anniversary”, but it could be a general trend, that less Hollywood films enter China. The main reason to stay in simply sunk costs, if you leave China, the CCP will just take your factories and possibly your equipment, but if you are a western company you will likely hesitate to invest in building new factories or substantially upgrading any already there.

          A major problem for manufacturing in China, is that a growing number of countries and companies are preventing many pieces of machinery and technology from going to China. Japan in particular, has been doing this, as a result of war threats by the CCP. If German countries join this movement, it would become incredibly difficult to build almost anything valuable in China. Many factories still there, will become less functional over time, as they are dependent on machinery, which can no longer be sent to China.

          China’s population isn’t even the biggest anymore. While, it’s not exactly a positive thing, India even surpassed china’s population. China’s real population is about 150 million less than claimed and is actually 1.26 Billion; Yi Fuxian of the University of Wisconsin-Madison, is one source for the 1.26 Billion number.

  4. Curious says:

    Can China’s economy be considered a bubble, with Evergrande the most visible? The message seems to be that it is, but you say the government will try to deflate it while keeping things under control. So it lets stock and bond holders become the first casualties.

    But is it unrealistic to think the government can control the potential implosion of such a large bubble, if that’s what it is? It seems that on the one hand it can let the bubble deflate, yet to keep things stable it will also need to inflate it even more, via having all the banks lend again. Wouldn’t that be a bit tricky?

    • Tom S. says:

      Replace China with USA and Evergrande with Tesla.

    • Rcohn says:

      China a bubble . Maybe in certain areas like property speculation, but just look at the cost of containers going to the US vs going to China.
      It is the US that has shipped a large % of its production overseas

  5. Fat Chewer says:

    Is it time to start ranting and raving about China now? Are at least four (there could have been more, but I gave up after that) extremely long and repetitive comments required now? Do I have to act like a headless chicken while not seeming to realise that all the current economic woes have a parallel in just about every Western nation? While not seeming to realise that we capitalists invented these horrible economic distortions? Rome had a slave economy, and it was difficult to get enough grain into Rome. Maybe it’s time to get really crazy and buy about 20 tons of various grains just in case. Now, where will I store them in my one bedroom flat? 🤫

    • Frederick says:

      Don’t worry The rats will eat most of it while your at work

    • Ralph Hiesey says:

      I hope all this China bashing is making everyone feel good.

      Seems like it’s a lot easier to criticize THEM than to try to fix our problems. Or maybe China bashing can help us forget that we have a few things that could use correcting in the good old USA?

      Does it feel good to say “It’s even worse over there?” Or is is because the US always seems to need a new enemy to chew on again?

      Sure–maybe China is a terrible place. Then be glad you’re not there.

      I suggest we let THE CHINESE figure out how they are going to fix their problems. I highly doubt they will take our advice, should we be silly enough to offer it.

      I humbly suggest we put your effort HERE in the USA to think about how to make things better, where it maybe has at least a chance to have some positive effect. There’s certainly plenty of opportunity for improvement.

  6. Nicko2 says:

    The problem with authoritarian regimes…..the scandals go on for longer, become larger, producing more victims.

  7. historicus says:

    If a butterfly flaps its wings…
    If a domino falls in the Chinese Forest and there is no one there to hear it….
    Rehypothication, cross collateralization, daisy chains of leverage…..
    coming undone…..geometrically dissolving

    • Michael Gorback says:

      For a second I thought Michael Engel was back until I saw who wrote it. :-)

    • Djreef says:

      Real estate Ponzi scheme in it’s entirety.

      • MCH says:

        All of this is just going to lead to a very unhappy place, and I don’t mean Lehman unhappy…. I am thinking this would make Lehman look like a picnic. Especially given the current unhealthy relationship between US and China.

    • Old School says:

      The trouble the money printers have made by rewarding leverage will come to roost when people panic. When things are based on today’s price action only, things have long way to fall when the bank run starts.

      • Frederick says:

        Does anyone still keep their money in a bank ? I withdrew everything two years ago when the system seemed to be getting alittle wobbly over here I figured I’d beat the crowds ( and lines)

      • Swamp Creature says:

        They will limit withdrawals to $300/week if there is a bank run. You will have to show “need” to take out more than that. ATM machines can easily be programmed to enforce this rule. They already do that now to some extent.

        Right now the opposite is happening. Noticed Wells Fargo now allows $1000 cash withdrawals from ATM machines. They took out the $500 button and replaced it with a $700 button. When will we see a $2000 button? Inflation anyone???

        • Not a CCP troll says:

          In Japan you could withdraw 1 million yen (about $10,000) from an ATM from about 30 years ago or so.

          You could also depsoit money to another person account at the ATM and it would show up right away.

          Can you do that in the USA?

        • Philip E Blythe says:

          I was a low level operational bank employee from ’74 to ’81. I’ve seen inflation.

  8. Yerfej says:

    Common people are dumb enough to believe the nonsense from their elite handlers. In the end the elites will hide their confiscation of the commoners wealth behind “social and financial engineering” that is sold as “benefiting” the downtrodden. Same con, over and over.

  9. historicus says:

    Central Bankers don’t seem to ever understand that when they subsidize something…like debt, by creating a false interest rate environment…the private sector will create more stock and debt than the central bankers could ever support.
    And here we are.

    • Young says:

      Central Bankers are not stupid as you seem to think.
      They are busy trading stocks and making money.
      Even the boss (JP) bailed out himself when he set the policy to bailout the bond market.

      Their main objective is to increase their own wealth. Whatever happens to the economy is not their concerns.

    • Nathan Dumbrowski says:

      Liquor store owner was telling me back in the early 2000’s credit was so flush that the distributors would wheel in inventory he never asked for. They would say no rush to pay off this merchandise your credit is good with us. His concern and issue was that he never ordered the inventory, didn’t want to increase his credit lines and finally had to stop them from delivering un-ordered stock.

      This seems to be the case again. Easy credit abound. Watch out below

  10. Keepcalmeverythingisfine says:

    The Evergrande story is a fantastic one. There is a great buying opportunity ahead, and as always I will tell you here what and when I am buying. As regular readers here know I leaned out of the S&P 500 and other stock indexes at the beginning of September. Multiple negative developments both in the US and globally combines with a historically weak seasonal period to give us a great opportunity. Patience, perspective and critical thought are very important right now.

    • historicus says:

      Keep…
      Youre right. The central bankers will, just like in any free market, come in and inject money into the flooded system to make sure stocks close on the highs of the year. /s
      So, how crowded is the group that relies on the Fed to save them? Very crowded I think.

    • Rcohn says:

      Another OCT 1987 coming this fall.
      Yes, there will be a great buying opportunity down 75%

      • Augustus Frost says:

        I agree but don’t think that’s what this poster had in mind. Going by the handle name, it’s more like everything is actually good or great and it’s another “buy the dip” opportunity.

        The reality? Global fundamentals are weak to awful. So are US conditions, even before COVID.

        Substantially or predominantly fake economy since at least 2008. The loosest and lowest aggregate credit and lending standards ever. The most overvalued asset markets in history.

        The only thing holding up this house of cards is the most extreme optimism ever, from financial market participants. A religious equivalent belief in central banks and governments ability to prevent declining asset prices and living standards. I read it in posts here, all the time.

        Those who believe in the financial levitation act are either counting on it lasting forever or getting out the door first.

        • Petunia says:

          I know what you are talking about. They don’t realize that the asset bubbles are all about distraction, managing the decline. The pie is actually a lot smaller, which is why they are inflating everything, another distraction.

      • Contrarian Kairos says:

        I am pretty sure something like that will eventually happen, but as always it is very hard to time it. The fed can still take a very dovish tone and let the music run for a little longer… but as long as you are out and don´t try to short it, you should be fine

      • ru82 says:

        The FED will not let that happen. ;)

      • Nick Kelly says:

        Oct. 1929 presented lots of buying opportunities too. These kept happening and people kept buying the dip until 1932, when many blue chips (Steel, Radio, Monkey Ward, aka US Steel, RCA, Montgomery Ward) were down 70 to 90 %.

    • Igor S says:

      I think the central planners wanted to let the air out slowly through inflation. Might be too late for that.

  11. Bet says:

    Toonces!

  12. David Hall says:

    Chinese Communist Party central planning built empty cities, ghost cities and towers full of mainly empty apartments. China recently blew up partially completed high rise apt. buildings having insufficient funds to complete them. Now their workforce is aging after years of the one child per family policy.

    • Rcohn says:

      And in the US , we waste money on F-35 which don’t fly and lack spare parts .The US is far more advanced at wasting money than anyone

    • roddy6667 says:

      And still, despite all this, the Chinese middle class is growing and has a better living standard every year. And the poor had benefitted the most. How does this compare what the American middle class has experienced , with their buying power now at 1967 levels. Nothing makes a citizen more loyal to his govenment than knowing that his liofe is better than last year and a lot better than ten years ago. Seven years of living in China has drummed that into my head. If you can do that for the common man, you don’t need to do much else.

      • Thomas Roberts says:

        Fake.

        The middle class is shrinking. Also, because of the CCP; the land, sky, and water are all heavily polluted. The education sucks and is getting worse. Construction quality continues to deteriorate. The Chinese population have a standard workweek of 72 hours and for many young people is much higher than that (many are working 007, i.e. nonstop except for some sleep). The Healthcare for the masses in China is very abysmal. The standard of living for the bulk of the population, isn’t that great in China. Because of CCP nonsense like the household registration system, most have very little access to social benefits and many have to commute for hours a day.

        Also, there are nearly 300 million “migrants” (rural workers, who work in the cities and that don’t have household registration). These “migrants” often have to leave their children behind in the villages, who might have to live by themselves, (and if the left behind kids are girls, they are vulnerable to being kidnaped), all because, the kids are ineligible for schools in the cities, where their parents live or work. This is because of the household registration system.

        The actual standard of living peaked for most in China, about 10 years ago.

        There is an upper middle class who benefits from all the poor and disenfranchised people in China, but even they have to deal with heavy pollution, terrible crime rates, terrible education systems and much more.

        Everyone in China, has to deal with things such as VPN’s being blocked and having an all seeing government watch you, that could make you disappear at any moment.

        Recently, China has been building fences on some of its borders. The barbed wire is facing inwards.

      • Happy1 says:

        China was poor as dirt 30 years ago. It doesn’t take much effort to move up from a starting point of less than 1,000$ a year per capita, all you have to do is allow private business and private property. China is following a well trod path behind Japan, Taiwan, and South Korea. It’s really easy to go from 1,000$ to 20,000$ a year per capita, and then it gets really hard.

        • Thomas Roberts says:

          It was possible for awhile to move up inside China, but it was incredibly backbreaking work. China rose up, because, of the foreign companies coming into China, for some of the reasons I stated further above.

          Starting in the 90s until the early 2010s, China continuously became alot more free and richer.

          Many issues came up in the few years after the 2008/9 global recession. Unfortunately, after Xi rose to power in 2012, he has begun to close off China. At first when Xi rose to power, alot of people, including expats in China, thought it was going to be a positive thing. It didn’t become obvious that China was heading in a very bad direction, until 2016/2017. Since then, all the ladders to success are being pulled up inside China, but even worse than that, many people are sliding downwards. Adjusted for cost of living, most people were better off in China in 2010, than today. The lower 75% have been hit by the rising cost of living in China, much sooner and harder.

          Right now, many people think that in order to reduce contact between China and the rest of the world, most of the population will be prevented from learning English. The CCP is also making it harder for most Chinese to obtain a passport.

          China’s per capita GDP is claimed to be about $14,000, but more realistically it’s about $10,000. The income inequality is incredibly massive though within China, and it’s only getting worse. China could have continued to get richer for awhile, but Xi has put an end to that. Unfortunately, even if Xi leaves the picture, he has pushed the CCP past many points of no return, and it won’t be easy or likely for the CCP to go in a positive direction. Like all regiimes, one day the CCP will end, sometimes much sooner than you think.

        • Thomas Roberts says:

          I made a math error.

          China’s real GDP is approximately $10T with a real population of approximately 1.26B…

          GDP per capita is about $8,000.
          PPP cannot be determined, because there are too many made up numbers from China.

          This is hopefully my last comment on this article.

      • Roger Pedactor says:

        According to who?

        The CCP????

        Hey wolf you got Bots on here.

        • Wolf Richter says:

          Roger Pedactor,

          roddy6667 has been commenting here for many years. Over those years, he has been telling us his story. Lived in China with his Chinese wife, and with Covid ended up back in the US and couldn’t go back to China.

          You or I might not agree with his vision of China, but he is definitely not a bot.

        • Thomas Roberts says:

          Roger Pedactor,

          I can tell roddy6667 is an actual person. In China, while it is becoming much harder to do. Foreigners can travel to China and be paid much more than average Chinese people to do a range of things; teaching English is one such thing, but another very big thing is to do white monkey jobs. White monkey jobs can be anything from pretending to be an architect of a building, while the company gives a tour of the factory/business to outsiders; to pretending to be a doctor and endorsing some medication, during an actual press conference; to being a model. Except for certain business things, foreigners are not allowed to take almost any job a Chinese person can do. Some foreigners can travel to China and actually buy stuff up at a discount, direct from the factory and have it shipped to Amazon, and do some small business stuff like that on their own.

          Until recently, foreigners were treated very positively by most people in China, and many expats would live there in a bubble in one of the best parts of the best cities and be deluded the entire time they were there and not understand anything going on around them. Even in the best cities though, the cities have lots of problems like flooding.

          Chinese wives (who live abroad) are pressured by their families, who are in turn are pressured by the CCP to be nationaliistic. There are many videos of this online, where a severely henpecked husband, will say positive things about how great China and the CCP are, possibly singing. Chinese people are taught from birth to never say anything bad about China to any foreigner. It’s very possible that any news roddy6667 gets about China, comes from his wife now, which acts like a filter. roddy6667 Probably believes all the nonsense he says.

          Some of the other posters here, could be actual Wumao (paid internet trolls) or Chinese nationalists lying, though.

  13. Winston says:

    China is not liberalizing and becoming more democratic while we become more like China, partly BECAUSE of China. I seriously hope any Western firm that invests in China gets their asses kicked financially. It might tamper their short sighted greed which has enabled an authoritarian adversary, now suddenly recognized as a military threat by the same morons who ENABLED that as described in the excellent book, The Hundred-Year Marathon. The now awakened author of that book even admits he was one of them with major official influence all the way back to Nixon’s visit to China.

    • Winston says:

      If you haven’t already, watch the great 2018 documentary, The China Hustle. It streams on Amazon.

      “From the producers of Enron: The Smartest Guys In The Room, a Wall Street heist story about Chinese companies, the US stock market and a still-unfolding financial crime so big, it has the power to affect all of our wallets.”

      • Citizen says:

        Great documentary and pretty much all I ever think about during these discussions. I am just amazed that we essentially know that the Chinese are playing us for fools by allowing us to invest in their companies while they don’t have to play by our rules and they can just be complete smoke and mirrors. ….. and we KNOW that they’re full of it but we just pretend they’re not because we want to be able to invest in the next big thing and everyone is happy with the fraud while it’s going up.

        • Turtle says:

          Everybody’s playin us for fools with us well-knowing it and not really even caring. That’s why Donald Trump became president. Too bad he didn’t work out. We’re going to be toast, it seems. Slowly, perhaps… but toast nonetheless.

        • Augustus Frost says:

          Some are did it and are doing it to get rich.

          Others might actually be ignorant or stupid enough to believe hot wars are obsolete and have been banned forever. To believe this concurrently imp[lies the current political order will either last forever or there will be peaceful transition.

          I’m 56. The US might retain it’s leading role for another 25 years or my projected life expectancy but that’s increasingly dubious. Given it’s imperial overreach and belligerence, I wouldn’t count on the US elite accepting a graceful decline in great power status.

        • Petunia says:

          AF,

          The Praetorian Guard(Milley) is already choosing our leaders. Voting(by mail) is a farce. It won’t be long now. All self inflicted too.

    • Paulo says:

      After watching these past two years of the Two Michaels being held hostage over the Huawei Meng Wanzhou deportation hearings, I wonder why any sane person would even travel there let alone think a shared investment would make sense? Greed blinds.

      Joint investments? I don’t think so. Even ‘so-called’ friendly nations impose tariffs and penalties when they think it brings advantage.

      Buyer beware, buyer be careful, always. Even with other people’s money.

      • roddy6667 says:

        Over 4000 American companies are doing business in China. They are also making money, which flows back to the parent company in the US. Perhaps they know something you don’t? Let me guess. You have never been to China, right?

        • Turtle says:

          Only 4,000?

          There are more Kentucky Fried Chicken restaurants in China than there are in the US.

          Fascinating…

        • Not a CCP Troll says:

          I think your post is false as China has a huge number of capital controls which restrict the the movement of profit out of China.

          And if they are able to move them out the costs are huge.

        • Ted says:

          That’s a lie. Trying to get money out of a US owned company in China is nearly impossible, even to just pay foreign vendors.

        • Sams says:

          Those that say that money made in China faces capital controls are probably right.

          On the other side, it is not that difficult to make money on investments in China and shufle income to tax heavens.

          An example, a branded product is made in China and sold in the USA. Export price from China is production cost, brand name markup is added before sale in the USA. This may make up a significant amount of the sale price and is generated outside China.

          Second example, if goods are to be sold in China, import key components at a significant elevated price.

          A big multinational company have a large tool chest of schemes like this to cook the books to whatever the y want.

    • Sams says:

      The empire used to rule from London, but it might never have been British. Then the empire hava had headquartes on Wall Street, but again it was maybe never American.

      To capitalism only the bottom line counts. Never true to any person, organisation, country or ideology. The empire will move on to wher the terms are more favourable.

    • MCH says:

      Are you wishing death to Apple? Because it, more than any American company has invested into China. It would not be a stretch to say that over the last two decades, Apple has created a trillion or more in value in China if you look at the impact of manufacturing sector. If anything I am understating that impact.

      • Educated but Poor Millennial says:

        I see American jobs in Apple manufacturing and soon engineering and Research and development that has gone to China .
        For sure apple made money but how about Americans that lost their jobs and other American campanies that used to work with appple?
        What we got from that money that you brag about? Huh we have to pay a pretty penny to get one.

        • MCH says:

          You are definitely educated…. 👍

          You got my point exactly. What did the US get out of it? If you believe Tim Apple…. There are a million jobs directly due to Apple’s ecosystem in the US.

          Did you see what’s missing? Yep, he didn’t mention how many jobs Apple created in China, and for that Cook is one of China’s best friends. If you are with the CCP and you want spyware in someone’s pocket… call Cupertino, they know where their bread is buttered.

        • Thomas Roberts says:

          It’s very disappointing that Timmy boy is going to place a photo scanner in every Apple device, I cancelled any plans of getting an iPad and will hopefully, eventually, be able to switch to a real Linux phone. Once they get actually good.

          I switched off icloud photo uploads. Everybody should.

      • Thomas Roberts says:

        MCH,

        Apple doesn’t directly invest much in China, It contracts with Taiwanese companies like Foxconn to have their stuff made. Previously, the final product was almost always assembled in China, however, Apple is having the Taiwanese manufacturers shift a large portion of final assembly to other countries. The bulk of the component pieces for Apple stuff, comes from countries outside China.

        • MCH says:

          @Thomas

          There is a matter of semantics there in one sense. In places like Foxconn, Apple buys the capital equipment that is then located into the Foxconn factory, which is located in China, I don’t know what else you would call that except a direct capital investment.

          But let’s take the next step, there is a whole subsidiary industry that has sprung up around the iPhone for everything ranging from camera modules to proximity sensors…. All of that stuff is directly paid for by Apple in some way, shape, or form…. This is directly including knowledge transfer around how to build those modules. Oh, you can argue semantics that the PO doesn’t come through Apple, and you’d be right, Apple has a network or shell companies doing its component, capital equipment orders for it.

          The direct result of Apple’s investment is the rise of Chinese smart phone manufacturers like Huawei, Oppo, Xiaomi, etc. they take advantage of the infrastructure and know how Apple puts in to them compete. All of these are direct capital investments benefiting… that’s right… not the US.

        • Thomas Roberts says:

          Fair enough,

          But either way (somewhat off topic), I do expect consumer electronics to crash in value in next 10 years.

          After that, it won’t matter nearly as much. Hopefully, the new factories once the smallest transistor sizes have been reached are in America. Right now, TMSC is planning a bunch of semiconductor factories in America.

  14. HR01 says:

    Nevergrande debt load likely multiples greater than the reported $300 B. CCP has no idea where to begin to unravel the mess. They’ll let it implode.

    How every Ponzi eventually gets exposed: unable to find new suckers for additional capital.

    Should be amusing to watch. Hope everyone has plenty of popcorn on hand.

    • Nathan Dumbrowski says:

      I concur with your logic. Got my virtual popcorn, waiting?!

      This type of fluff and run is not unique to China. Happens to all kinds of countries. Just so happens that this one is a whale.

      We are going to need a bigger boat

  15. Nicko2 says:

    The shit is hitting the fan.

    All hail Wolf and his mighty hand crafted All-American beer steins of foretelling!

    • Nathan Dumbrowski says:

      Not sure the steins are all-american. The article spelled out some global players in the mix. However hail the man who is begging us to go on buyers Strike.

      Wish I could say I have done my part. However Amazon has got a fair piece of the purchases to build up my home back in SoCal. Only brought across the country what would fit in my mid-sized SUV. Thorugh you I learned to check across other websites for the same item and find them fight over the business. More people should try to add an item to their Walmart. com cart then try to buy the same product at Amazon. com.

  16. CJH says:

    FDR Madison Square Garden speech in 1936.

    “For nearly four years you have had an Administration which instead of twirling its thumbs has rolled up its sleeves. And I can assure you that we will keep our sleeves rolled up.

    We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

    They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.”

    President Biden should read this speech and make it his for today’s time. Same old dirty laundry.

    • lisa2020 says:

      Good quote!

    • David Hall says:

      Chairman Xi is an example of government ruled by organized politicians greedy for political advantage and monetary gain. A megachurch was dynamited. Pastors were arrested. Democracy protestors were jailed. Muslims were forced into Communist re-education camps. Business owners was hindered by claiming national security or monopoly busting. Intellectual property rights ignored when foreigners owned the patents, but enforced when the Chinese owned the patents.

      • Rcohn says:

        And what is the image of the US?
        That of a country which drone bombs innocent civilians

        • Wisdom Seeker says:

          Hopefully in the new geopolitical rivalry, both sides will see that it’s in their interest to improve themselves?

        • Auldyin says:

          @Rc
          It is utterly disgusting that the US as a purportedly civilised nation can condone the use of these drones, where people go to work after breakfast and murder civilians without warning or trial.
          RT’s interview with the father who saw his whole family blown to bits in front of his eyes while loading charity water supplies should be compulsory viewing on your MSM but it won’t be.
          The military says oops sorry we made a mistake.
          How long will the hatred last? Get on top of it for f*** sake.

        • Happy1 says:

          Yea, the US killed 10 people with a mistaken drone attack. Meanwhile China imprison hundreds of thousands of Uighers. That seems equivalent.

        • BuySome says:

          Auldyin, the guy who brought us the the whole concept of drones was old-time Hollywood screen actor Reginald Denny. He was an Englishman who served in the Royal Flying Corps during “the war to end all wars”. Guess he learned from experience that there’s a great future in keeping the balls rolling, no matter who gets crushed in the resulting landslides. [He also ran Revell models in Venice CA…you know, getting kids to build-a-bomber without needing a bake sale. Sort of like the game of training psycho soldiers to fly planes into civilian targets on the home computers.]

        • MCH says:

          Well, the US govt keeps saying there is ISIS-K or Al Qeada or whatever in Afghanistan, of course there is… we are busy helping to lay the foundations for it and ensuring those people become exactly that.

          Imagine what the families of those people feel like…. You do a drone strike, crow about it on TV as righteous, then take two weeks to walk it back on a Friday afternoon when you hope no one is paying attention.

          After all these years, apparently Ron Paul was one of the few sane ones in our political system. Unsane.

        • Auldyin says:

          @H1
          If the actual proven death of 7 children helping their dad to load bottles of charity water for the distressed people of Kabul is in any way equivalent to you to an MSM ‘allegation’ regarding Uighers in China, then I think you make my point of get on top of it for F*** sake.
          Of course, Julian Assange is locked up, isn’t he for exposing similar ‘Fake’ news.

    • MCH says:

      He should, but first, he needs to bring back the SALT deductions. Or let his build back better plan die horribly in the bowels of the Congress.

      Yes… I’m still trying to lobby for my own interest. Cause, have you seen the property tax and income tax such in CA, it sucks.

      I’m all for taxing Zuck, Cook, the Google boys, Tom Steyer, etc, until they are blue in the face, but first, give us our SALT deductions back. In fact, tax their stocks and real estate (just them) at current value even if a transaction hasn’t been made, just their paper gain at 70%. I’m all for it. But SALT deduction first. (or I’m ok if you do simultaneous)

      • Swamp Creature says:

        Why should some poor slob working his a$s off in flyover country for relatively low wages pay for the prolific spending in the Blue states on the coasts. I personally don’t a s$it about the property/income taxes in NY and California. We got our own problems here in Maryland.

        • MCH says:

          I think we can all agree this country has entered into a phase where the only people we should be looking out for is ourselves and those immediately around us. (as sad a statement as that is)

          If you want an honest answer about the SALT deductions, what Trump did was actually fair along that line. It’s a reasonable question to ask why should people in the middle of the country pay for the high taxes on Democratic states… but overall fairness in my opinion has little to do with the situation.

          But I don’t care one bit about your taxes (sorry, SC, it’s the truth, I’d rather not sugarcoat stuff like this), I just care about my situation. I did the most practical thing possible in the last election, because it’s obvious Trump would never have restored the SALT deductions, so I hope that Biden would. So far, he has been disappointing, but for me, he was a single issue candidate, and he hasn’t delivered. That’s all that matters.

        • Cas127 says:

          Hey CA and NY,

          If you have lost MD (most millionaires per capita and it ain’t because of the f*$#ing crab cake industry) you can kiss your SALT giveback adios.

          MD (along with VA) is where the Swamp goes home to sleep, so political pandering is a way of life there. So if they ain’t feelin’ it with a Dem controlled Congress, the coasts are boned, property tax wise.

          And this ritual screwing of ostensible/former allies will be the rule from here on out…DC is far, far, far too broke for Dem statists to be *returning* money to anybody.

      • Shiloh1 says:

        I’d be good with a 60,000 standard deduction, and hold the SALT.

        • MCH says:

          I would be too… I’d actually like to make it $120K given the cost of inflation and what we have to pay for taxes out on the coast.

          Go big, you can always negotiate down later.

        • Gianna says:

          I prefer more ownership taxes, on all assets, periodically. That’s in my best interest. Don’t care to pay for someone else’s tax cuts.

    • ChrisR says:

      Biden would get all teary eyed by the overwhelming feeings of nostalgia he would experience at the thought of this “achievement.”

  17. Rcohn says:

    The CCP will take measures to mollify some of the losses of Chinese citizens. Western holder of Evergrande debt will get less than 5cents on the dollar

  18. JV says:

    So the FED will now twist China’s arm to bail out Evergrande?
    The takeover of the world by our FED isn’t such a long shot after all!

  19. Anthony says:

    There is an old geological fact that I was once taught, that sometimes explains “unexpected” madness and therefore panic…

    Ice Ages always start when the temperatures are at the warmest
    Ice Ages always end when temperatures are at their coldest.

    • Wisdom Seeker says:

      Great metaphor but the geology part is wrong!

      Ice Ages only end when the average annual temperature warms up enough to start thawing the accumulated ice.

      To see this for yourself, consider winter in any climate where the lakes freeze over. Frozen lakes don’t “start to melt” right after the coldest day of the winter … it’s only months later, when the average temperature gets back above freezing, that net melting begins. And the ice isn’t gone until well after that.

      For Ice Ages, it’s more complicated since there are additional factors relating to precipitation vs. temperature as well…

      But recessions DO start when the economy seems strongest, and Bear Markets start with the market is near its highs…

  20. BuySome says:

    Ever Given, Evergrande. What comes next, Ever Awe…as one stares into the face of a singularity only to realize that seats for spectators along the edge of the event horizon seem to be squeezing tighter together and moving forward? It might be a bit late for “financial technicians” to go over and advise China on the way to run their economic super-collider. Stuffing new allotments of funny paper into these black holes isn’t going to slow down that Ever Appetite.

    • Ron says:

      Mine whole world is dumb shovel cash to communist why was Russia left out we built there economy for greed cheap labor now. They will flush the toilet on your money fools

      • Alku says:

        If you refuse to use punctuation, why would you split your comments in parts and number them? This would be well received I believe :)

      • Anthony A. says:

        This rambling makes absolutely no sense.

        • Alku says:

          That’s why I was suggesting to split in part and number – would compensate for M.E. posts some have already started missing :)

  21. Bobber says:

    I appreciate how Wolf connects the Evergrande fiasco with corporate consolidation in the US. If governments sit back as corporations gain control over crucial communication and commerce platforms, the monopolies and oligopolies effectively control the government through lobbying efforts, and at some point, huge corporations rule the land, not voters.

    Allowing huge companies to make 50 small acquisitions a year allows them to effectively buy out all meaningful competition. It kills small businesses that require a level playing field to complete.

    Also, why do major tech companies pay a tax rate that is half the rate that small businesses pay? How does this happen, if not through lax and selective enforcement of the tax law, or loopholes intentionally placed in the law?

    After 30 years of corporate consolidation, we should demand that governments level the playing field for small business.

    • Wolf Richter says:

      “Allowing huge companies to make 50 small acquisitions a year allows them to effectively buy out all meaningful competition. It kills small businesses that require a level playing field to complete.”

      There is a phrase for that area surrounding big tech companies: “the kill zone.”

      • MCH says:

        it’s hard to tell what’s considered competition any more in the case of these mega conglomerates. Think about all of the little bits and pieces Amazon and Apple have acquired over the years. Take Apple for example, there were at least 10 major acquisitions, and probably close to quinteple that we never heard of.

        It’s all around their ecosystem anyway, none of it by itself could remotely be considered monopolizing. For example, they acquire a weather app, or a VR firm, none of those are pertinent to their core business currently, or would only have a very minor impact. (and if they buy a chip design company, what would be the rationale for telling them no) How would one even make a case against this, unless they are kept from acquisitions altogether. But a blanket ban on acquisition also seems very challenging when these guys are vertically integrating. They always point to the fact that no one is obligated to buy their smart phones.

        I’m not against keeping these companies in check, but it seems to be a very slippery slope because what would be the metric to stop companies from acquisition. Market cap? Competition in the same space? Potential new markets? Pretty soon, we would end up with a blunt hammer solution of just breaking these companies up, and it’ll be done in a very messy way.

        The $1B acquisition of Instagram is often an example of why Facebook should not be allowed to acquire potential competitors, but at that moment in time, no one knew if Instagram or even the Facebook acquisition would’ve been successful. If anybody really had that kind of crystal ball, Instagram would’ve gone for 10x or 50x that amount easily.

        In the evolving tech landscape, the government entities are always playing catch up… they do it badly, and what I would be worried about most is that they overstep and really break something important.

        • Bobber says:

          Sure, nobody knows whether any one of the 200 acquisitions per year would have been successful, but that is my point. By buying out hundreds of startups per year, Big Tech ensures nobody will ever know. Some of them probably would have been the next Google, Apple, or Microsoft.

          There are ways to keep Big Tech in check without being heavy handed. For example, we could install a progressive corporate tax rate. The larger you get, the more corporate tax you pay. Right now, we have a regressive model which allows the largest companies to escape corporate tax.

        • MCH says:

          @Bobber

          Can’t disagree with you there. But let’s face it, most of these people were in it to be bought out by the big guys. If they didn’t, they’d just be steamrolled.

          As for a progressive tax structure, that’s what we have had for the citizens, and look at how well that’s worked out in terms of improving income inequality. It’s a joke, because the Fed is outside the tax structure, and while they’ve aided and abetted the corporations by sticking it to the rest of us, guys like Kaplan and Powell have also been taken advantage of the situation, buying stocks and munis and fattening their own wallets.

          Literally, it’s not a stretch to say every single one of those members should be investigated and sanctioned, and their gains clawed back.

          But I digress, I would like to see what a 50% tax rate would do to Apple or Amazon. My guess is not all that much, because if you look at Bezos, he has been nothing by adroit in his ability to dodge corporate taxes. The only reason Cook hasn’t been quite as bad is because he tend to care more about his image, and wants to come across as a charming southerner like your next door neighbor instead of a cold eyed corporate assassin that he is, one whose only goal is to maximize profit at the expense of everyone else.

        • Auldyin says:

          @MCH
          “what would be the metric to stop companies from acquisition? ”
          I would say our old friend ‘decent interest rates’
          Because these companies can borrow vast sums (due to QE) at virtually no cost, they can just buy anything that takes their fancy.
          If cost of capital was un-manipulated they could only buy companies that returned more than the cost of capital. Which is not easy.
          The whole financial World is distorted from all reason by absurdly low rates and they can’t get out of it without bringing the house down, IMO.

        • MCH says:

          @Auldyn

          I honestly don’t think that the interest rate is that big an obstacle to these guys.

          1. Look at how much cash they have on the balance sheet.

          2. For them, an acquisition of $50M barely constitutes pocket lint, no impediment on smaller acquisitions at all. At a larger scale, they can absorb those anyway just by virtue of their cash hoard.

          Taxing them very heavily is going to inevitably invite a slew of lawyers, accountants, and lobbyists to fight on their behalf, and no politician can withstand a major employer putting out press releases that says we cut jobs because of government taxes on us. Or worse, how do you tax no profit…. Like Amazon has been doing for years. You try taxing the revenue too much, and see above.

          Yep, I agree that something needs to be done. I am very interested in seeing what surgical approach our ham fisted government can come up with.

        • Lynn says:

          So what happened to the idea of taxing corporations on the balances and assets advertised on their stock promotions rather than their books? I don’t know how to word this.. I hope you know what I mean.

    • Cas127 says:

      “corporations gain control over crucial communication”

      See 3 TV network oligopoly from 1950 to 1990…

      State adjacent MSM brainwashed a majority of Americans a lonnnggg time ago.

      And we have just barely started living in the consequential aftermath (doomed promises/lies all coming due…)

  22. At least China has customers for their homes, the US is facing population decline, and further wealth disparity, meaning there is no way for the those whose incomes don’t match median home prices to ever catch up. China had regional problems, which they haven’t addressed, which will tax their GDP. I expect the worlds central bankers (IMF with SDR) to bailout China and the US military to bail out Vietnam, which is on the backside of China’s missteps in Asia..

    • Nicko2 says:

      Not really true; the USA still has positive population growth thanks to immigration. China is facing a population collapse similar to Japan.

      • 1.2 billion Chinese, (and growing) 126 million Japanese. US population growth rate is down, and most of that comes from immigration. In round terms US housing is facing an oversupply crisis, unless we can raise median income, (and it often takes two or three generation for immigrants to be economically viable) without inflating asset prices. According to the Fed report income inequality is less severe in China, and that implies their supply of housing will find demand. US housing is a measure of income inequality.

        • VintageVNvet says:

          Don’t know where you get the idea: ”(and it often takes two or three generation for immigrants to be economically viable)” AB, but just the opposite has been my very clear perception for the last 5 or 6 decades in SE and west coast USA.
          Fave is the first gen guy who did ”a little” master level plaster work for me in Ca, and when I asked him to do a large job showed up with 25 guys; turned out his son was the largest union plaster contractor in NorCal, with 20 folks in the office.
          The master would get up on the scaffold himself to put the final finishing touches on historical restoration work so that it looked exactly as did the original, up into his late 80s!!!
          OK, maybe only a few dozens in my direct experience, but ALL of them came here to work and did work hard and did succeed, from professional class folks, doctors, engineers, architects, to carpenters, masons, auto mechanics, farmers, etc., etc…

    • Peanut Gallery says:

      What could/would the IMF do with SDR that China can’t solve on their own?

    • Wisdom Seeker says:

      The demographic trend from 2000-2020 says the US population will overtake China’s in 50-100 years.

      US also has greater natural resources (land and water) to carry a large population, primarily in the middle of the country.

      • 91B20 1stCav (AUS) says:

        Wisdom-better recheck the state of the Oglala Aquifer (Great Plains), heavily tapped after the Dust Bowl, and not gaining much recharge since…

        Increased human population will do nothing but continue to reduce the business value of an average individual. Reduction in population should do the reverse in the absence of overwhelming automation, but given automation’s continued expansion it will be interesting to see if the ‘collapse’ in populations will benefit labor in similar manner as the prox. 30% population reduction via plague in 14th Century Europe changed the playing fields of feudalism.

        may we all find a better day.

      • Cas127 says:

        “primarily in the middle of the country.”

        For chrissake…don’t tell the politically lobotomized coastal locusts…they already pissed away one paradise (California)

        • 91B20 1stCav (AUS) says:

          Cas-with all due respect, most of the ‘coastal locusts’ you refer to started out east of here, likely some from your fair state (in my case father’s side Sweden-1910, mother’s side Arkansas 1936. Growing up in San Diego ’50’s/’60’s, i was ALWAYS, as a native Californian, in the minority in school (the wide spread of classmate origins DID greatly assist my young grasp of U.S. geography, physical and social…).

          Things go up, things go down. Sounds like your slice of heaven may be trending up. Good luck managing the influx, you’ll need all you can get if your territorial slice is truly heavenly (and if so, brace yourself for the brickbats from ‘elsewhere’ sure to follow…).

          may we all find a better day.

        • Wolf Richter says:

          Cas127,

          “the politically lobotomized coastal locusts”;

          Sounds better than whatever you are. Cheers and congrats for a braindead comment!

    • MonkeyBusiness says:

      Population collapse is what you want when faced with real resource constraints.

      We live in a finite world. I’ve said this before, but if the Earth contains unlimited energy, then in the long run, high levels of debt etc don’t matter.

  23. Andrew says:

    Sell now and buy the dip once the US Federal Reserve bails out Evergrande duh.

  24. GSH says:

    This situation calls for a new set of FED tools. How do we bail out the member banks and other too-big-to-fail entities that leveraged those Evergrande dollar bonds? How about a dollar swap line for a 3rd party to purchase the dollar bonds at par or better? See, easy.

    • MonkeyBusiness says:

      Supposedly the Administration is proposing a legislation that would allow the IRS to have more information on bank accounts with more than $600.

      Pretty soon, you’ll need to turn over all you have to bail out the corporations.

      • doug says:

        Pretty soon only the great big monopolistic banks will be able to afford compliance. Get rid of those pesky small banks. I think that is the motivation.

      • Swamp Creature says:

        If you are running a business and receive checks for payment of services and deposit them in your commercial bank account, beware!
        The IRS will use the infusion of 80 billion to set up a sever farm next to the one in Utah used by the NSA. The servers will store everyone’s bank transactions and run an algorithm to see if income from the business matches that reported to the IRS. If it doesn’t then you will get fined and have to pay the back taxes plus penalties. Enjoy

        • That’s a good thing. They figure your taxes for you, or your estimated liability. No hassling over intent after the fact. I guess the US system is going to have its own crackdown. If you’re conservative, you want a balanced budget, raise taxes, and the best way is through compliance of the tax laws already on the books. Put an end, to borrow and spend…

        • Swamp Creature says:

          Ambrose Bierce

          You’re dreaming.

          Sorry, that will never work. People will just not put their payment receipts in the bank. Or better yet, do all transactions in cash. The only thing to look out for is they may do everything retroactively, going back 5 or 10 years. There’s a gold mine of unreported income waiting to be tapped.

        • Shiloh1 says:

          I remember when the friendly neighborhood liquor store would be fine with cashing a $200 paycheck circa ~ 1978.

          I also remember a guy who worked at a south side of Chicago cookie factory who’d sell 100 $5 raffle tickets to win his $200 paycheck,

        • Look at it this way SC. 70% of Americans pay no income tax. Every year they truck down to H&R block and fork over a hefty fee which indemnifies them. It’s a racket and a government mandated racket. Buffet knows a good thing when he sees it. Now of course IRS has free online filing services and some pretty good ones too. The next step let them figure your taxes for you. I get it, you have to fight them to get your sneaky tax breaks, but I have never been able to afford that kind of accountant anyway. Then maybe we will get some revenue to fix those federal account deficits. Taxes and immigration are the same problem, enforce the laws you have, or repeal the amendment.

  25. lisa2020 says:

    That was absolutely the greatest REAL NEWS podcast! The FT has new headlines that are 30minutes old.

    But, But, But: I can’t wait to hear the rest of the story! How many bubblies and wifie poos get to “zoom” all around the sunset into Dubai, while the poor little ants get sparrowed by RH’s arrows in the US? Maybe, I better not hold my breath for the rest of that story! This may be the next not- news story: What Yahoo gets to take the next flight on Elon’s crafty little tin cans into outer space?

  26. DR DOOM says:

    Sound money is out of reach. The cure is now limited to deleveraging and carnage. The US system does not represent the people’s interest because the electorate does not know or care that sound money is in their interest. If the Fed tells them all is well then all is well. China’s government knows that obscene wealth inequality will ,not maybe, turn the masses on them. They know this lesson well because that is how they got their power. Its looking like Powell’s printing press had better install those high speed German bearings and see if he can out run the deleveragin beast. He might be hearing the faint sound of beating claws on the ground.

  27. SocalJim says:

    The financial earthquake in China will further hurt the supply chain. And, the worlds CBs will flood the system with liquidity making sure the sell side markets are deep enough for institutional players to raise cash.

    This is an inflationary event. Do not think deflation. Clearly, overweight hard assets and underweight financial assets.

  28. SocalJim says:

    Also, the high yield bond markets will be dangerous. Be careful there.

    • Swamp Creature says:

      The high yield market follows the stock market. It’s like a hybrid investment. When the stock market crashes, so will the high yield market. Also it is very tax unfriendly. Long term capital losses, short term taxable gains. Been there, done that. Never again.

      • SocalJim says:

        In truth, HY credit spreads are highly correlated with high short interest stocks. Correlation between low short interest stocks and HY is anecdotal at best. Furthermore, the liquidity in HY markets is a real problem during any earthquake.

  29. Anthony A. says:

    I suspect the J Team will be on the news tonight to calm things down and restore the 800+ point drop in the Dow that is currently underway. I mean, they must have a Tool in the Toolkit for events such as this?

    • Phoneix_Ikki says:

      Yup, sadly I think you’re right. If I am a gambling man, I would load up a huge call position tomorrow to get a front row seat of the dead cat bounce for the next couple of days, weeks of months. Call me jaded, even with the fiasco with Archegos, market just shrug this off and power up and up since March of last year. This is much larger in scale but people know Weimar Powell will somehow come to the rescue and the Chinese government is likely just playing chicken a little longer and will bail it out one way or another.

      I really really hope I am wrong on this..guess time will tell and I am not really all that optimistic there will be long term bloodletting based on my observation since GFC.

      • Lynn says:

        IDK, you might be wrong.. I hope so. The media is loudly proclaiming that losses are mostly contained in China.

    • Swamp Creature says:

      Jim Cramer was on CNBC this morning. He’s big on Chinese stocks. He looked like he was s$iting in his pants.

  30. Keepcalmeverythingisfine says:

    S&P 500 down 922 (2.66%) right now. Boy am I going to make a lot of money on this one. I love doing this!

    • Alku says:

      Which way? BTD or short?

      • Keepcalmeverythingisfine says:

        I never short. I will buy through the bottom. I may not catch the exact bottom, but if I can get within 10% of it on either side I’ll achieve what I want. I will look for sectors that got punished far more than the broader market and buy them. Big bounce at the end of the day today.

        • Random guy 62 says:

          Big bounce at the end. Plunge protection team hitting the field right before the closing bell, eh?

        • Old School says:

          Hard to know where the bottom is going to be, but it’s good to get a plan. Maybe 1 in 100 chance SP500 goes back to 2009 low of below 700.

    • Auldyin says:

      @Kcef
      Old King Coal
      Was a merry old soul
      He had 10000 men
      He led them up to the top of the hill
      Then he led them down again.
      Just sayin’

  31. SocalJim says:

    You have to keep this in perspective.

    1) Evergrande has half the debt as Lehman.

    2) The global HY market is about 2.5X larger than 2008.

    3) CBs have figured how to provide sell side liquidity facilities in times of crisis.

    This will be an average correction earthquake for the US markets. However, it the Asian financial shake will undermine global supply chains and inflation will take another step higher.

    • Keepcalmeverythingisfine says:

      This selloff is not just about Evergrande. It has been churning under the surface for many weeks. We might get 5-10% down from the highs. We’ll recover all and then some before year end. However, what is going to happen in about a year will truly be the big one unless we change course before then. The US and most of the world will be in a massive contraction. He’s just getting warmed up folks.

    • Alku says:

      I think the domino effect is the main danger here. I’ve just read that another developer’s shares sank 85% and even some banks start to be affected.

      • SocalJim says:

        With banks, the danger is impared assets which preceeds a credit crunch. Once a bank’s assets are impared, they do not have the reserves needed for credit expansion, and that is deflationary. This was the 2008 story.

        So, if you sell banks, then your expectation is theiir assets will be impared … do you think that is the case? In the US and EU, this should not happen. But, I don’t have insight on other blocks.

        • Auldyin says:

          @S
          The banks have been stress tested to destruction this time round. Can’t speak for EU, can’t find results.

        • Alku says:

          I am just trying to make sense of it all.. Was referring to several articles I’ve read. From one of the sources: “crash in Evergrande dragged down … banks exposed … (.. over 120)”

        • Crunchy says:

          Do the banks still need reserves in order to lend these days?

        • What do banks really own? They got out of the mortgage business, they secularize just about everything. They live off (investment) fees, and the flow of credit. Wilson over at MS calls this Fire or Ice. If GDP comes in hot, the Fed raises rates, you want to own financials. Ice we get a contraction. No Goldilocks allowed I guess. The financials are like the auto industry, yesterdays news, but they usually come up with something to keep people interested (EVs). My insurance co furloughed its financials advisors. I see competition from shadow banks, and the growth of community banks, all put pressure on their business model. Since they are the private half of the Federal Reserve, they have a firewall. Then you wonder if fiscal spending displaces monetary policy, what’s the future in that? Or crypto? The dollar is their main product. Banks are the third rail, while even their capital formation business is obsolete. The word zombie comes to mind, but its much worse than that, its like British Royalty, they’re no longer lord of the realm and not quite celebrities either.

        • SocalJim says:

          AB,

          Banks own loans and securities, as well as cash. For example, BNY has 400 Billion in assets.

    • Tom S. says:

      Shadow banking, debt ceiling, no infrastructure bill, evictions allowed, inflation forcing the fed’s hand, take your pick.

  32. DawnsEarlyLight says:

    Ah, smell those nuts starting to roast on the campfire! It will take a while longer though, before they are cooked. Play ball!

  33. MonkeyBusiness says:

    Six senior Evergrande executives are facing “severe punishment” for securing early redemptions for themselves on investment products which the imploding Chinese real estate giant told retail investors they couldn’t repay on time.

    According to the Financial Times, over 40 group executives had personally invested in its investment products – with six of them securing early redemptions. All six will return the money.

    “All funds redeemed by the managers must be returned and severe penalties will be imposed,” said the company, which has offered to repay investors with discounted apartments and parking lots.

    Won’t happen in the US … ever

    • jon says:

      if this happens in USA then the FED and its members would be sent to jail first.
      But this would never happen here.

    • Anthony A. says:

      Sounds like the Chinese have this under control. Now resume your normal programming and place your bets on the Monday Night Football game.

      Oh, Buy the Dip….

  34. Lynn says:

    A lot of construction in China is or has been built as investment shells in more ways than one. Most obvious is that the units are not finished and are actually worth more unfinished. Unfinished means “new”, finished means “used” which is culturally less desirable.

    Less obvious is shoddy materials and workmanship. If no one is going to actually live there, why bother making things sound? Maybe just make one or two sound? IDK. Evidently, some of these huge developments are falling apart just 3 years or so after being built. So, how much are they worth, not only after financial deflation but also after quality and habitability discovery? Assuming the CCP wants to lower prices and have people actually housed there.

    I don’t know for a fact if Evergrande is one of the developers building shoddy developments, but with 1.5 million units in sales proceedings alone it’s very likely at least some of the subcontractors were using crappy cement, bad drainage and less rebar.

    My guess is the video footage you see in the news of several tall buildings being demolished was because the structures were not salvageable- not because they were unfinished.

    So- what is the real value of Evergrande’s assets after the dust settles? I’d guess far less than estimated.

  35. Lynn says:

    Just as an aside, I found a good explanation on “Chinese Money Laundering and Global Real Estate” Nov 30, 2020 on You Tube. It’s produced by a financially educated ex-pat Chinese man who is just as frustrated by the inability to buy a home as anyone else in the world.

    RE is a huge sink for big laundered money. I would imagine not only around the world but also in China. The advantages of foreign RE investment in the US and probably Canada and England etc is that while citizens of those countries need to account for where they got their money, foreigners don’t. Same with casinos which is why Macau is being closed in on more. It all ties in with capital flight which China hates. When it’s not top leading CCP families at least.. And who knows, maybe even when it is.

    • Mike G says:

      One of those situations where everyone is breaking the law, so the predators at the top can pick and choose who to pursue based on political favoritism.

  36. David Hall says:

    Chinese residential and commercial real estate developer Sinic Holdings Group stock dropped 87%. Trading was halted at 3:28 on 9/20/21.

    • drifterprof says:

      Very interesting! These comments can be worthwhile to learn stuff, along with another very interesting podcast by Wolf. I hadn’t heard of the Evergrande founder’s technique of pumping huge dividends into their pocket while owning most of the shares. It seems like in the United States there would be some kind of courtroom battles to get at that money.

      Evergrande might do well to hire Trump as a consultant. He also is reported to owe about $300 billion in debt, coming due in the next three years. And he seems to be very experienced in weaseling out of loan defaults, as well not paying suppliers and creditors. And with six Chapter 11 bankruptcies by Trump companies, he could provide a steady guiding hand to the filthy rich Evergrande founders.

    • Franz Beckenbauer says:

      If anybody thinks Evergrande is an outlier and the rest of the bunch is all hunky-dory, they are delusional.

      Evergrande is the canary in the coal mine. Chinese coal mines are the most dirty in the world.

      By the way, here’s a list of entities holding Evergrande debt according to a bloomberg terminal:

      UBS AG
      Credit Agricole
      Allianz SE
      Blackrock (of course)
      Vontobel Holding AG
      Prudential PLC
      Government Pension Funds
      Royal Bank of Canada
      Nordea Bank
      Invesco Ltd
      BNP Paribas (of course)
      Van Eck Associates

      and the list goes on.

      Oops !

  37. cd says:

    this is wall street big money driving China lower to buy in while distracting retail from the debt limit date coming…..its about the debt limit….

    yellen wouldn’t be yelling so loud for fix

    • DawnsEarlyLight says:

      Can’t keep the theft going, without lifting other peoples wallets!

      If it’s financial investments and china, then it’s a scam! (KD)

    • Old School says:

      I don’t know. It seems it has the hallmarks of corrupt financial behavior:

      1. Corporation takes on excessive debt to keep bad business model afloat.
      2. Consumer makes bad decision by partially prepaying for something not produced yet.

      As a consumer it’s good to pay when item is fully delivered if possible.

      Wall Street pulls that trick a lot by extracting a fee up front for an investment vehicle that never delivers.

  38. RH says:

    They are just as crooked as banksters and Wall Streeters. Their real estate developers are Ponzi-like: incoming “purchasers'” funds pay for earlier “Purchasers” property construction. They are using the crackdown claims to crush the CCP faction opposing Xi.

    Xi’s family “coincidentally” are all ultra-rich after losing everything during earlier CCP tyrants’ regimes. What is going on is a CCP gangster war, like in the USA in the 1930s before Lucky Luciano and then reportedly his partner, Meyer Landing took over organized crime in America.

    When one CCP POZI RE scheme collapses, others will collapse as chumps get suspicious.

    • RH says:

      Correction: Meyer L a n s k y was reportedly the friend and later, successor to Lucky Luc c iano as head of US organized crime according to authorities or at least the Italian-Jewish portion of it, since I doubt gangs from Mexico or other countries were in it. Tablet rejected both names.

  39. Rcohn says:

    And what will happen if there is an inevitable naval military confrontation between the US and China

    • Auldyin says:

      @Rc
      It’ll be over in an afternoon.
      The Chinese are geared to defense not offense.
      Aircraft carriers and subs are the most offensive weapons. Count them for each side.
      Expect them to be absolutely surrounded by underwater drone swarms if ever they pose any real danger to the motherland.
      Fortunately the West knows all this and wouldn’t be stupid enough to try, but they still have to pose tough for the MSM warhawks. China lets them because they know they have to.

  40. historicus says:

    And as of now, todays opening in stocks is HIGHER than yesterday’s highs…
    so if you sold stock indices yesterday, the Fed’s Plunge Protection Team has made certain you are a loser, as futures are “goosed” overnight by over 350 pts.

    • historicus says:

      The NY Fed was busy last night punishing those who think a melt down in China means anything

  41. Frank says:

    Actually the Fed is really getting less effective and is losing it’s strength. I have a financial post article in 1994 that many analysts forecasting a 30,000 Dow Jones by the year 2000. It took them 20 more years to reach 30,000 Dow Jones.

    My observation here is they are losing their power and one day they are going to ruin everything and say that it tried to save the system but it had to transition to an electronic, credit social system. This is just an excuse as they inflated everything to death and if they just left capitalism based on actual sound financial principles work the way it is supposed to like interest rates of 3%+ inflation, anywhere from 5% to 11% interest rates over the last 30 years, the winners and losers would be competing against each other and worked out.

    • historicus says:

      “one day they are going to ruin everything and say that it tried to save the system”

      when in fact they stole the free market , ran it for the benefit of a few for a while…then the game was up. IMO

  42. Rcohn says:

    Which is riskier?
    Evergrande bonds at current prices , which may be rescued by the CCP or 10 year Treasuries which are yielding a negative real yield of 3,4 5 ,6 %.
    If the CCP rescues Evergrande bond holders , those buying bonds will do very well.
    If the CCP does not bailout Evergrandes bonds , panic will be the order of the day,equities will tube ,resulting in the Fed flooding the market with even more liquidity , thus increasing the amount of negative real yields.

    • DawnsEarlyLight says:

      Depends on which bondholders the CCP bails out.

    • Old School says:

      It’s hard to figure out right now. At least one of the big gold miners is selling at 10 times free cash flow and 6 times operating cash flow implying gold is going much lower. Seems like market is pricing in a deflationary outcome.

  43. CreditGB says:

    Bear in mind that the CCP has made a subtle shift its public opinion propaganda toward a severely anti west and doubled down on anti US propaganda in particular. A sort of revolution of the Chinese people. This is a notable shift from the CCP. Many believe that this is in response to a perceived loss of control over the mindset of the Chinese by the CCP. “Laying down” being a recent development, but it represents a position directly opposite of the CCP where workers work until death, it is a cultural thing. Another Chinaman said “may you live in interesting times”. I think China has embarked on some heretofore unimaginable “interesting times”.

  44. CreditGB says:

    In addition to the “people’s revolution” shift, is a shift to demonize the very wealthy Chinese. People like Jack Ma are not so much in the CCP’s favor, which is not a good position to be in if you live and profit in China.
    Not sure what the end game of this play is, but it seems to be to reestablish and consolidate control over the every days Chinese. 1.3 billion people who decide they’d rather be more like the west they get a glimpse of now, is a formidable problem for the CCP. Seems like they are walking a very fine line here, keeping manufacturing and their people under control may be an interesting task.

  45. Joy'n BlackRock Misery says:

    What’s the magnitude of loss for BlackRock? I hear they are ~$400 mil in…

  46. J-Pow!!! says:

    I will bail you out She! As long as you start spelling your name correctly! Xi is not correct! That is pronounced eks-eye in English!

  47. shandy says:

    George Carlin really nailed it. “When you are born you get a free ticket to the freak show, in America you get a front row seat”

    No Doubt George

  48. drifterprof says:

    “China Evergrande unit to make $35.9 mln onshore [bond interest] coupon payment on Sept 23…”

    “Evergrande is also due to make an $83.53 million coupon payment on an offshore dollar bond on Thursday. The Shenzhen exchange filing did not mention the offshore bond.”

    “Difference in stakeholders: commercial banks are the biggest investors in onshore bonds, while asset managers (mutual funds) are the biggest investors in offshore bonds; their risk appetites, liquidity requirements and investment objectives can be different.”

    So are more non-Chinese investors in the offshore bonds?

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