What do you make of the Evergrande situation in China,
@Juan? They are struggling to pay the interest on their $300b worth of debts, and if they default, it will have a significant impact on the central banks in China and the rest of the world.
I have read developers in China were actually warned by the Chinese governments a few years back that they were taking too much debt and leverage, and they decided to ignore that.
So now there is a chance that the Chinese government let's Evergrande fall and try to use some firewall to limit and contain the damage from spreading too much.
It is interesting to see how Chinese property is priced, as it is a lot cheaper (a lot!) to buy before it is built. So there will be a social problem because many people already handed money over to developers who are not going to fulfill their contracts and build anything.
There is an energy crisis on top of this as well. It's not looking good.
It seems Russia wants to push gas prices further up.
Also, the transport data does not correlate with the wider economic data which suggests there's a risk of a downturn similar to what happened in 2008.
Some people are excited about airline stocks in Europe, but the reality is (i) there are less people travelling (a consistently lower demand to travel); (ii) business travel is dead; (iii) some people do not want to travel by plane due to environmental reasons (climate change); (iv) energy getting more expensive, fuel etc; (v) taxes likely to go up due to environmental and regulatory reasons.
This is the problem with printing endless amounts of money; it will present a big problem for America and everyone else. They are already creating $85b in fresh money, via bonds, every month, to keep the economy afloat. What will their solution be if the shit hits the fan? Print even more money? The situation is becoming very precarious
Central banks still want to keep delaying any policy shift, which is totally irresponsible. Central banks have cornered themselves and left no space for maneuvering around this crisis.
In my opinion, they should start tapering before everyone loses the little faith is left on central banks.
Yesterday I read an article on The Guardian explaining how "young" people (born after 1980) are hoping for socialist states and an extension of the welfare state, which is the opposite from what we are witnessing lately:
- Billionaires who do not pay taxes
- Billionaires who use instruments designed for the middle class to take advantage of tax deductions they do NOT qualify for (there was an article on Peter Thiel, and mentioned Jeff Bezos too as recipients of those questionable deductions)
- Technological companies that predate the economy, act monopolistically and do not pay taxes
- Politicians and central banks who in fact are rescuing tech billionaries and the richest people on earth while they
ignore basic problems like the global housing crisis (= bubble and the Evergrande collapse).