As China Sees Lehman Moment, Bitcoin Is A Godsend

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The below is a direct excerpt of Marty’s Bent Issue #1080: “Nothing like the smell of credit risk contagion on a Monday morning.” Sign up for the newsletter here.

A few weeks ago we warned you freaks about the potential of a “canary in the coal mine” situation developing in China as one of the country’s largest real estate developers, Evergrande, seemed to be at the “acceleration” phase of a massive devaluation of their credit which markets began pricing-in in May of this year. Well, we congregate in this dark corner of the Internet today to make you freaks aware (if you aren’t already) that something has snapped. Evergrande is going under and it is dragging other large real estate developers in China down with it. The world is witnessing another Lehman moment, but this time it is emanating from China and not New York City.

As you can see from the chart above shared by Zerohedge, this contagion event in the Chinese real estate development market is beginning to call into question the value of Chinese sovereign debt as the price of 5-year credit default swaps skyrocketed this morning. Signaling to markets that investors are willing to pay high prices for default insurance as the likelihood of a contagion event in Chinese (and potentially global) credit markets seems inevitable at this point. Especially considering the fact that the CCP has come out and stated that they do not plan on backstopping the real estate developers who are currently plummeting toward bankruptcy. It will be interesting to see if they keep this posturing as things get worse.

If the below article from the WSJ is accurate in its description of the intentions of Xi’s CCP to “roll back China’s decades long evolution toward Western-style capitalism and put the country on a different path entirely” – a path more in line with Mao’s Communist China – then this implosion of the Chinese real estate development market may be the perfect boogeyman to lean into as Xi attempts to force the Chinese economy in that direction.

“Look at what capitalism has wrought. We need to better align ourselves with Chairman Mao’s philosophy now more than ever. The greedy capitalists have put us in a very precarious situation.”



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