The New CS Board

[jumanji0881]

Doug Noland laid out the magnitude of the Evergrande default in this week's Credit Bubble Bulletin: http://creditbubblebulletin.blogspot.com/2021/09/weekly-commentary-evergrande-moment.html

Excerpt:
Evergrande owes over $300 billion – to banks and non-bank financial institutions, domestic and international bond holders, suppliers and apartment buyers. It has bank borrowings of $90 billion, including to Agricultural Bank of China, China Minsheng Banking Corp and China CITIC Bank Corp. (reports have 128 banks with exposure). Thousands of suppliers are on the hook for $100 billion.

As a focal point of the global Bubble in leveraged speculation, China’s offshore debt market has ballooned during this protracted cycle. From the FT (Hudson Lockett and Thomas Hale): “Chinese issuers face their largest-ever wave of dollar bond maturities this year at $118bn, according to Refinitiv. But even that is dwarfed by the Rmb7.8tn ($1.2tn) of onshore debt maturing in 2021. The latter figure could have big repercussions for offshore bondholders, especially if the restructuring of onshore debt is prioritised.”


My Comments:
Given the imminent collapse of Evergrande in China and the implications for the global economy, I don't think the Fed will be willing to risk tapering. China could add a lot of liquidity, but their sovereign debt is also taking a hit which added liquidity would only worsen that. Gold should benefit from the bursting of the global bubble.

Adding to the economic problems is the debt ceiling and the $3.5T social spending package. I don't think the Republicans will yield on the debt ceiling nor do I think they should. The $3.5T spending needs to be killed and Democrats don't have the votes to approve it. The Dems may have to use reconciliation to raise the debt ceiling, but not before the markets fear a debt defaut by the US government. Gold should be moving much higher,