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Yeah, dude, the number of 'normal people losing their homes' will create a revolution, and/or, consumer spending will crash, combined with the fact that a 'majo

Yeah, dude, the number of 'normal people losing their homes' will create a revolution, and/or, consumer spending will crash, combined with the fact that a 'major component of GDP has crashed' (i.e. construction), that's 'extremely bad'. The US was able to 'rebalance' by propping up some banks - but in reality they saved 'consumers' by taking toxic loan assets of banks balance sheet and absorbing it onto the fed balance sheet. CCP can't really do that for houses that are not built. The other issue is the size of that part of the economy in relative terms. This is is not going to 'blow over' - everything, including Xi's totalitarian takeover, increased control and repression, issue of age, diminishing marginal returns to growth ... ... this adds up to a 'major shift' in what China is. We saw a different China in the 1990s (quietly building), 2000's (onto the world stage), 2010 trying to be a global superpower, threatening Taiwan, occupying S. China Sea etc, and now 2020's 'reckoning /rebalancing'.

jpgvm 4y ago
As I said, I will believe it when I see it. Heard the same doomsday stories over and over at this point. The most likely way this plays out is CCP slowly nationalizes Evergrande and other embattled developers (bond holders and equity investors 100% screwed), sell the unfinished projects to developers that didn't run themselves into the ground for them to be completed. This is already happening. As much as people want to believe there will be collapse I just see it as incredibly unlikely given both track record and the iron grip that CCP has over the Chinese state banks. Without a failure in the banking sector I just don't see significant enough contagion to cause long-term damage.
JumpCrisscross 4y ago
> taking toxic loan assets of banks balance sheet and absorbing it onto the fed balance sheet This is not what happened. (The Fed never bought the toxic assets. It bought Treasuries and super-safe nontraditional assets off owners of toxic assets so they had the liquidity to resolve themselves. But the toxic stuff ended up in other places.)
- jollybean 4y ago
  No, the Central Banks give banks cash in return for garbage mortgages. Look at the giant bump in 2008 in Fed assets. Most of that is mortgages. And then in 2019 an even bigger calamity. Those massive jumps represent the finantialization of the USA, a massive form of economic shift. [1] https://wallstreetonparade.com/2022/06/fed-data-shows-a-half-century-of-moderate-growth-in-the-feds-balance-sheet-through-two-world-wars-then-a-seismic-explosion-under-bernanke-yellen-and-powell/ https://wallstreetonparade.com/2022/06/fed-data-shows-a-half...
  - JumpCrisscross 4y ago
    > Central Banks give banks cash in return for garbage mortgages There are zero mortgages on the Fed’s balance sheet. There has never been a mortgage on its balance sheet. If you think the Fed bought whole mortgages off banks for keepsies, or lost a single cent on its bailouts, you’ve missed something.
    - atwood22 4y ago
      Is this a joke? The Fed has almost 3 trillion of mortgages on its books. Source (from the Fed itself): https://fred.stlouisfed.org/series/WSHOMCB https://fred.stlouisfed.org/series/WSHOMCB
      - JumpCrisscross 4y ago
        > Fed has almost 3 trillion of mortgages on its books “Mortgage-backed obligations held by Federal Reserve Banks…guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae” [1]. Not mortgages. It’s a subtle difference. But a big one, given the top tranches of mortgage-backed securities never faced a solvency (versus a liquidity) problem. [1] https://fred.stlouisfed.org/series/WSHOMCB https://fred.stlouisfed.org/series/WSHOMCB
        atwood22 4y ago
        There is literally 0 functional difference. Fannie Mae and Freddie Mac are government sponsored entities. They buy conforming mortgages from banks, package them up into a mortgage-backed securities, and then sell them on the open market. The Fed buys these. So your claim that the Fed doesn’t buy mortgages because “ackshually Fannie Mae buys the mortgage” doesn’t hold much water. And in fact, the only real reason Fannie Mae can guarantee mortgages is because ultimately the Fed can step in to buy any distressed assets.
HWR_14 4y ago
> CCP can't really do that for houses that are not built. Assuming there was political will, there's no reason the CCP couldn't do that for houses not yet built. By definition toxic debt is larger than whatever the collateral is.

jpgvm 4y ago

As I said, I will believe it when I see it. Heard the same doomsday stories over and over at this point. The most likely way this plays out is CCP slowly nationalizes Evergrande and other embattled developers (bond holders and equity investors 100% screwed), sell the unfinished projects to developers that didn't run themselves into the ground for them to be completed. This is already happening. As much as people want to believe there will be collapse I just see it as incredibly unlikely given both track record and the iron grip that CCP has over the Chinese state banks. Without a failure in the banking sector I just don't see significant enough contagion to cause long-term damage.

JumpCrisscross 4y ago

> taking toxic loan assets of banks balance sheet and absorbing it onto the fed balance sheet This is not what happened. (The Fed never bought the toxic assets. It bought Treasuries and super-safe nontraditional assets off owners of toxic assets so they had the liquidity to resolve themselves. But the toxic stuff ended up in other places.)

jollybean 4y ago
No, the Central Banks give banks cash in return for garbage mortgages. Look at the giant bump in 2008 in Fed assets. Most of that is mortgages. And then in 2019 an even bigger calamity. Those massive jumps represent the finantialization of the USA, a massive form of economic shift. [1] https://wallstreetonparade.com/2022/06/fed-data-shows-a-half-century-of-moderate-growth-in-the-feds-balance-sheet-through-two-world-wars-then-a-seismic-explosion-under-bernanke-yellen-and-powell/ https://wallstreetonparade.com/2022/06/fed-data-shows-a-half...
- JumpCrisscross 4y ago
  > Central Banks give banks cash in return for garbage mortgages There are zero mortgages on the Fed’s balance sheet. There has never been a mortgage on its balance sheet. If you think the Fed bought whole mortgages off banks for keepsies, or lost a single cent on its bailouts, you’ve missed something.
  - atwood22 4y ago
    Is this a joke? The Fed has almost 3 trillion of mortgages on its books. Source (from the Fed itself): https://fred.stlouisfed.org/series/WSHOMCB https://fred.stlouisfed.org/series/WSHOMCB
    - JumpCrisscross 4y ago
      > Fed has almost 3 trillion of mortgages on its books “Mortgage-backed obligations held by Federal Reserve Banks…guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae” [1]. Not mortgages. It’s a subtle difference. But a big one, given the top tranches of mortgage-backed securities never faced a solvency (versus a liquidity) problem. [1] https://fred.stlouisfed.org/series/WSHOMCB https://fred.stlouisfed.org/series/WSHOMCB
      - atwood22 4y ago
        There is literally 0 functional difference. Fannie Mae and Freddie Mac are government sponsored entities. They buy conforming mortgages from banks, package them up into a mortgage-backed securities, and then sell them on the open market. The Fed buys these. So your claim that the Fed doesn’t buy mortgages because “ackshually Fannie Mae buys the mortgage” doesn’t hold much water. And in fact, the only real reason Fannie Mae can guarantee mortgages is because ultimately the Fed can step in to buy any distressed assets.

HWR_14 4y ago

> CCP can't really do that for houses that are not built. Assuming there was political will, there's no reason the CCP couldn't do that for houses not yet built. By definition toxic debt is larger than whatever the collateral is.