{"id":12339,"date":"2021-09-20T19:54:06","date_gmt":"2021-09-20T19:54:06","guid":{"rendered":"https:\/\/www.buyucoin.com\/crypto-labs\/evergrande-losses-sparks-fear-of-looming-credit-contagion-janet-yellen-asks-to-raise-us-debt-ceiling\/"},"modified":"2021-09-20T19:54:06","modified_gmt":"2021-09-20T19:54:06","slug":"evergrande-losses-sparks-fear-of-looming-credit-contagion-janet-yellen-asks-to-raise-us-debt-ceiling","status":"publish","type":"post","link":"https:\/\/www.buyucoin.com\/crypto-labs\/evergrande-losses-sparks-fear-of-looming-credit-contagion-janet-yellen-asks-to-raise-us-debt-ceiling\/","title":{"rendered":"Evergrande Losses Sparks Fear of Looming Credit Contagion, Janet Yellen Asks to Raise US Debt Ceiling"},"content":{"rendered":"

Global investors have their eyes peeled on the Evergrande Group or the Evergrande Real Estate Group, China\u2019s second-largest property developer by sales. Evergrande Group shares nosedived on Monday dropping to 11-year lows and many analysts and economists are concerned about a possible credit contagion. Credit problems with China\u2019s real estate industry have affected global markets a great deal as European and U.S. stocks have slid during Asia\u2019s overnight.<\/strong><\/p>\n

Evergrande Group\u2019s Counterparty Risk and Liquidity Shocks Could Spark a Credit Contagion on a Global Level<\/h2>\n

Many people woke to the news of China\u2019s Evergrande Group losing a significant amount<\/a> of its market capitalization as the company\u2019s shares dive-bombed to an 11-year low. While Evergrande losses can\u2019t take down the economy alone, but it could cause a domino effect<\/a> like the collapse of Lehman Brothers did during the 2007-2010 financial crisis. The domino effect is called a \u201ccredit contagion\u201d and signs of this occurring are already happening.<\/p>\n

Other mega Hong Kong and China-based real estate giants are feeling the heat of Evergrande Group\u2019s losses and the possibility of the firm defaulting. Hong Kong\u2019s Henderson Land Development Co. saw a significant selloff and Ping An Insurance Group Co. also saw shares tumble. The Hang Seng Tech Index plunged in value on Monday morning as the news roiled markets. Analysts and economists believe that the debt from Evergrande could move to other lenders and bond markets in the near future.<\/p>\n

The problem with Evergrande and China’s property bubble is that all the Keynesian ‘solutions’, liquidity injections and bailouts have already happened.<\/p>\n

It is not an issue of liquidity but of solvency.<\/p>\n

\u2014 Daniel Lacalle (@dlacalle_IA) September 20, 2021<\/a><\/p>\n<\/p>\n

Basically, a credit contagion happens when counterparty risk and liquidity shocks take place in the market and it causes creditors to deleverage their positions and move to safer venues. Zero Hedge columnist Tyler Durden explained<\/a> that the market is expecting China\u2019s Evergrande Group to default on a number of payments which will spark a significant domino effect across global markets.<\/p>\n

Sinic Holdings Group (2103HK)<\/p>\n

Contagion: Another Chinese real estate development company down over 90% this morning. #Evergrande<\/a> pic.twitter.com\/g8CorYBDSE<\/a><\/p>\n

\u2014 T O’Mahony (@TurboCBDC) September 20, 2021<\/a><\/p>\n<\/p>\n

\u201cSpeaking of Evergrande\u2019s imminent default,\u201d Durden wrote on Monday. \u201cWe noted earlier that while the company is scheduled to pay $83.5 million of interest on Sept. 23 for its offshore March 2022 bond, and then has another $47.5 million interest payment due on Sept. 29 for March 2024, the day of reckoning may come as soon as Tuesday: that\u2019s because Evergrande is scheduled to pay interest on bank loans Monday, with a one-day grace period,\u201d the author added. Durden\u2019s critique of Evergrande solvency continues:<\/p>\n

In other words, should it fail to arrange an extension, it could be in technical default as soon as Tuesday (for a much more detailed analysis of next steps please see This Is How Contagion From Evergrande\u2019s Default Will Spread To The Rest Of The World<\/a>.) Spoiler alert: a default is coming because Chinese authorities have already told major lenders not to expect repayment.<\/p>\n

So far, Bloomberg and Durden\u2019s Zerohedge have reported<\/a> on at least eight investment-grade companies that have pulled their bond offerings over the Evergrande crisis. Moreover, Durden and many others predicted Evergrande\u2019s falter months ago as one person tweeted<\/a>: \u201cEvergrande bond flush update. If you\u2019re wondering why you should care\u2026 you will learn soon\u201d on July 20, 2021.<\/p>\n

<\/p>\n

Janet Yellen\u2019s Plea to Raise the Debt Ceiling Before Possible October Default<\/h2>\n

Meanwhile, U.S. Treasury secretary Janet Yellen has shown that she is concerned<\/a> about defaults. On Sunday, Yellen asked lawmakers in Congress to raise the federal debt ceiling and said that if the U.S. defaults on debt it could be disastrous by compounding on top of the Covid-19 pandemic effects.<\/p>\n

\u201cWe would emerge from this crisis a permanently weaker nation,\u201d Yellen stressed. While Evergrande\u2019s imminent default is being predicted, Yellen said the U.S. could default by October. At that time, the Treasury will have exhausted all the cash reserves it has on hand and will be limited by the debt ceiling, the Treasury secretary said.<\/p>\n

\u201cWe can borrow more cheaply than almost any other country, and defaulting would jeopardize this enviable fiscal position. It would also make America a more expensive place to live, as the higher cost of borrowing would fall on consumers,\u201d Yellen explained. \u201cMortgage payments, car loans, credit card bills\u2014everything that is purchased with credit would be costlier after default.\u201d<\/p>\n

Dear @federalreserve<\/a> can we just skip the drama and go to the part where you start buying ETFs and stocks?<\/p>\n

Everyone knows it’s coming<\/p>\n

\u2014 zerohedge (@zerohedge) September 20, 2021<\/a><\/p>\n<\/p>\n

On Monday, U.S. stocks like the Dow Jones, Nasdaq, NYSE, and more dropped a great deal in value during the morning trading sessions and have continued to sink lower as the day continues. Gold markets dropped to lows not seen in six months and the crypto economy shed more than $250 billion<\/a> in 24 hours time.<\/p>\n

What do you think about global markets getting roiled by Evergrande Group\u2019s default fears? What do you think about Janet Yellen\u2019s call to raise the United States\u2019 debt ceiling? Let us know what you think about this subject in the comments section below.<\/strong><\/em><\/p>\n

Bitcoin News
\nEconomics, Bloomberg, China, China real estate, Chinese real estate, credit contagion, crypto economy, Debt Ceiling Raise, Default, Default Risk, economic, economic slide, Economy, Evergrande, Evergrande Group, Evergrande Real Estate Group, gold, Hong Kong, Janet Yellen, property markets in China, stocks, Treasury Secretary, Tyler Durden, US Debt, US Debt Ceiling, ZeroHedge<\/p>\n","protected":false},"excerpt":{"rendered":"

Global investors have their eyes peeled on the Evergrande Group or the Evergrande Real Estate Group, China\u2019s second-largest property developer by sales. Evergrande Group shares nosedived on Monday dropping to 11-year lows and many analysts and economists are concerned about a possible credit contagion. Credit problems with China\u2019s real estate industry have affected global markets…<\/p>\n","protected":false},"author":0,"featured_media":12340,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[53,3],"tags":[],"class_list":["post-12339","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blockchain-news","category-coin-news"],"_links":{"self":[{"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/posts\/12339"}],"collection":[{"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/comments?post=12339"}],"version-history":[{"count":0,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/posts\/12339\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/media\/12340"}],"wp:attachment":[{"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/media?parent=12339"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/categories?post=12339"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buyucoin.com\/crypto-labs\/wp-json\/wp\/v2\/tags?post=12339"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}