Below 14% in May 2021, Evergrande yields would be at 75% by mid-October. While Beijing stuck a band aid on Huarong (recapitalization), the blood would soon be spurting from numerous wounds. Recall that Chinese Crisis Dynamics began with the Huarong eruption in April 2021.
In short, as we've witnessed in recent weeks, many independent yet interrelated Bubbles create extraordinarily complex (and erratic) global dynamics.Īcute China Bubble fragility last year was a key dynamic working to sustain ultra-low global bond yields (thus elsewhere extending "Terminal Phase Bubble Excess") even in the face of intensifying inflationary pressures. And speculative dynamics have never before played such a pivotal role in global liquidity dynamics. There are also faltering Bubble sequencing issues, along with a dispersion of policy responses. There is the complex "Periphery to Core" dynamic. This creates significant analytical challenges.
The world is these days literally confronting scores of Bubbles, some bursting and others at the cusp. Bubble excess could not have been more systemic on a global basis. This provided unparalleled durability to Bubble Dynamics, where years of the most egregious excess (i.e., monetary, fiscal, leveraged speculation, Bubbles, manias, mal-investment, etc.) wreaked historic financial and economic structural maladjustment. Bubble Dynamics went to the foundation of global "money" - central bank Credit and government debt. The global Bubble period was unprecedented in scope and duration. Beijing moved aggressively with a $600 billion stimulus program, as China and the developing world provided the key "economic locomotive" driving global recovery. It's worth noting that while the so-called "great financial crisis" (GFC) was global, it was not in the true sense of the term "systemic." Importantly, China and EM (generally) were at the time of the crisis demonstrating strong inflationary biases (i.e., vigorous Credit growth, asset inflation, speculative impulses, economic momentum, etc.). Post-2008 crisis reflationary measures were unprecedented on a global basis. This critical dynamic ensured the Bubble period was more prolonged, excesses broader and deeper, and associated financial and economic structural impairment much greater. This historic Bubble was - at the margin - financed by perceived safe and liquid (money-like) "AAA" mortgage securities and derivatives (too much acquired for leveraged speculation). The resulting mortgage finance Bubble was more systemic. It helped tremendously that housing and mortgage finance were, even in the midst of the bursting tech Bubble, demonstrating powerful inflationary biases. Importantly, since the Bubble was not systemic, the system readily responded to Fed reflationary measures. The Bubble was reasonably well contained within the technology, telecom and media sectors. "tech" Bubble was financed, at the margin, by high-yield debt (telecom, in particular), speculative hedge fund levered finance, and GSE liquidity. 09, 2022 5:13 AM ET ACTV, AFMC, AFSM, AMER, ARKK, AVUV, BAPR, BAUG, BBMC, BBSC, BFOR, BFTR, BJUL, BJUN, BKMC, BKSE, BMAR, BMAY, BOCT, BOSS, BOUT, BUFF, BUL, CALF, CATH, CBSE, CSA, CSB, CSD, CSF, CSML, CSTNL, CWS, CZA, DDIV, DEEP, DES, DEUS, DFAS, DFAT, DGRS, DIA, DIV, DJD, DON, DSPC, DVLU, DWAS, DWMC, EES, EFIV, EPS, EQAL, ESML, ETHO, EWMC, EWSC, EZM, FAB, FAD, FDM, FFTY, FLQM, FLQS, FNDA, FNK, FNX, FNY, FOVL, FRTY, FSMD, FTA, FTDS, FYC, FYT, FYX, GBGR, GLRY, GSSC, HAIL, HIBL, HIBS, HLGE, HOMZ, HSMV, IJH, IJJ, IJK, IJR, IJS, IJT, IMCB, IMCG, IMCV, IPO, ISCB, ISCG, ISCV, ISMD, IUSS, IVDG, IVE, IVOG, IVOO, IVOV, IVV, IVW, IWC, IWM, IWN, IWO, IWP, IWR, IWS, IYY, JDIV, JHMM, JHSC, JPME, JPSE, JSMD, JSML, KAPR, KJAN, KJUL, KNG, KOMP, KSCD, LSAT, MDY, MDYG, MDYV, MGMT, MID, MIDE, MIDF, NAPR, NIFE, NJAN, NOBL, NUMG, NUMV, NUSC, NVQ, OMFS, ONEO, ONEQ, ONEV, ONEY, OSCV, OUSM, OVS, PAMC, PAPR, PAUG, PBP, PBSM, PEXL, PEY, PJAN, PJUN, PLTL, PQLC, PQSG, PQSV, PRFZ, PSC, PTMC, PUTW, PWC, PY, QDIV, QMOM, QQC, QQD, QQEW, QQQ, QQQA, QQQE, QQQJ, QQQM, QQQN, QQXT, QTEC, QVAL, QVML, QVMM, QVMS, QYLD, QYLG, REGL, RFG, RFV, RNMC, RNSC, ROSC, RPG, RPV, RSP, RVRS 17 Comments 20 Likes
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