Hosts: Ansel Lindner and Christian Keroles
Listen To This Episode: Apple / Spotify / Google / Libsyn / Overcast / RSS
Fed Watch is a macro podcast with a true rebellious bitcoin nature. Each episode we question mainstream and bitcoin narratives by examining current events in macro from across the globe, with an emphasis on central banks and currencies.
In this episode, CK and I catch up on the week, go through an update on the evolving Chinese financial crisis, talk about why “fiat” money today should rightly be called credit-based money and the side effects of that fact, and lastly, we dive into the bitcoin chart and so forth.
You can access this episode’s slide deck of charts here or below, depending on the medium where you are viewing these show notes.
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ChinaFirst up, is the situation in the Chinese economy. They are facing some major issues in their real estate market, economy and banking system. Currently, 28 of the top 100 real estate developers have defaulted on or restructured their debts. There is a growing “mortgage boycott”, where purchasers of unbuilt housing units in projects that are now delayed due to the pandemic, developer financial situation, and zero Covid policy, have refused to pay their mortgages. It started with 20 projects and has since grown to 230 projects.
The boycott accounts for roughly 100,000 households refusing to pay their mortgages. This amounts to 0.1-0.5% of all outstanding mortgages and 1% of outstanding mortgage value.
The rhetoric around this mortgage crisis is eerily similar to that in the US in 2007. Excuses like it is a small number of mortgages, effects are contained, and others are being used.
As a result of the developer and mortgage problems, small and medium-sized banks are running into solvency issues. Chinese banks have $9 trillion in exposure to real estate and it accounts for 20% of bank assets. You can see if there were a problem with perpetually falling home prices, it could very quickly cause a solvency issue for banks as well. Indeed, that is exactly what we are seeing.
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