I haven’t been updating every twist and turn of the Evergrande collapse, but we’re going to look at it again because this Peter Zeihan video has a fairly staggering statistic. He asserts that there are 1.5 BILLION (with a B) unoccupied housing units in China. Even though we already knew about the ghost cities, that’s like an entire ghost nation for a China that was already headed down the economic crapper.
“A Hong Kong court has ruled that China’s largest property development group, Evergrande, is bankrupt and needs to be broken up. This is something that the Chinese government has spent a lot of effort on the last two years not happening.”
“There’s two big things that dominate the Chinese economy. The first is something I call hyperfinancialization: The idea that the government both de facto confiscates the savings of the citizen population so it can only go into projects funded by Chinese State Banks, as well as massively expanding the money supply to a tune of like almost triple what we have here in the United States.”
“It’s a public stability political control approach to finance. It’s not about profit, it’s about throughput, because throughput requires a lot of bodies.”
“Number one, you get companies like Evergrande, who gorge on all this bottomless supply of debt to build build, build, build, build, even if there’s no demand.”
“Second, you get a population who knows that their private savings is almost worthless, because the Chinese government is forcing them to keep it in the state banks, and they want to put it into a hard asset that preferably the state can’t control. And if they can’t get their money out of the country, then the next best thing is a hard asset in the country, which typically is property.”
“You have somewhere probably in the vicinity of 1.5 billion units in the country that have never been lived in, never will be lived in. So you’re talking about 100% overbuild, conservatively. Some estimates say it’s as high as three billion, which is just so far beyond stupid.”
“How many vacant homes are there now? Each expert gives a very different number, with the most extreme believing the current number of vacant homes are enough for 3 billion people,” said He Keng, 81, a former deputy head of the statistics bureau.
“That estimate might be a bit much, but 1.4 billion people probably can’t fill them,” He said at a forum in the southern Chinese city Dongguan, according to a video released by the official media China News Service.
That’s people, not homes. Still, even if you cut it in half, to 750 million vacant condos, that’s a huge number. That’s the equivalent of 30 empty Shanghais.
Back to Zeihan:
“Evergrande going down means that their debts aren’t going to be serviced anymore, and the physical assets they have are going to be parceled up and foreign investors are going to be coming in seeing what bits that they can get.” Any foreigners investing in Chinese real estate need their heads examined.
“These things are things that the Chinese Communist Party would not normally allow to happen, so there’s a couple ways that this can go, none of them are good.”
“Option number one is we follow a western style bankruptcy and restitution program where this system is broken up and a lot of their assets are sold at pennies, maybe dimes, on a dollar.”
“You can count on private citizens being up in arms. I mean, the best estimate I’ve seen out of China is at 70% of total private savings is wrapped up in real estate, and most of these assets are worth no more than 10 cents on the dollar.”
“You have a fire sale of the single largest player which controls one sixth of the market, holy shit, things are going to get real very, very, very quickly.”
“Option number two is that the Chinese step in and abrogate the Hong Kong ruling. Now legally this cannot happen, but the Chinese Communist party is not really big on legal details when it comes to Hong Kong in particular.”
“Then Evergrande goes on some sort of state drip and everything with the system just kind of limps on, with the understanding now that Hong Kong has no legal authority over its own holdings, which will start an exodus of what few international firms are still there.”
“Regardless how this goes, don’t expect anything in the market to get better.”
“Evergrande may be the biggest player in this market, but it is by far not the only one who’s been doing stupid things like this, building condos that have no demand or running it like a Ponzi scheme. Every development company in the country basically operates this this way, and the second and third largest players in the industry are state-owned.”
“Even if all of a sudden this place were run by a bunch of Austrian economists, it’s too late.” Because of the one-child policy, there simply aren’t enough people of home-buying age.”
“I don’t want to say anything overly dramatic as ‘This is where it all starts to fall apart,’ because we’ve had a lot of things like that go down in the last 18 months. But this cuts to the core of what enables the average [Chinese] citizen to actually support the government, and there’s no way we move forward from this without a lot of side damage.”
The Chinese economy is already sucking. If the housing oversupply is really as bad as Zeihan makes out, China is in for an economic upheaval that makes 1929 look like a mild case of the hiccups.
Remember the bank runs in China story after all those bank accounts in Hunan were frozen? I’ve been looking for signs of wider contagion amidst the Chinese banking sector, and mostly haven’t seen it. But I have seen a lot of other cracks appear in China’s overall economic system, so here’s a roundup.
One reaction to the frozen accounts: “Chinese Bank Run Turns Violent After Angry Crowd Storms Bank of China Branch Over Frozen Deposits.”
A large crowd of angry Chinese bank depositors faced off with police Sunday in the city of Zhengzhou, and many were injured as they were taken away, amid the freezing of their deposits by some rural-based banks.
The banks froze millions of dollars worth of deposits in April, telling customers they were upgrading their internal systems. The banks have not issued any communication on the matter since, depositors said.
According to Chinese media the frozen deposits across the various local banks could be worth up to $1.5 billion and authorities are investigating the three banks.
On Sunday, about 1,000 people gathered outside the Zhengzhou branch of China’s central bank on Sunday to demand action; they held up banners and chanted slogans on the wide steps of the entrance to a branch of China’s central bank in the city of Zhengzhou in Henan province, about 620 kilometers (380 miles) southwest of Beijing.
China’s communist government reacted to the protests with their usual tact and understanding:
But it looks like some of them will finally get some money back:
(Plus more on the property slump.)
The official line on the Hunan account freeze: “Henan police said in a statement on July 10 that further investigations showed that, since 2011, a criminal group led by a suspect named Lu Yi had gradually taken control of several rural banks, through companies including the Henan New Wealth Group, to illegally transfer out funds. The police said they had arrested more suspects and seized more assets involved in the case.” I have no doubt the aforementioned were probably guilty, but I bet a whole lot more bank officials, regulators, and CCP officials (to the extent that those are separate groups and not mostly-overlapping Venn circles) were in on the scheme, plus a whole bunch more in dozens of other schemes that siphoned off depositor money into various pockets and a host of entirely different schemes. As I’ve said before, it’s smoke and mirrors all the way down.
Another thing driving unrest: “Rotten tail buildings,” that is residential buildings on which all construction is stopped, but for which those with mortgages for individual units are still expected to pay for:
A rapidly increasing number of “disgruntled Chinese homebuyers” are refusing to pay mortgages for unfinished construction projects, exacerbating the country’s real estate woes and stoking fears that the crisis will spread to the wider financial system as countless mortgages default.
According to researcher China Real Estate Information, homebuyers have stopped mortgage payments on at least 100 projects in more than 50 cities as of Wednesday, up from 58 projects on Tuesday and only 28 on Monday, according to Jefferies Financial Group Inc. analysts including Shujin Chen.
And that was over a week ago.
According to Citi analysts, average selling prices of properties in nearby projects in 2022 were on average 15% lower than purchase costs in the past three years. Meanwhile, it’s only getting worse as China’s home prices fell for a ninth month in May, with June figures set for release Friday.
The crisis engulfing Chinese developers is reaching a new phase, with a debt selloff expanding to firms once deemed safe from the cash crunch, including investment-grade names such as Country Garden Holdings, the largest builder by sales.
The payment refusals, which come at a time when China’s economy is set to post what may be a negative GDP print due to the latest economic shutdown over Xi’s catastrophic zero covid policies, underscore how the storm engulfing China’s property sector is now affecting hundreds of thousands of average citizens, posing a threat to social stability ahead of a Communist Party Congress later this year. Chinese banks already grappling with challenges from liquidity stress among developers now also have to brace for homebuyer defaults.
As a result of the unprecedented push for a debt jubilee, shares of China’s banks extended their recent decline Thursday, with the CSI 300 Banks Index falling as much as 3.3% before closing down 2.2%. A Bloomberg Intelligence index of Chinese developer stocks slid as much as 2.7%, even though Chinese lenders were quick to try and dispel fears that the movement could crash the economy: according to Bank of Communications, its outstanding balance of overdue mortgage loans linked to housing projects with risks of delayed delivery is 99.8 million yuan, accounting for 0.0067% of its domestic housing mortgage balance. The bank added that its housing mortgage loan quality is stable and risks are controllable, the Shanghai-based lender says in an exchange filing. At the same time, Postal Savings Bank of China says its overdue mortgage loans linked to halted housing projects is 127m yuan, and risks are controllable. Of course, it’s not like Chinese banks would ever lie, now is it?
The Great Debt Jubilee is picking up speed: China’s homebuyer mortgage boycott, which prompted Beijing to scramble to avoid a potentially devastating crash in what is the world’s biggest asset is spreading, and according to Bloomberg, some suppliers to Chinese real estate developers are now also refusing to repay bank loans because of unpaid bills owed to them, a sign that the loan boycott that started with homebuyers is starting to spread.
In a jarring case study of what happens when a ponzi scheme goes into reverse, hundreds of contractors to the property industry complained that they can no longer afford to pay their own bills because developers including China Evergrande Group still owe them money, Caixin reported, citing a statement it received from a supplier Tuesday.
Similar to homebuyers who have taken a stand and refuse to pay for properties that remain uncompleted, one group of small businesses and suppliers circulated a letter online saying they will stop repaying debts after Evergrande’s cash crisis left them out of pocket.
“We decided to stop paying all loans and arrears, and advise our peers to decline any requests to be paid on credit or commercial bill,” the group said in the letter dated July 15, which was sent to the developer’s Hubei office. “Evergrande should be held responsible for any consequence that follows because of the chain reaction of the supply-chain crisis.”
As Bloomberg oh so perceptively puts it, “the payments protest is the latest sign of how a movement by homebuyers to boycott mortgages on unfinished homes in China is spreading to affect other sectors in the economy.”
Yes it is, and it’s also why Beijing should be freaking out (if it isn’t), because what is taking place in China is far worse than what took place in March 2020 when the global credit machinery ground to a halt, only back then it’s because there was no other option, now it’s a voluntary development and not even fears of reprisals from China’s ruthless, authoritarian, Lebron-beloved dictatorship is stopping millions of people from calling for a systemic boycott, one which can topple China’s entire $60 trillion financial system in moments.
Probably an overstatement, just because it takes a whole lot to overcome the inertia of the average Chinese citizen just wanting to keep their head down and not be the nail that sticks up.
Embattled Chinese real estate giant Evergrande is expected to deliver a preliminary restructuring plan this week, following the exit of two bosses.
The firm says its chief executive and finance head have resigned, after an internal probe found that they misused around $2bn (£1.7bn) in loans.
Chinese businessmen misusing funds? Try to contain your shock.
Evergrande has more than $300bn in liabilities and defaulted on its debts late last year.
The crisis has spooked traders who fear contagion in China’s property sector.
On Friday, Evergrande said it found that chief executive Xia Haijun and chief financial officer Pan Darong were involved in diverting 13.4bn yuan ($2bn; £1.7bn) in loans secured by its property services unit to the wider group.
The firm said in a filing to the Hong Kong Stock Exchange that Mr Xia and Mr Pan had resigned because of their “involvement in the arrangement of the pledges”.
Getting caught trying to cook the books even after it’s hit the fan. Classic Chinese management.
The U.S. Securities and Exchange Commission has started the process, compelled by a 2020 law, and investors have started to pay attention. So has China, which moved to potentially clear a big hurdle that stymied U.S. regulators for years.
1. Why does the U.S. want access to audits?
The 2002 Sarbanes-Oxley Act, enacted in the wake of the Enron Corp. accounting scandal, required that all public companies have their audits inspected by the U.S. Public Company Accounting Oversight Board. According to the SEC, more than 50 jurisdictions work with the board to allow the required inspections, while two historically have not: China and Hong Kong. The long-simmering issue morphed into a political one as tensions between Washington and Beijing ratcheted up during the administration of President Donald Trump. The Chinese chain Luckin Coffee Inc., which was listed on Nasdaq, was found to have intentionally fabricated a chunk of its 2019 revenue. The following year, in a rare bipartisan move, Congress moved to force action.
2. Where does it stand?
As required by the law, known as the Holding Foreign Companies Accountable Act or HFCAA, the SEC in March started publishing its “provisional list” of companies identified as running afoul of the requirements. While the move had long been telegraphed, the first batch of names fueled a sharp decline in U.S. shares of companies based in China and Hong Kong as it dashed hopes for some kind of compromise. In all, the PCAOB has said it’s blocked from reviewing the audits of more than 200 of those businesses. The companies say Chinese national security law prohibits them from turning over audit papers to U.S. regulators. SEC Chair Gary Gensler said in late March that the Chinese authorities faced “a hard set of choices.” Days later, China announced it would modify a 2009 rule that restricted the sharing of financial data by offshore-listed firms, potentially clearing one obstacle.
3. What is China changing?
The China Securities Regulatory Commission said the requirement that on-site inspections should be mainly conducted by Chinese regulatory agencies or rely on their inspection results would be removed. It said it would provide assistance for cooperation with foreign regulators. The CSRC said it’s rare in practice that companies need to provide documents containing confidential and sensitive information. However, if required during the auditing process, they must obtain approvals in accordance with related laws and regulations.
4. What’s the broader issue?
Critics say Chinese companies enjoy the trading privileges of a market economy — including access to U.S. stock exchanges — while receiving government support and operating in an opaque system. In addition to inspecting audits, the HFCAA requires foreign companies to disclose if they’re controlled by a government. The SEC is also demanding that investors receive more information about the structure and risks associated with shell companies — known as variable interest entities, or VIEs — that Chinese companies use to list shares in New York. Since July 2021, the SEC has refused to greenlight new listings. Gensler has said more than 250 companies already trading will face similar requirements.
5. How soon could Chinese companies be delisted?
Nothing is going to happen this year or even in 2023, which explains why markets initially took the possibility in their stride. Under the HFCAA, a company would be delisted only after three consecutive years of non-compliance with audit inspections. It could return by certifying that it had retained a registered public accounting firm approved by the SEC.
6. How many companies will be affected?
There’s not much discretion. If a company from China or Hong Kong trades in the U.S. and files an annual report, it will soon find itself on the SEC’s list simply because those have been identified as non-compliant jurisdictions. In the March interview, Gensler pointed out that the law focuses on non-compliant countries, rather than specific companies.
For that and other reasons, Beijing is looking to impose more controls to prevent capital flight.
What would a “China is screwed” roundup be like without a Peter Zeihan video?
“Demographically they’re in collapse…China’s not even going to survive this decade. They don’t even have the numbers to try…China doesn’t have the naval capacity to secure markets and resources….Xi Jinping has enacted a cult of personality that is tighter than anything that has existed through Chinese history. It’s gotten so tight that no one wants to bring him information about anything…This is how countries die.” Plus: China doesn’t know how to store grain.
The widely acclaimed globalization of the post-Cold War era is now running in reverse. A protracted slowdown in global trade has been reinforced by persistent pandemic-related supply-chain disruptions, ongoing pressures of the US-China trade war, and efforts to align cross-border economic ties with geostrategic alliances (“friend-shoring”). These developments tighten the noose on China, arguably the country that has been the greatest beneficiary of modern globalization.
Of the many metrics of globalization, including financial, information, and labor flows, the cross-border exchange of goods and services is most closely tied to economic growth. Largely for that reason, the slowdown in global trade, which commenced in the aftermath of the 2008-09 global financial crisis and intensified in the COVID-19 era, points to a sea change in globalization. While global exports went from 19% of world GDP in 1990 to a peak of 31% in 2008, in the thirteen years that followed (2009-21), global exports have averaged just 28.7% of world GDP. Had world exports expanded on a 6.4% trajectory – halfway between the blistering 9.4% pace of 1990-2008 and the subdued post-2008 rate of 3.3% – the export share of global GDP would have soared to 46% by 2021, far above the actual share of 29%.
China’s gains from the globalization of trade have been extraordinary. In the decade prior to China’s 2001 accession to the World Trade Organization, Chinese exports averaged just 2% of total world exports. By 2008, that share had risen nearly fourfold, to 7.5%. China had timed its WTO membership bid perfectly, just when the global trade cycle was on a major upswing. While the financial crisis took a brief toll on Chinese export momentum, the interruption was short-lived. By 2021, Chinese exports had surged to 12.7% of world exports, well above the pre-2008 peak.
China is unlikely to maintain this performance. Overall growth of global trade is slowing, and China’s slice of the trade pie is under mounting pressure.
The ongoing trade war with the United States is especially problematic. During the first phase of China’s export-led growth surge in the aftermath of WTO accession, the US was consistently China’s largest source of external demand. Largely due to former US President Donald Trump’s tariffs, that is no longer the case. By 2020, US imports of Chinese goods and services had fallen 19% below the peak levels of 2018. Despite rebounding sharply on the heels of the US economy’s post-pandemic snapback, in 2021, US imports from China remained 5% below the 2018 peak. Partial tariff rollbacks for selected consumer products, which President Joe Biden’s administration is apparently considering as an anti-inflation gambit, are unlikely to jump-start bilateral trade.
At the same time, enduring pandemic-related supply-chain disruptions are likely to take a sharp toll on China and the rest of the world.Over the six months ending in April, a “global supply chain pressures index” constructed by researchers at the Federal Reserve Bank of New York averaged 3.6, well above the 2.3 reading in the first 21 months following the February 2020 onset of pandemic-related lockdowns, and sharply higher than the “zero” reading associated with the absence of supply-chain disruptions.
This is a big deal for a world connected by supply chains. Global value chains accounted for more than 70% of the cumulative growth in overall global trade from 1993 to 2013, and China has enjoyed an outsize share of this GVC-enabled expansion. As supply-chain disruptions persist, exacerbated by China’s zero-COVID policies, pressures on Chinese and global economic activity are likely to remain intense.
Mounting geostrategic tensions are the wild card in deglobalization, especially their implications for China. “Friend-shoring” in effect turns Ricardo’s efficiency calculus of cross-border trade into an assessment of the security benefits that come from strategic alliances with like-minded countries. China’s new unlimited partnership with Russia looms especially relevant in this regard. With China edging closer to crossing the line by providing support to Russian military efforts in Ukraine, the US has recently moved to impose sanctions on five more Chinese companies through its so-called Entity List.
You’ve heard about the ghost cities. Did you hear about the failed ghost developments that were built as weird, cheap imitations of western structures?
Is Xi Jinping in danger from a coup?
No doubt I’ve missed many other examples of cracks in China’s economic edifice. Feel free to share them in the comments below.
If it looks like I’ve been absent from Twitter, it’s because I received a seven day timeout merely for posting one of Twitter’s pre-loaded gifs, probably this one:
(If it’s not animated, it says “Die in a fire” at the end.)
Josh Rogin delivers an unnerving scoop in the Washington Post:
Administration sources confirmed that in an October call between Deputy Secretary of State Wendy R. Sherman and Sen. Jeff Merkley (D-Ore.), the other co-sponsor, Sherman made it clear that the administration prefers a more targeted and deliberative approach to determining which [Chinese] goods are the products of forced labor. She also told Merkley that getting allied buy-in was critical and more effective than unilateral action.
“To be clear, the Department of State is not opposing this amendment,” a State Department spokesman told me. “We share the Congress’ concerns about forced labor in Xinjiang.”
In other words, while the administration supports the legislation in public, they are asking Democrats to essentially water it down in private. Sherman’s specific criticism relates to a part of the bill that would require a presumption that all products coming from Xinjiang are tainted by forced labor unless the importer can prove otherwise. This happens to be the exact provision corporations are also objecting to. Maybe it’s a coincidence.
“It isn’t partisan or in any way controversial for the U.S. to be unequivocally, resoundingly opposed to genocide and slave labor,” Merkley told me. “The Senate passed this legislation in July, and it’s time to get it over the finish line.”
Watering down congressional efforts to punish China for the Uyghur genocide is not what Joe Biden promised when he was running for office, or when he took office.
Snip.
Month by month, the Biden administration is proving more and more reticent to confront the Chinese government in substantive and consequential ways. The investigation into the origins of COVID-19 is effectively dropped, and Biden didn’t mention China’s refusal to cooperate with the WHO’s separate investigation in his teleconference summit with Xi Jinping.
Biden did not mention China, the Uyghurs, Hong Kong, or the origins of COVID-19 in his address to the United Nations.
Snip.
Elsewhere, Biden nominated Reta Jo Lewis to run the U.S. Export-Import Bank. Senator Marco Rubio contends that, “Reta Jo Lewis is currently a strategic advisor for the U.S.-China Heartland Association, which is a conduit for the Chinese Communist Party’s (CCP) United Front Work Department (UFWD), which aims to influence key Americans at the subnational level and ultimately undermine America’s national interests.”
As I noted yesterday, even the proposed diplomatic boycott of the Olympics is moot, because the Chinese government announced that U.S. politicians were not invited before Biden could even officially announce the decision.
The rumors started circulating in July: Vice President Harris’s staff was wilting in a dysfunctional and frustrated office, burned out just a few months after her historic swearing-in and pondering exit strategies. A few days later, Harris hosted an all-staff party at her official residence, where most of her office bit into hamburgers and posted pictures of smiling, congenial co-workers on Twitter, pixelated counterpoints to the narrative of an office in shambles.
“Let me tell you about these burgers at the VP’s residence!!” chief Harris spokesperson Symone Sanders gushed in a tweet. “The food was good and the people were amazing.” Her official defense against reports of staff unrest was more searing. She called people who lobbed criticism behind nameless quotes “cowards” and stressed that working for a groundbreaking vice president was a difficult job, but not a dehumanizing one. “We are not making rainbows and bunnies all day,” she told one outlet. “What I hear is that people have hard jobs and I’m like ‘welcome to the club.’ ”
Five months later, Sanders is leaving the vice president’s office, the highest-profile member of an end-of-year exodus that includes communications chief Ashley Etienne and two other staffers who help shape the vice president’s public image. Sanders told The Washington Post her departure is not due to any unhappiness or dysfunction, but rather because she is ready for a break after three years of the relentless pressure that came with speaking for and advising Biden and Harris while navigating a global pandemic.
But the quartet of soon-to-be-empty desks reignited questions about why Harris churns through top-level Democratic staff, an issue that has colored her nearly 18 years in public service, including her historic but uneven first year as vice president. Now, those questions about her management extend to whether it will hamper her ability to seek and manage the presidency.
“Historic” because she checks social justice warrior diversity boxes, “uneven” because the Post will never be allowed to call it “horrible” for the same reason.
Critics scattered over two decades point to an inconsistent and at times degrading principal who burns through seasoned staff members who have succeeded in other demanding, high-profile positions. People used to putting aside missteps, sacrificing sleep and enduring the occasional tirade from an irate boss say doing so under Harris can be particularly difficult, as she has struggled to make progress on her vice-presidential portfolio or measure up to the potential that has many pegging her as the future of the Democratic Party.
“One of the things we’ve said in our little text groups among each other is what is the common denominator through all this and it’s her,” said Gil Duran, a former Democratic strategist and aide to Harris who quit after five months working for her in 2013. In a recent column, he said she’s repeating “the same old destructive patterns.”
“Who are the next talented people you’re going to bring in and burn through and then have (them) pretend they’re retiring for positive reasons,” he told The Post.
The Washington Post spoke with 18 people connected to Harris for this story, including former and current staffers, West Wing officials and other supporters and critics. Some spoke on the condition of anonymity to be more candid about a sensitive topic. The vice president’s office declined to address questions about Harris’s leadership style.
Her defenders say the criticism against her is often steeped in the same racism and sexism that have followed a woman who has been a first in every job she’s done over the past two decades.
“Shut up, because social justice!”
Her selection as President Biden’s vice president, they say, makes her a bigger target because many see her as the heir apparent to the oldest president in the nation’s history.
“Shut up, because social justice!”
They also say Harris faces the brunt of a double standard for women who are ambitious, powerful or simply unafraid to appear strong in public.
“Shut up, because social justice!”
Some pro-forma Harris defense snipped.
Staffers who worked for Harris before she was vice president said one consistent problem was that Harris would refuse to wade into briefing materials prepared by staff members, then berate employees when she appeared unprepared.
“It’s clear that you’re not working with somebody who is willing to do the prep and the work,” one former staffer said. “With Kamala you have to put up with a constant amount of soul-destroying criticism and also her own lack of confidence. So you’re constantly sort of propping up a bully and it’s not really clear why.”
For both critics and supporters, the question is not simply where Harris falls on the line between demanding and demeaning. Many worry that her inability to keep and retain staff will hobble her future ambitions.
Why should we remotely worry about her future ambitions when she’s obviously not even up to her current job?
Biden’s plans to relieve port crowding at LA/Long Beach haven’t worked.
Looking all the way back to Nov. 2, five weeks ago, the total number of excess dwell containers in Long Beach was down 22% as of Wednesday (the decrease is even higher, at 32%, when comparing to Oct. 28). Yet the numbers in Long Beach have plateaued more recently. Furthermore, the number of total import containers at Long Beach terminals has not decreased — it has actually slightly increased. There were 57,042 import containers at Long Beach terminals on Nov. 1 and 57,970 on Tuesday.
I embraced my people, and my people embraced me. They gave me everything I had always imagined I wanted: a Ph.D. from an Ivy League university; a professorship at NYU, complete with a roomy office overlooking Washington Square Park; book deals; columns in smart little publications; invitations to the sort of soirees where you could find yourself seated next to Salman Rushdie or Susan Sontag or any number of the men and women you grew up reading and admiring. The list goes on. Life was good. I was grateful.
And then came The Turn. If you’ve lived through it yourself, you know that The Turn doesn’t happen overnight, that it isn’t easily distilled into one dramatic breakdown moment, that it happens hazily and over time—first a twitch, then a few more, stretching into a gnawing discomfort and then, eventually, a sense of panic.
You may be among the increasing numbers of people going through The Turn right now. Having lived through the turmoil of the last half decade—through the years of MAGA and antifa and rampant identity politics and, most dramatically, the global turmoil caused by COVID-19—more and more of us feel absolutely and irreparably politically homeless. Instinctively, we looked to the Democratic Party, the only home we and our parents and their parents before them had ever known or seriously considered. But what we saw there—and in the newspapers we used to read, and in the schools whose admission letters once made us so proud—was terrifying. However we tried to explain what was happening on “the left,” it was hard to convince ourselves that it was right, or that it was something we still truly believed in. That is what The Turn is about.
You might be living through The Turn if you ever found yourself feeling like free speech should stay free even if it offended some group or individual but now can’t admit it at dinner with friends because you are afraid of being thought a bigot. You are living through The Turn if you have questions about public health policies—including the effects of lockdowns and school closures on the poor and most vulnerable in our society—but can’t ask them out loud because you know you’ll be labeled an anti-vaxxer. You are living through The Turn if you think that burning down towns and looting stores isn’t the best way to promote social justice, but feel you can’t say so because you know you’ll be called a white supremacist. You are living through The Turn if you seethed watching a terrorist organization attack the world’s only Jewish state, but seethed silently because your colleagues were all on Twitter and Facebook sharing celebrity memes about ending Israeli apartheid while having little interest in American kids dying on the streets because of failed policies. If you’ve felt yourself unable to speak your mind, if you have a queasy feeling that your friends might disown you if you shared your most intimately held concerns, if you are feeling a bit breathless and a bit hopeless and entirely unsure what on earth is going on, I am sorry to inform you that The Turn is upon you.
Snip.
You don’t get to be “against the rich” if the richest people in the country fund your party in order to preserve their government-sponsored monopolies. You are not “a supporter of free speech” if you oppose free speech for people who disagree with you. You are not “for the people” if you pit most of them against each other based on the color of their skin, or force them out of their jobs because of personal choices related to their bodies. You are not “serious about economic inequality” when you happily order from Amazon without caring much for the devastating impact your purchases have on the small businesses that increasingly are either subjugated by Jeff Bezos’ behemoth or crushed by it altogether. You are not “for science” if you refuse to consider hypotheses that don’t conform to your political convictions and then try to ban critical thought and inquiry from the internet. You are not an “anti-racist” if you label—and sort!—people by race. You are not “against conformism” when you scare people out of voicing dissenting opinions.
When “the left” becomes the party of wealthy elites and state security agencies who preach racial division, state censorship, contempt for ordinary citizens and for the U.S. Constitution, and telling people what to do and think at every turn, then that’s the side you are on, if you are “on the left”—those are the policies and beliefs you stand for and have to defend. It doesn’t matter what good people “on the left” believed and did 60 or 70 years ago. Those people are dead now, mostly. They don’t define “the left” anymore than Abraham Lincoln defines the modern-day Republican Party or Jimi Hendrix defines Nickelback.
“The defaults of Evergrande and Kaisa move us to the second step of this China Property downturn, with systemic risk being gradually replaced by idiosyncratic risk,” said Robin Usson, credit analyst at Federated Hermes. He is of course referring to the much bigger risk that is the downturn in China’s residential – and in general property – sector, which as Goldman recently showed is the world’s largest asset and arguably the most important pillar propping up China’s entire economy. Should China’s housing market crash, all bets are off.
Smoke and mirrors all the way down…
Study: “It is almost certain that in Wisconsin’s 2020 election the number of votes that did not comply with existing legal requirements exceeded Joe Biden’s margin of victory.” (Hat tip: TPPF.)
The rising star on the right is Eric Zemmour, who, writes The New York Times, “became one of France’s best-selling authors in the past decade by writing books on the nation’s decline — fueled, he said, by the loss of traditional French and Christian values, the immigration of Muslim Africans bent on a reverse colonization of France, the rise of feminism and the loss of virility, and a ‘great replacement’ of white people.”
Zemmour is being called “the Donald Trump of France.” And he and Le Pen are now running third and second behind Macron in the polling to become the next president of France, which suggests the power of the issue on which they agree: uninvited and unwelcome Third-World migration.
“You feel like a foreigner in your own country,” said Zemmour in his announcement speech Tuesday, declaiming, “We will not be replaced.”
Neighboring Spain is gripped by the same concern. Refugees and migrants from the global south use Morocco as a base from which to breach the Spanish enclaves of Ceuta and Melilla on the African coast.
Spain has taken to pushing the intruders back into Morocco.
Madrid has accused Rabat of using the migrants as a diplomatic weapon to extort changes in Spanish policy.
Italy, whose native-born ethnic population has been in a steady decline, patrols the Mediterranean Sea to prevent migrants from Libya from reaching its shores.
Drowning deaths are not uncommon. The Channel and the Mediterranean Sea are more formidable and unforgiving waters to cross than the Rio Grande.
Greece is attempting to keep Turkey from moving refugees and migrants from Middle East wars onto the Greek islands off Turkey’s coast.
Half a decade ago, Turkey was bought off with billions of euros to prevent the millions of Arab and Muslim refugees within its borders from crossing over into the EU.
In the recent clash between Poland and Belarus, the weapon of choice for Alexander Lukashenko was — migrants.
Brought into Belarus from the Mideast, they were moved to the Polish border, forcing Warsaw to deploy troops to keep thousands out of Poland. Lukashenko was exploiting the migrants to punish Poland and the EU for supporting sanctions on his regime.
After Europe united against him, Lukashenko moved the migrants away from the border and sent many back to Syria and countries whence they came.
In the hierarchy of European fears, the perceived threat to national identities that comes with mass migrations from the failed and failing states of the Third World appears to rank as a greater concern than the prospect of a Russian army driving toward the Rhine.
LA crime has gotten so bad that even Hollywood liberals are getting strapped. “‘Even hardcore leftist Democrats who said to me in the past, ‘I’ll never own a gun’ are calling me asking about firearms,’ said Joel Glucksman, a private security executive. “I’d say there has been an increase of 80 percent in the number of requests I’m getting this year.'” (Hat tip: Dwight.)
Only 2 percent of those polled refer to themselves as Latinx, while 68 percent call themselves “Hispanic” and 21 percent favored “Latino” or “Latina” to describe their ethnic background, according to the survey from Bendixen & Amandi International, a top Democratic firm specializing in Latino outreach.
More problematic for Democrats: 40 percent said Latinx bothers or offends them to some degree and 30 percent said they would be less likely to support a politician or organization that uses the term.
Judge blocks de Blasio’s private employer mandate for New York City and Louis Rossmann goes on an epic rant, including how it would disproportionately fall on minorities. “You are coming up with a policy because de Blasio is such a stupid cuntrag that it actually turns the clock back 40 or 50 years.” Also: “I don’t know who the fuck would sign up to do this job. I’d expect to disappear if I were doing this job…I would expect to end up on the bottom of the East River.”
Facebook admits that it’s “fact checks” are merely opinion.
If you parcel out your business It needs to multiple companies, but all of them rely on AWS (which had an outage Tuesday), you haven’t necessarily reduced your risk.
The outage at Amazon.com Inc.’s cloud-computing arm left thousands of people in the U.S. without working fridges, roombas and doorbells, highlighting just how reliant people have become on the company as the Internet of Things proliferates across homes.
The disruption, which began at about 10 a.m. Eastern time Tuesday, upended package deliveries, took down major streaming services, and prevented people from getting into Walt Disney Co.’s parks.
Affected Amazon services included the voice assistant Alexa and Ring smart-doorbell unit. Irate device users tweeted their frustrations to Ring’s official account, with many complaining that they spent time rebooting or reinstalling their apps and devices before finding out on Twitter that there was a general Amazon Web Services outage. Multiple Ring users even said they weren’t able to get into their homes without access to the phone app, which was down.
Others said they weren’t able to turn on their Christmas lights.
Let’s Go Brandon boat wins boat parade, until award is cancelled due to liberal tears.
Boom:
Is this a master class on avoiding Wisconsin, peddling collusion hoaxes and paying Russians to meddle in our elections, deleting e-mails, or being a sore loser? https://t.co/w96auaVbzv
Soldiers told us there have been cartel gunfights in Ciudad Miguel Aleman, the Mexican city across from Roma, TX, frequently in recent days and weeks. The soldiers heard gunfire and explosions two days ago and showed us this video of smoke billowing after the gunfight. pic.twitter.com/yow1pPvJS8
Indeed, Biden’s poll numbers are so low that even CNN has noticed. “Just 32% of independents approved of how Biden is handling his job while 60% disapprove in a new Quinnipiac University national poll… In 2010, the Republicans picked up 63 seat, with being up 19 points among independents.”
Short-term debt limit extension bill passes. Tastes like chicken…
The reconciliation bill is deeply hostile to marriage. Well, it’s no surprise, since happily married couples with children are increasingly an obstacle to Democratic Party control…
U.S. Attorney General Merrick Garland recently instructed the FBI to begin investigating parents who confront school board administrators over Critical Race Theory indoctrination material. The U.S. Department of Justice issued a memorandum to the FBI instructing them to initiate investigations of any parent attending a local school board meeting who might be viewed as confrontational, intimidating or harassing.
Attorney General Merrick Garland’s daughter is Rebecca Garland. In 2018 Rebecca Garland married Xan Tanner. Mr. Xan Tanner is the current co-founder of a controversial education service company called Panorama Education. Panorama Education is the ‘social learning’ resource material provider to school districts and teachers that teach Critical Race Theory.
So far, all we have is his press conference and other such made-for-media huff-puffing. No such rule even claiming to be legally binding has been issued yet.
That’s why nearly two dozen Republican attorneys general who have publicly voiced their opposition to the clearly unconstitutional and illegal mandate haven’t yet filed suit against it, the Office of the Indiana Attorney General confirmed for me. There is no mandate to haul into court. And that may be part of the plan.
According to several sources, so far it appears no such mandate has been sent to the White House’s Office of Information and Regulatory Affairs yet for approval. The White House, the Occupational Safety and Health Administration (OSHA), and the Department of Labor haven’t released any official guidance for the alleged mandate. There is no executive order. There’s nothing but press statements.
Let the lawsuits against private companies firing people for refusing the vaccine for which no mandate exists begin!
Scientists from Wuhan and the US were planning to create new coronaviruses that did not exist in nature by combining the genetic codes of other viruses, proposals show.
Documents of a grant application submitted to the US Defense Advanced Research Projects Agency (Darpa), leaked last month, reveal that the international team of scientists planned to mix genetic data of closely related strains and grow completely new viruses.
A genetics expert working with the World Health Organisation (WHO), who uncovered the plan after studying the proposals in detail, said that if Sars-CoV-2 had been produced in this way, it would explain why a close match has never been found in nature.
Here’s a novel thought: How about you not do that?
Did I mention that Wuhan scientists also wanted to genetically engineer coronaviruses that were more infectious to humans and release aerosols containing “novel chimeric spike proteins” among cave bats in Yunnan, China? And they also applied DARPA grant! Who the hell was asleep at the grant proposal switch while Chinese biological warfare scientists were going full Frankenstein?
Masks are not mandatory now in classrooms in: UK, Iceland, Denmark, Sweden, Finland, Norway, Switzerland, Austria, Netherlands, Belgium (12 & under), Russia, Poland, Hungary, Bulgaria (up to 5th grade), most of South America, etc. Masking children in the U.S. isn't science.
Facebook’s fake “Whistleblower” Frances Haugen was part of the election meddling team that suppressed the Hunter Biden laptop story. Also: “She’s receiving ‘strategic communication guidance’ from former Obama aide Bill Burton’s public relations firm Bryson Gillette, which is run by Democratic operatives. White House Press Secretary Jen Psaki was a senior adviser there until September 2020.” Basically she’s a pawn to let Facebook suppress even more conservative stories.
WOW! This is the moment Acting Senior Sergeant Krystle Mitchell QUITS Victoria Police.
"I can't remedy in my soul anymore how the organisation I love is being used [to enforce health tyranny]… and the damage it's causing to the community."
“Tesla is moving its headquarters from Palo Alto, California, to Austin, Texas, CEO Elon Musk announced at the company’s shareholder meeting on Thursday.” Given how crappy California’s business climate has become, this was pretty much a forgone conclusion. Come on down, Elon.
Amazon is looking at leaving Seattle. “After years of deteriorating relations with their home city of Seattle and its ultra-progressive city council, Amazon’s CEO [Andy Jassy] made it known that the online giant may look for greener pastures. Citing the city’s hostility toward their presence, Jassy suggested that the suburbs are looking better and better for a new home to its 50,000-employee home base.”
Speaking of Seattle, over 400 police officers may be facing termination over refusal to get vaccinated. Good thing Seattle is a peaceful utopia where there are never any antifa riots…
The China/India border is getting frisky again. “Sources mentioned that patrol parties of both the countries came face-to-face in Arunachal Pradesh, which led to some jostling before they disengaged. The incident took place last week near Yangtse in the Tawang sector.” Arunachal Pradesh is basically the complete opposite end of northern India from where most of last year’s clashes occurred.
Did China lose coal shipments waiting for docks to open up to India? Source is a little “rah-rah India,” so grains of salt are probably in order.
Are you using the wrong plunger? This plumber seems to think that this one is the new hotness for clearing toilets.
I’ve been writing about China’s bubble economy for over a decade, from the housing bubble to the Ghost Cities and even ghost collateral. And now China’s entire house of cards appears to be trembling thanks to a company called Evergrande, which owes more than $300 billion.
China Evergrande Group, until recently the world’s largest property developer, owns dozens of stalled sites like Sunny Peninsula across China. Buckling under more than $300 billion in liabilities, the company is close to collapse, leaving 1.5 million buyers waiting for finished homes.
That’s why Evergrande has reached its Lehman moment:
Instead of Evergrande making the announcement, it was the entity that will soon control the massively overlevered property developer that made it for them: the Chinese government.
According to Bloomberg, Chinese authorities told major lenders to China Evergrande Group not to expect interest payments due next week on bank loans, which takes the cash-strapped developer a step closer the nation’s largest modern-day restructurings, and guarantees that China’s “Lehman Moment” is now just a matter of days, if not hours.
According to Bloomberg, citing unnamed sources, the Ministry of Housing and Urban-Rural Development told banks in a meeting this week that Evergrande won’t be able to pay its debt obligations due on Sept. 20, and instead most of Evergrande’s working capital in now being used to resume construction on existing projects, the housing ministry told bankers, according to a Bloomberg source.
And since nonpayment of interest and principal will represent an event of default, the company is unlikely to make any subsequent interest, or principal, payments either since it will have already default even though Bloomberg claims that “Evergrande is still discussing the possibility of getting extensions and rolling over some loans.” It won’t, especially since the developer will also miss a principal payment on at least one loan next week, which means it’s game over.
Meanwhile, as reported previously, Chinese authorities are already laying the groundwork for a debt restructuring of the $300 billion company (which recently hired Houlhan Lokey to advise it during the upcoming historic bankruptcy), assembling accounting and legal experts to examine the finances of the group. With senior leaders in Beijing silent on whether they will allow Evergrande creditors to suffer major losses, bondholders have priced in slim odds of a rescue infuriating countless investors and creditors who have mobbed the company’s offices across the country and also gathered at its HQ, demanding the company “return their money.” It won’t happen.
Not only is Evergrande possibly facing complete liquidation, but word came down that the company might make payments on Chinese-owned debt, but stiff foreign debt holders.
But the word this morning is that the Chinese government is now telling them to avoid default on dollar-denominated bonds. After all, if investors worldwide decided that all Chinese debt was potentially toxic, that would leave connected Chinese communists in a world of hurt.
And we can’t have that.
The unusual thing about Evergrande is that they owe money to everyone:
It seems to me that what is interesting about Evergrande is not so much the magnitude of its debt problems but their variety. Evergrande owes money to Chinese banks. It owes money to foreign hedge funds, and foreign investors own its stock. It owes money to suppliers, and to Chinese retail investors in those wealth management products. And it owes apartments to buyers. And the retail investors who bought Evergrande wealth management products were often also Evergrande homeowners, because the products were sold at Evergrande buildings.
It even took out short-term loans from its own employees. Also, it’s evidently stopped paying some employees. I don’t know about you, but for me both those would be signs it was time to look for another job.
When a big company runs out of money, the basic questions are (1) who gets paid and who doesn’t and (2) should the government pay its debts for it? Those questions are interconnected. There is an ordinary way to answer the first question, some waterfall of claim seniority. You look at the company’s capital structure and say “well these people have senior claims and will get paid back, and these people have junior claims and won’t, and these other people are somewhere in the middle and might get some recovery.” And there are complex and subtle questions about the best way to preserve value in the business: Perhaps you have the legal right to stiff customers (perhaps their deposits aren’t particularly senior claims), but if you do that you’ll never get any more customers, so you treat them better than you are legally required to. And the managers of the business and the creditors and the lawyers work together to figure out a plan that maximizes the recovery for everyone.
But if the ordinary process to answer the first question ends up with an answer like “sympathetic ordinary people lose their life savings,” or “politically connected people lose everything,” or “the banking system loses a lot of money and becomes undercapitalized,” or for that matter “housing prices collapse,” then that is a good reason for the government to step in. And if the government is stepping in, there is no particular reason to assume that the ordinary claims of seniority will apply. If the government steps in to rescue small investors or the banking system or housing prices, that doesn’t necessarily mean it will also rescue foreign hedge funds.
Bloomberg’s Joe Weisenthal and Tracy Alloway did an Odd Lots episode with analyst Travis Lundy about this, in which he gives his best guess at a waterfall of repayment. “I think that if you start from the ranking of who ends up coming out well on this, if you had to ask, this is the Communist Party of China who’s the most important stakeholder in this,” he says, and then goes through a list of claimants ordered by, basically, how politically sympathetic they are. This seems like a more reasonable analysis than, like, looking at the corporate structure and legal document to see which claims are more senior.
After the subprime meltdown in 2008, steps were taken to reduce systemic risk in the American and European economies. China? Not so much.
Whatever the ultimately resolution of Evergrande, the Chinese real estate market still seems both way over-leveraged and horribly opaque.
That wasn’t Evergrande, but a dizzying succession of other firms:
The original developer was Kunming Xishan Land and Housing Development and Operation (Group) Co., Ltd. (hereinafter referred to as Kunming Xifang). The project covers an area of about 340 acres. It is planned to have residential, commercial and office buildings. It is divided into 4 plots for development and construction, namely A1, A2, A3, and A4. Among them, the A1 and A3 plots are commercial, and the A2 and A4 plots are residential, with a total construction area of approximately 630,000 square meters. Among them, the delivery of four high-rise residential buildings on the A2 plot has been completed, with a construction area of about 136,000 square meters.
In 2012, due to the break of Kunming Xifang’s capital chain, the project was taken over by Yunnan Tin Industry Real Estate Development and Management Co., Ltd. (hereinafter referred to as Yunxi Real Estate). The project was renamed Yunxi·Gemdale. In July 2013, due to various reasons, Yunxi Construction of Sikkim Land was suspended. 2014 was originally the delivery time for the A2 plot of Yunxi Jindi, but due to the suspension of the project, the delivery did not begin until March 2015. In addition to the 4 high-rise buildings in the A2 plot that have been delivered, the remaining three plots A1\A3\A4 totaling 15 high-rise buildings have been suspended since the end of 2013.
In order to solve the problems left over from the unfinished project, the government restarted the project through the listing and transfer of the Yunnan Provincial Property Rights Exchange. On December 29, 2020, Yunnan Honghe Real Estate Co., Ltd. obtained the right to develop the project through equity transfer.
According to Sun Zheng, general manager of Xifang Group’s Liyang Star City Phase II Project, on January 6 this year, Yunnan Honghe Real Estate Co., Ltd. acquired 100% of Kunming Xifang’s equity and 23,068,600 yuan of debt at a transfer price of 979 million yuan. At present, West Real Estate is a wholly-owned subsidiary of Honghe Land. In order to maintain the continuity of project development, Liyang Star City Phase II will continue to use West Real Estate as the main development entity.
Got all that? That’s just one development in one city you’ve never heard of. How many other ghost developments are there in China? Hundreds? Thousands?
Another real estate boondoggle: Why Shanghai Tower failed. “The Shanghai Tower is owned by Yeti Construction and Development, a consortium of state-owned development companies which includes Shanghai Chengtou Corp., Shanghai Lujiazui Finance & Trade Zone Development Co., and Shanghai Construction Group.”
Remember that declines in real estate holding values were huge drivers for Japan’s bubble bursting as well as the subprime meltdown that took out Lehman Brothers and Countrywide (among others).
Could China’s house of cards finally collapse in the same way? Very possibly. But remember this caveat:
China's economy can be about to collapse longer than you can remain short.
