What China’s Alarming Financial Crisis And A Strengthening US Dollar Means For Bitcoin
China’s banks face insolvency risks with widespread mortgage boycotts. The U.S. dollar is strengthening and bringing bitcoin down in the process.
“Fed Watch” is a macro podcast with a true and rebellious bitcoin nature. In each episode we question mainstream and Bitcoin narratives by examining current events from across the globe, with an emphasis on central banks and currencies.
Listen To The Episode Here:
In this episode, Christian Keroles 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. Last, we dive into the bitcoin chart.
You can access this episode’s slide deck of charts here or below.
First 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, developers’ financial situation and the country’s zero-COVID policy, have refused to pay their mortgages. The boycott started with 20 projects and has since grown to 235 projects.
The rhetoric around this mortgage crisis is eerily similar to that in the U.S. in 2007. Excuses such as, “It is a small number of mortgages” and “Effects are contained” are being offered.
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. If there was a problem with perpetually falling home prices, it could very quickly cause a solvency issue for banks. Indeed, that is exactly what we are seeing.
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