Bitcoin News and Finance
Evergrande Losses Sparks Fear of Looming Credit Contagion, Janet Yellen Asks to Raise US Debt Ceiling Skip to main content

Evergrande Losses Sparks Fear of Looming Credit Contagion, Janet Yellen Asks to Raise US Debt Ceiling

Evergrande Losses Sparks Fear of Looming Credit Contagion, Janet Yellen Asks to Raise US Debt Ceiling

Global investors have their eyes peeled on the Evergrande Group or the Evergrande Real Estate Group, China’s 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’s real estate industry have affected global markets a great deal as European and U.S. stocks have slid during Asia’s overnight.

Evergrande Group’s Counterparty Risk and Liquidity Shocks Could Spark a Credit Contagion on a Global Level

Many people woke to the news of China’s Evergrande Group losing a significant amount of its market capitalization as the company’s shares dive-bombed to an 11-year low. While Evergrande losses can’t take down the economy alone, but it could cause a domino effect like the collapse of Lehman Brothers did during the 2007-2010 financial crisis. The domino effect is called a “credit contagion” and signs of this occurring are already happening.

Other mega Hong Kong and China-based real estate giants are feeling the heat of Evergrande Group’s losses and the possibility of the firm defaulting. Hong Kong’s 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.

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 that the market is expecting China’s Evergrande Group to default on a number of payments which will spark a significant domino effect across global markets.

“Speaking of Evergrande’s imminent default,” Durden wrote on Monday. “We 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’s because Evergrande is scheduled to pay interest on bank loans Monday, with a one-day grace period,” the author added. Durden’s critique of Evergrande solvency continues:

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’s Default Will Spread To The Rest Of The World.) Spoiler alert: a default is coming because Chinese authorities have already told major lenders not to expect repayment.

So far, Bloomberg and Durden’s Zerohedge have reported on at least eight investment-grade companies that have pulled their bond offerings over the Evergrande crisis. Moreover, Durden and many others predicted Evergrande’s falter months ago as one person tweeted: “Evergrande bond flush update. If you’re wondering why you should care… you will learn soon” on July 20, 2021.

Janet Yellen’s Plea to Raise the Debt Ceiling Before Possible October Default

Meanwhile, U.S. Treasury secretary Janet Yellen has shown that she is concerned 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.

“We would emerge from this crisis a permanently weaker nation,” Yellen stressed. While Evergrande’s 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.

“We 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,” Yellen explained. “Mortgage payments, car loans, credit card bills—everything that is purchased with credit would be costlier after default.”

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 in 24 hours time.

What do you think about global markets getting roiled by Evergrande Group’s default fears? What do you think about Janet Yellen’s call to raise the United States’ debt ceiling? Let us know what you think about this subject in the comments section below.

Labels:

Comments

Post a Comment

Popular posts from this blog

Custodial Lightning Network Service Attack Discovered by LN ‘Newbie’ — Hacker Strikes 6 LN Custodians

On September 18, a Redditor posted to the r/bitcoin forum and explained how he discovered a way to “attack [the] lightning Network’s custodial services.” The Reddit account dubbed “Reckless Satoshi” wanted to figure out if a “discrepancy between real routing fees and service’s transaction fee can be exploited for a profit.” The researcher disclosed that he wanted to see how large the damage could be and said “it is bad.” 6 Lightning Network Custodial Services Attacked, Researcher Discloses Findings to Offenders Prior to Public Disclosure A Redditor called Reckless Satoshi published a disclosure post on r/bitcoin this past Saturday and disclosed how he had found a vulnerability with routing fees and some of the Lightning Network’s custodial services. The research attack was done in good faith and after it was complete he disclosed the bugs to the offending services before publishing his findings. Reckless Satoshi used the Lightning Network (LN) attack on six different services incl
Post a Comment
Read more

Axie Infinity Down 40% Since Last Week’s Price High, Protocol Revenue Outshines Competitors

Last week, the game token leveraged within the Axie Infinity gaming universe skyrocketed to all-time highs, while other crypto markets remained extremely lackluster. During the last seven days, Axie Infinity’s platform token has dropped significantly in value shedding more than 12%. Meanwhile, the game platform’s smooth love potion token has slid over 8% over the last 24 hours. Axie Infinity Down More Than 40% Since All-Time High Not too long ago, the axie infinity (AXS) token was a topical conversation because it reached an all-time high on July 15. At the time, AXS managed to capture $28.93 per unit and since then it has shed 12.8% during the last seven days. The axie infinity (AXS) token is used within the blockchain-based game that involves battles between token-based creatures called “Axies.” AXS is used for the game’s governance system as well as other actions within the game. At the time of writing axie infinity (AXS) is exchanging hands for $16.70 per coin. AXS/USD on Ju
Post a Comment
Read more

Play-to-Earn Game From Polker (PKR) Exchange Listing – Endorsed by Akon

The Play-to-Earn NFT based Polker.Game ‘s native token $PKR has been officially listed on the popular centralized exchange BitMart. Polker.game has been in the spotlight recently as Akon, the American R&B superstar and record producer gave his official endorsement of polker stating that the “game is revolutionary” and that Polker is “hands down.. the best play to earn, NFT game in the space.”. With the BitMart listing and celebrity endorsement from Akon, Polker is perfectly positioned to become a major player in the Play-to-Earn league. Watch Akon’s Video Here What is Play-to-Earn? Although not a new concept, play-to-earn has become a trending term due to the popularity of the NFT game AXIE infinity. In the past, previous play-to-earn games have also achieved success – however, thanks to the huge amount of development in the blockchain space in recent years the gaming experience is now massively improved. Play-to-Earn games are essentially free to play and open to anyone and
Post a Comment
Read more

China to Crack Down on Copyright Infringement Through NFTs

Authorities in China are going after creators of digital collectibles based on other people’s works of art, the use of which was not authorized. The government offensive is part of a campaign to combat online copyright infringement and piracy with the participation of several departments. Regulators in China Move to Strengthen Copyright Supervision of Online Platforms The National Copyright Administration of China (NCAC) has recently launched a campaign against copyright infringement and piracy on the internet, together with the Ministry of Industry and Information Technology, the Ministry of Public Security, and the State Internet Information Office of the People’s Republic. A major objective of the initiative is to improve copyright supervision of online businesses by investigating cases involving the sale and distribution of infringing products on short video, live broadcast and e-commerce platforms, and promptly dealing with infringing content, the agency announced in a press r
Post a Comment
Read more
Blogarama - Blog Directory