“Evergrande, China’s Ponzi property developer, is now officially in default as Fitch has confirmed the indebted company has missed interest payments on bonds, with over $300 billion in bonds outstanding. Property developer Kaisa is also named in the default decision, and there are nearly a dozen other Chinese property developers that are widely believed to be on the path to default…
Importantly, Evergrande is prioritizing domestic debt holders in China and has been ordered by the Chinese government to bail on overseas debt holders. This means any non-China holders of Evergrande debt are going to be lucky to eventually get paid 10 cents on the dollar for the Evergrande paper they hold. More likely, they will get next to nothing.
Contagion will spread across the global financial system throughout 2022
As we all learned from watching the 2008 sub prime real estate market collapse, large-scale defaults take time to ripple through the financial system. While Evergrande is officially in default today, holders of its debt — who are due interest payments from Evergrande — will have their own grace periods for making their own debt interest payments to their debt holders. Typically, these grace periods are 30 days in duration, meaning every 30 days or so, we are likely to see defaults down the line, all stemming from Evergrande failing to meet its own obligations. (Everybody is leveraged, and one catastrophic financial event can ripple through the entire system over time.) Throughout 2022, we are all going to witness extreme financial stress — and many possible defaults — spreading through various institutions that held Evergrande debt. This can affect pension funds, hedge funds, institutional investors, private investors and even central banks. Every investor who held Evergrande debt is going to get hammered by this default, especially if they were expecting Evergrande’s interest payments in order to meet their own debt obligations. Contagion has begun.
The Tether / Crypto Black Swan scenario
The default of Evergrande is a Black Swan event, and as we have covered the last several days, many analysts believe that Tether, the “stablecoin” provider that creates cryptocurrency out of thin air — digital currency printing — may have tens of billions of dollars of exposure in Evergrande. With default now officially proclaimed, this means Tether’s holdings of Evergrande, Kaisa or other Chinese property developers is effectively worth zero. Importantly, this could mean that Tether no longer has sufficient assets to cover the USDT coins it has issued into the crypto ecosystem. Logically, if a sufficient number of users seek to redeem their Tether coins and demand dollars, this could spell a run on Tether and theoretically lead to a Tether default. Worsening the context of all this, Tether continues to refuse to submit to any legitimate financial audit, and many observers believe Tether is simply minting USDT coins with nothing to back them. This would be the equivalent of a digital fiat currency counterfeiting operation. Since two-thirds of all Bitcoin purchases are actually made using Tether coins, it would also mean that Bitcoin’s market valuations may be wildly inflated by digital money printing operations. While Bitcoin itself isn’t at fault here, Bitcoin’s valuations can be heavily manipulated by any other coin that can be traded for Bitcoin.”
John Perez believes that the entire crypto ecosystem is pinned on a massive digital currency counterfeiting operation and that the bubble will soon burst, leaving crypto holders in the same position as Evergrande debt holders. Here are his recent interviews with Mike Adams.
8 December 2021
10 December 2021
20 December 2021
David Morgan on the CRYPTO RESET and ties it to Epstein and Evergrande
6 December 2021