The China Syndrome - part the sixth

A meaningful factoid, known to the econ crowd for some long time, is that the problem with Evergrande isn't totally of its own making. There's no Blythe to blame; so far as I can find. No, as mentioned in this missive and this report going back nearly as far, housing Ponzi has been ingrained in China for a long time. Eventually, it had to collapse. Whether Evergrande does, and is the failing keystone of the Chinese economy, is the question.

So, we get reporting like this.

Still the ripples were felt across the market. Bond yields fell as prices rose because investors fled to safety. Bitcoin, another risky asset class, also felt some pain and dropped more than 7%.

In the world of commodities, US oil prices fell 2%, while gold prices inched up 0.2%.

As is ever the case: real estate, esp. residential, only makes money on a Ponzi basis. There is no direct productivity from a fancy house or apartment unlike a fancier semi fab. It's value can rise if, and only if, the underlying income of mortgage holders increases. More specifically, incomes of new, prospective, mortgage holders: they're able and willing to pay more per square foot than the last guy. If they can, then the market value of existing properties rises a bit in concert. If not, then all properties devalue. And Blythe saw to it that such a contagion can be country wide (he he).