Why EOS Why Crypto Volume 1
Often times in the world of crypto, it’s events that involve high volatility, that can make one grow nervous about their financial convictions. For crypto veterans like myself and many others this is simply another almost boring crypto shake out, here to shake loose weak hands, in offer bargain prices for diamond holders. But it occurs to me that for some lacking true conviction, it is necessary to often point to many other reasons why many of us left the traditional marketspace, in search for greener pastures in the first place. So, in this video I will go over an article I read called “China’s Nightmare Evergrande Scenario Is an Uncontrolled Crash” and I will be giving you my opinion on what I think this means for EOS and crypto in general, OK now let’s get started.
To summarize and paraphrase, the article first begins with, Chinese Evergrande Group offices in China see a dramatic increase in protests as the developer misses more than 70,000 investors’ investment pledges. Construction of unfinished properties with enough floor space to cover three-fourths of Manhattan grinds to a halt, leaving more than a million homebuyers in limbo. Fire sales hit a jittery real estate market, which further crushes other developers and ripples down the country’s supply chain, which makes up 26.4% of China’s GDP.
Crisis in the credit markets has migrated from lower-rated property companies to their stronger rivals and the financial institutions. Over the course of the past 15 months, global investors who bought $527 billion in Chinese equities and bonds have started to sell.
After Evergrande had its credit rating lowered and requested a trading suspension in its onshore notes, Chinese junk-bond yields surged to an 18-month high and shares of real estate businesses suffered huge losses. Some Chinese banks appear to be stockpiling yuan at the greatest expense level in almost four years, a likely precursor to a liquidity squeeze in the event of a crisis, according to a Mizuho Financial Group Inc. strategist.
Chinese bond yields have hit the highest level since March of the year 2020. It is unclear where Xi Jinping will draw the line. Hui Ka Yan, the billionaire founder of Evergrande, has asked the head of China’s top financial regulator to find a solution to the company’s debt difficulties, but no word has been given on whether the government will accept a debt restructuring or bankruptcy.
The timing is delicate since China is trying to balance the slowing economy, a comprehensive campaign against the private sector, and tense relations with the United States all ahead of a once-in-five-year leadership turnover in 2022, when Xi plans to indefinitely stay in power. Yu Yong, former China Banking and Insurance Regulatory Commission regulator and currently top risk officer at China Agriculture Reinsurance Fund, said the government must exercise extreme caution in regulating Evergrande.
According to Yu, “Property is the most talked-about bubble in China,” as revealed in an interview with Everbright Sun Hung Kai Capital analyst Jonas Short on a recent podcast. As far back as the founding of the People’s Republic of China, maintaining social order has been of critical importance to the Communist Party. For many years, the Chinese government has pushed its citizens to invest in property whose prices were only expected to rise. Today, real estate comprises almost 40% of household assets, and owning a house (or two) is something that we take very seriously in our culture. In the West, many people are concerned about increasing home costs, yet the majority of Chinese residents criticize dropping home prices.
While Beijing has learned to let some weaker enterprises fail, unrestrained offshore lending would risk destabilizing the financial lifeline for small and medium-sized businesses. The country’s issuers might also risk losing global investor confidence at a time when Beijing is encouraging more international investment. Citigroup strategists predict that Evergrande dollar debt holders may not get precedence in a restructuring.
The stakes are higher on the mainland, where the credit market is about 15 times the size at $12 trillion. Evergrande, is at risk of going under, and this would result in banks removing their corporate debt holdings and even halting money markets in China, which are vital to the financial system. Governments and central banks would almost certainly be pushed to act in such a credit crunch. As banks that finance property lending will be put under greater strain, there is a greater risk of soured loans.
Just my opinion, I think it’s a bit of an understatement to say that this is potentially a very serious scenario that could result in a Black Swan event that starts the Domino’s rolling for the entire interconnected global financial market. And unfortunately, this is always the problem when you built your house metaphorically on sand, to my recollection I recall listening to a report speculating that Evergrande’s death load is over $300 billion with a capital B, and the truth is that this was merely a speculation that was in my opinion, likely under reporting the true amount. Many of us that have been involved in cryptocurrencies for any length of time have known the traditional market system is little better than a Vegas casino where the house has the advantage, the traditional financial institutions has long been building houses of cards, all over the world, and unfortunately it looks like this one is about to collapse if the government does not step in.
Some people might look at this scenario and say the Chinese government will likely do the right thing, and save this company from complete collapse, and much of the debt load. But this is inherently the problem with the traditional system, government always has to come to the rescue eventually, to prevent the entire House of Cards from collapsing. And this innately is why crypto is so very crucial to the world at large, we cannot continue to have economies based on governments picking winners and losers, and transferring the liability on to the tax base of said country in question.
These corporate too big to fail institutions, have to learn the consequences for their immoral business practices, to serve as examples for others. I personally do not wish to see anyone get hurt financially, but kicking the can down the road, is not going to help matters either, and it will eventually create an even greater problem, that will be even more challenging to deal with in future. This is why programmable cryptocurrencies like EOS are so important to the future of the world, decentralized open digital ledgers will make it very difficult to create debt bubbles like this, and in doing so force companies into more beneficial and advantageous business practices that are good for the benefit of the entire community, rather than just a few at the top. EOS will help usher in such a future, and I look forward to the day where we can see more stable and fair business practices that benefit the whole, and not just too big to fail institutions.
To all EOS holders, programmable crypto is the future