The Chinese crisis is temporarily on hold. Here it was not without a telephone consultation between the U.S. authorities and the Chinese. After the phone call, the People’s Bank of China urgently printed $18.6 billion to pay off some of the urgent debts of the real estate developer Evergrande.
Evergrande made the interest payment on time, and promised that there would be no further delays. The next interest payment on the bonds, scheduled for Sept. 29, is on the line.
The Fed held a FOMS, leaving the prime rate unchanged at 0 – 0.25%, with the next rate hike possible only in 2022. At the same time, the Fed approved a $120 billion a month asset buyback program until there is substantial progress on employment and inflation.
In addition, the Fed is raising the daily overnight repo limit from $80 billion to $160 billion, i.e., twice as much. For decency, the Fed raised its inflation forecast from 3.4% to 4.8%. But real inflation, as calculated by the old methodology, is closer to 12%.
The market is excited about the good news, and there is nothing else to stop the unrestrained growth feast from continuing. But that is until there are some new infostructures. Hyperinflation is now with us for a long time, even though everyone pretends it is not there.
In fact, the infusion of $18.6 billion into the debts of Evergrande cannot save the situation with the Chinese real estate crisis. It is a patch on the wounded body of the Chinese real estate bubble. No word yet on whether the money will reach a dozen more developers in a similar position. Who will save the insurance groups that are bearing huge losses, and most importantly, the banks, overdue debts to which from the developers and insurance companies only began to grow.