Evergrande is practically at default. World real estate is shaking

Evergrande is a name that until recently was known only in business circles. But like every time a giant falls, it has now become very well known to everyone.

Evergrande is a huge player in the Chinese economy. In fact, in addition to having built entire cities, it owns companies of all kinds. The case of the footballer and now mister Cannavaro is very well known, who had to return to Italy following the collapse of the Chinese football team he was coaching owned by Evergrande. Evergrande is now practically in default. Even if the default has not yet been declared because theoretically the company still has time to pay its debts, it is clear to everyone and implicitly confirmed by managers and authorities that it will not do so because it does not have the means to do so.

Isolated case or global phenomenon?

Plenty of international investment firms took a hit from the Evergrande crash and the rating on those shares is now a hair above that of junk. But the big question is whether Evergrande’s is just a gigantic isolated case or if it marks the beginning of the supposed bursting of the housing bubble. Many economic and financial authorities have for some time been warning about the anomalous evolution of the real estate sector which is absolutely typical of bubble speculations. However, central banks have always been very shy indeed absent on this front. The hawks of the American Central Bank have repeatedly stressed how forceful action should have been taken to crush the dynamics of the housing bubble.

However, they remained largely unheard and the American Central Bank remained immobile on its policies. As well as the European Central Bank.

At this point it is very difficult to understand if the real estate bubble will deflate naturally and gradually or if the evergrande burst is a phenomenon destined to repeat itself perhaps in very different ways in other parts of the world.

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