Week in a Glance: Defaults, Central Banks and Fall of Crypto

27 Eyl 2021

The past week has been extremely challenging for the financial markets. From the very beginning, there were many questions, each of which could provoke a full-fledged panic wave. Will Evegrande default? Will the US raise the government debt ceiling or will we face a US default? What will the Fed say following the FOMC meeting?

Evegrande, with its 2 trillion units of assets (2% of China's GDP), is the kind of company that can upset the balance and wreak havoc not only in China (the real estate and construction sector is about 20% of China's economic activity), but in the world as a whole. (financial contamination - Evegrande's investors are the world's largest investment companies such as BlackRock, UBS, HSBC). Not surprisingly, everyone watched with bated breath Thursday - the date of payment of $ 83.5 million in interest on offshore bonds. The result of Thursday was nothing - no money came to investors, and the company itself remained deadly silent and pretended to be "in the house." The end of the world on this matter has not yet come, because there is still a 30-day period to pay off the debt until what happens is considered a default.

At the start of last week, the Wall Street Journal published an article by US Treasury Secretary Jannette Yellen, in which she predicted an apocalypse for the country if the public debt ceiling was not raised. At the end of the week, no one raised anything, but government agencies received a command to prepare for the shutdown, that is, the cessation of activity due to lack of funding.

The leading central banks of the world (the Fed, the Bank of Japan and the Bank of England), although they left the parameters of monetary policy unchanged, made it clear (with the exception of the Bank of Japan) that tightening is not far off and the account is already underway for months. But most of all, the Bank of Turkey was surprised, which against such a background and against the background of inflation of 19.25%, the rate was taken and lowered by as much as 100 basis points. The Turkish lira did not appreciate this cunning and unorthodox economic move and went on to dig further in search of a new fragile bottom.

And at the end of the fun week, China finally banned all crypto-shabash on its territory, that is, no mining, no payments, no exchange operations, no cryptocurrencies - that's enough. The cryptocurrency market fell into a depression on this issue. However, as experience shows, fans of cryptocurrency are unlikely to be ripped out of their clearing with green grass, rainbows and unicorns.