The crash in the Chinese real estate market, at times the largest single sector of the global economy, has wiped out around 13 trillion dollars in credit. The fiat money system, which leverages deposits on a frictional basis, cannot compensate for such an immense correction of bank balance sheets on a biblical scale without entering a deflationary spiral.

Two years ago, the construction industry collapsed by around 40% year-on-year and a few weeks ago the CCP announced new financial injections of another USD 40 billion to support the struggling Chinese banks and regions that need to get rid of this stinking baskets of rotten credit. These subsidies were exclusive funds for Chinese institutions; the highly involved Japanese institutions (maybe it wasn't the yen carry trade after all?), which are now paying the price for their involvement in China, were spared state aid just like other foreign investors during the evergrande bankruptcy. The European banking sector is also likely to be affected, as it was also heavily involved in the eternally booming Chinese real estate market, which probably has around 90 million vacant apartments, through institutions such as Deutsche Bank.

A bravura piece of central planning madness that ultimately leads to a deflationary spiral, which the central planners are now trying to stop by loosening credit conditions and introducing massive fiscal support programs. China is likely to have abandoned its ambitious growth targets for the time being.