Interesting comparison: Ukraine fought for five years, with military spending and aid totaling roughly $330 billion. Evergrande’s hole—2.4 trillion yuan—also comes out to about $300 billion.
The liquidation cost of a real estate bubble is basically equal to the five-year cost of a moderately sized modern war.
That’s why I’ve always said the cost of capital misallocation isn’t any cheaper than geopolitical conflict. Whether the money is burned into rebar, cement, and vacancy rates—or into weapons, ammunition, and reconstruction—the essence is the massive misallocation of a country’s resources.
The difference is that war at least has a clear win/loss and an endpoint, while a real estate bubble’s cleanup is slow bleeding; taking ten years isn’t unusual. In the 1990s, South Korea and Japan followed this script, and so did the U.S. in 2008.
So when you see an economy doing “deleveraging” or “resolving risks,” don’t think it’s just a technical adjustment. This is digesting systemic mistakes accumulated over the past decade or two, and the costs won’t be that much lower than fighting a war.
The liquidation cost of a real estate bubble is basically equal to the five-year cost of a moderately sized modern war.
That’s why I’ve always said the cost of capital misallocation isn’t any cheaper than geopolitical conflict. Whether the money is burned into rebar, cement, and vacancy rates—or into weapons, ammunition, and reconstruction—the essence is the massive misallocation of a country’s resources.
The difference is that war at least has a clear win/loss and an endpoint, while a real estate bubble’s cleanup is slow bleeding; taking ten years isn’t unusual. In the 1990s, South Korea and Japan followed this script, and so did the U.S. in 2008.
So when you see an economy doing “deleveraging” or “resolving risks,” don’t think it’s just a technical adjustment. This is digesting systemic mistakes accumulated over the past decade or two, and the costs won’t be that much lower than fighting a war.