- Allistair Mitchell
Tales from the Edict 26 - Taking the Hit
Updated: Apr 30, 2021
With the long-anticipated depression gripping the world economy nations were wrestling with a range of outcomes. Some were on the verge of financial collapse. Others like the EU were forced into drastic measures to stem the slide in confidence for the Euro. Everywhere the pain was sharp, but short. A couple of nations went to the wall, but somehow the world did not fall into conflict. Dictatorships crumbled, unable to externalise the problem in the classic sense since every other country was in the same situation. Democracy bowed but did not break.
Aside from the social upheaval, industrial contraction, and growing discontent with the inequity between the insulated rich and everyone else, governments considered what the future might look like. Taxes would have to rise, and the wealthy would have to make a greater contribution to correcting the world they had gained so much from in the good years. Tax havens would have to be unlocked to release the hoarded wealth. What value remained intact would have to be used.
But before that could happen the world struggled with rising inflationary pressures. China’s property bubble began an indefinite slump having run out of people to buy new empty homes. This ended the first boon in Local Government Financial Vehicles and provincial government budgets briefly lost 40% of their income, sending local administration into a tailspin that would have normally obliged the central government to step in. However, desperate to avoid financial scrutiny, the provincial and prefecture administrators sought other means of raising money and avoiding bankruptcy. This led to the rise of a new type of quasi property speculation, termed Open House. Open House was the value now associated with land with planning permission to build on, but with no longer a requirement to actually construct anything on. Instead it relied on ‘digital construction’.
None of this alleviated the property bubble. Prices fell for those already invested. Since a shock like this was novel to the new Chinese consumer market, the dismay at falling valuations took time to filter into the wider economy but property quickly lost all lustre as people realised there was no state cure for the fundamental oversupply. In the twenty years since the Chinese property market took off the population had aged, and ambitions changed. No one needed yet another home, and rural relocation was in reverse. Those left with debts to service grew disgruntled, however, there was never any threat that this disenchantment would spill into the streets. Because the Chinese consumer was offered a way to recover their investment – via Open House.
When the whole gambit with Local Government Financial Vehicles collapsed in January 2030 with the start of the depression, everyone was caught by surprise. Provincial leaders appealed to central government for relief to save them from imminent bankruptcy.
Consumers appealed to central government for justice to punish those who had sold them fraudulent property investments. The bankers appealed to central government for relief on foreign investments that had tanked. When central government looked for culprits all they could find was digital ruin. No one held up their hand up to this cyber-crime. China looked for a solution, then a scapegoat, but there was none.
It was made clear by the international markets that China would not be allowed to print more money without a total collapse in the Renminbi as investors took flight. Overnight long-term plans like the Belt and Road Initiative were cancelled, large scale projects ground to a halt, capital spending shrank. In a depression China would not be able to export its way out of its difficulties. The threat of hyper-inflation stalked every western nation as they watched most of South America fall into an economic chasm.
For the first time in more than 70 years property across the globe lost value everywhere, as did most currencies save the Swiss Franc and other minor havens. All Cryptocurrencies collapsed. After seeing incredible inflows of investment for almost a decade and prices shattering all conceivable valuations, the sector collapsed. Bitcoin died the day after it reached $500,000 and no one could afford to run the system anymore. Payment in Bitcoin had already been outlawed to stem the flight from government-controlled fiat currencies, but this had just stoked the investment fire. Gold and precious metals rocketed in value. The question remains, what triggered the end of the cryptocurrencies?