China is giving off strong Lehman Brothers vibes

Plus: The economy is fine, or not. [Bloomberg]( Follow Us [Get the newsletter]( This is Bloomberg Opinion Today, a wasteland of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - China has a [mortgage problem](. - The Fed [must cause a recession](. [Or not](. - Ukraine must [stay on the moral high ground](. - People [aren’t taking Covid boosters](. China’s Lehman Moment An old myth is the idea of the Wasteland, about a kingdom falling into ruin due to the illness or moral depravity of its leader. It’s the basis for such entertainments as the Arthurian legends, T.S. Eliot’s most famous [poem]( and the 1990 Steven Seagal vehicle “Marked for Death.” We’re not saying Xi Jinping is ill or morally depraved. But he did [disappear]( from public view for nearly two weeks recently. This is normal behavior for, say, newsletter writers who live like late-era [Howard Hughes](, but doesn’t really meet the baseline expectation for leaders of modern countries, even authoritarian ones. Meanwhile, China is kind of falling apart. Most notably, people who in recent years took out large mortgages to buy properties being built by Evergrande and other such rock-solid developers have ended up with only unfinished properties and the aforementioned large mortgages. Imagine a huge swath of society getting [loaded up]( with [debt]( for [no reason](! Anyway, many of these Chinese borrowers have done the rational thing and [gone on strike](, refusing to pay their mortgages. But this isn’t just a feel-good story: Shuli Ren warns the Borrowers Revolt (my kids’ least-favorite [Mary Norton]( book) is only [the tip of an iceberg made of troubled debt](. Shuli, who worked for Lehman Brothers when America hit its own mortgage-debt iceberg, is getting uncomfortably familiar vibes now riding the prow of China’s economy. It’s also not encouraging that local officials in Zhengzhou sent [plainclothes goons to beat up peaceful protesters]( angry about having their money frozen at a bank accused of fraud, Matthew Brooker notes. Video of the attack went viral in China. And with the economy teetering on the brink of a downturn or worse, copycat protests will likely follow. More beatings will not, contrary to what you’ve heard, improve morale. But China’s absentee leader doesn’t seem to have any better ideas at the moment. Maybe Russia can loan out [Steven Seagal](. Bonus China Reading: President Joe Biden is [wrong to make the China rivalry about democracy](. — Minxin Pei Stagflation Watch! Not that things are going so much better in the USA. On the economic spectrum between “Happy Days Are Here Again” and “Why Is All of the Money on Fire?” we are currently somewhere in the [confusing]( and terrifying middle. The job market is strong like bull, but Bill Dudley warns the Fed will have to stab it with a [descabello](, causing a [recession to kill raging inflation](. Conor Sen, on the other hand, takes heart in the fact that [wage growth in last year’s hottest industries]( — think Amazon warehouses, restaurants and the team that scrubs my [Las Vegas]( hotel suite of terrifying germs — has flatlined lately. The economy might be doing some of the Fed’s dirty work for it already. John Authers warns that, contra Matt Winkler [yesterday](, markets only see lower inflation in the medium term because they [expect the Fed to go Full Dudley in the short term](. But Dan Moss counters that central bankers all over the world will [rue being super-aggro about inflation]( at a time when the global economy is already weakening. Meanwhile, [JPMorgan Chase]( and [Morgan Stanley]( reported disappointing earnings this morning, bringing back unwelcome memories of the “money on fire” days. But the banks are in far better financial shape now, and Paul J. Davies notes both banks said US [consumers and businesses were as strong as ever](. Like I said, it’s confusing. Slog Days in Ukraine The Ukraine war that Vladimir Putin thought would end in a couple of weeks is about to turn five months old. It’s now a grim war of attrition, from which much of the West has turned its attention. This raises the risk that [Ukraine will adopt the same amoral approach]( to the conflict as Russia, writes Leonid Bershidsky. That would be a mistake, given Ukraine’s ambition to join the family of enlightened European nations. It must hold the moral high ground. Sustained attention from the West would help. One of the [few things Boris Johnson got right]( was the importance of defending Ukraine and standing up to Putin, writes Therese Raphael. His successor will have to maintain that stance in the face of growing pressure to go wobbly. Telltale Charts Better Covid booster shots are coming, but [can we convince people to take them](? The signs aren’t encouraging, writes Lisa Jarvis. Further Reading Despite GOP obstruction, [real gun-safety progress is being made](, slowly but surely. — Bloomberg’s editorial board Italy and Europe need [Mario Draghi to stay in office](. — Maria Tadeo President Joe Biden [needs to win India’s support in the Middle East](. — Mihir Sharma [Dems shouldn’t waste time with messaging bills]( and just hurry up and get real stuff passed. — Jonathan Bernstein Jair Bolsonaro has [given the military a troubling amount]( of political power. — Clara Ferreira Marques Normal investors [don’t have to sweat a bear market](. Low-cost index funds are still your friend. — Nir Kaissar ICYMI Penny [Mordaunt is the new favorite]( to replace Boris Johnson. Ken Griffin is opening [a Palm Beach office](. What if Elon [Musk refuses a court order]( to buy Twitter? Ivana [Trump has died](. Kickers Area man accused of trying to sell [stolen “Hotel California” lyrics](. (h/t Ellen Kominers) Van Gogh self-portrait found [hidden behind another painting](. Finnish baseball park has a [river in the outfield]( and a camera in the river. Swedish tree is [nearly 10,000 years old](. Notes: Please send Eagles lyrics and complaints to Mark Gongloff at mgongloff1@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. 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