Predictions make fools of us all but if the Fed pushes forward with two more rate rises this year I suspect we will have our Global Financial Crisis 2.0:
“The Federal Reserve raised interest rates on Wednesday, a move that was widely expected but still marked a milestone in the U.S. central bank’s shift from policies used to battle the 2007-2009 financial crisis and recession.
“In raising its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75 per cent to 2 per cent, the Fed dropped its pledge to keep rates low enough to stimulate the economy “for some time” and signalled it would tolerate inflation above its 2 per cent target at least through 2020.
““The economy is doing very well,” Fed Chairman Jerome Powell said in a news conference after the rate-setting Federal Open Market Committee released its unanimous policy statement after the end of a two-day meeting…”
“”U.S. non-financial corporate debt hit a post-crisis high of 72% of GDP: At around $14.5 trillion in 2017, non-financial corporate sector debt was $810 billion higher than it was a year ago, with 60% of the rise stemming from new bank loan creation. At present, bond financing accounts for 43% of outstanding debt with an average maturity of 15 years vs. the average maturity of 2.1 years for U.S. business loans. This implies roughly around $3.8 trillion of loan repayment per year. Against this backdrop, rising interest rates will add pressure on corporates with large refinancing needs.””
https://www.forbes.com/sites/johnmauldin/2018/06/13/yet-another-debt-crisis-is-brewing/#2963871fff57
“My analyses indicate that the underlying dynamics of the [US] unemployment situation remain exceedingly worrisome… various aspects of lending growth and related measures have shown a marked slowing in the growth rate… The level and growth rates of wages and household earnings continue to be (highly) problematical… many other indicators discussed on this site indicate economic weakness or economic contraction.”
https://seekingalpha.com/article/4181357-charts-implying-economic-weakness-june-2018
“Global trade is showing signs of slowing… The U.S. dollar has strengthened considerably, turning in a headwind for emerging market economies… Sales growth has been slowing… Geopolitical tensions and policy concerns, particularly around tariffs, have sent shockwaves of volatility back into the markets…”
https://www.cnbc.com/2018/06/13/emerging-markets-sinking-into-a-correction-this-year-may-fall.html
“Markets welcomed the International Monetary Fund’s (IMF) $50 billion rescue stabilization package last week, which seems to be stabilizing the [Argentine] peso. But the financial umbrella will be costly.”
“A two-month national survey to track migrants showed 442,462 Venezuelans without visas, stamped passports or temporary permission to remain had arrived over the 15 months. Another 376,572 arrivals did have legal permission.”
“Moody’s downgraded Gabon’s sovereign debt rating for the second time in 12 months to Caa1, citing liquidity pressures which are making debt repayment tougher.”
http://www.africanreview.com/finance/economy/moody-s-downgrades-gabon-on-debt-repayment-worries
“The steep rise in [Kenya’s] debt means a looming increase in debt servicing obligations, including interest and principal repayments…”
“The one-month Hong Kong interbank offered rate (Hibor) rose 2 basis points to 1.60 per cent on Thursday, its highest level since 2008. Three-month Hibor was up for a seventh straight day to 2.01 per cent. The increase in Hibor rates shows that it was getting harder and costlier for banks to obtain funds in the interbank market…”
“China’s economy is finally starting to cool under the weight of a multi-year crackdown on riskier lending that is pushing up borrowing costs for companies and consumers, with data on Thursday pointing to a broad slowdown in activity in May. The data, which showed the slowest investment growth in over 22 years, “was all shockingly weak by Chinese standards,” economists at Rabobank said…”
http://www.asahi.com/ajw/articles/AJ201806140054.html
“The default [of China Energy Reserve and Chemicals Group] has spurred some investors to reassess risks with Chinese firms that had previously been seen as solid bets…”
“Household leverage may have peaked, house prices are falling, and credit conditions are tightening. The combination of the three should have all of us asking: what next [for Australia]?”
“The European Central Bank will debate on Thursday whether to end its huge asset purchases by year-end, in what would be its biggest step towards dismantling crisis-era stimulus credited with pulling the euro zone economy out of recession.” [Let us hope they postpone]
“Industrial production in the eurozone fell more sharply than expected in April, resuming its 2018 decline.”
https://financialtribune.com/articles/world-economy/88052/eurozone-factory-output-slowdown-continues
“The DIW economic institute has slashed its growth forecast for Germany due to an unexpectedly weak start to 2018 and risks from abroad including concerns about Italy’s new government and the escalating trade conflict with the United States.”
“Banks in major European economies could be severely hurt by political developments in Italy given their exposure to Italian debt, with France’s lenders leading the potential losses. Recent political turmoil in Italy has increased the borrowing costs for the euro zone’s third-largest economy, but it has also raised questions about potential contagion to other countries.”
