“At the end of May, the International Monetary Fund launched its global debt database. For the first time, IMF statisticians have compiled a comprehensive set of calculations of public and private debt, country by country, constructing a time series stretching back to the end of the second world war . It is an impressive piece of work.
“The headline figure is striking: global debt has hit a new high of 225% of world GDP, exceeding the previous record of 213% in 2009. So, as the IMF points out, there has been no deleveraging at the global level since the 2007-08 financial crisis. In some countries, the composition of debt changed, as public debt replaced private debt in the post-crisis recession, but that shift has mostly stopped…
“…the numbers do tend to support the hypothesis that the so-called debt intensity of growth has increased: we seem to need higher levels of debt to support a given rate of economic growth than we did before…
“We must hope, therefore, that the Basel-based capital requirements imposed by the various US banking regulators are adequate. So far, the ratios have not been cut, though other deregulatory initiatives, proposed by Trump appointees in the relevant agencies, are in the works…”
“The British Chambers of Commerce has cut its UK growth forecast for 2018, warning the economy faces its weakest year since the financial crisis.”
“The Bank of England is expected to hold interest rates steady at its latest monetary policy meeting this week with debate raging among economists as to whether the UK economy is ready for another rate hike.”
“Rising interest rates in the Eurozone – which will have an impact in Ireland – could pose a threat to Irish mortgage holders in the early years of their home loans. Already there are signs that interest rates are on the way up over the next few years which could leave those homeowners on fixed rate mortgages facing hefty monthly increases as their fixed rate term matures.”
“What marks Italy out as a smouldering source of debt crisis is that, unlike Japan, the United States and the UK, Italy does not have the ability to issue debt, nor to redeem it, in a currency that it issues. Nor does it have control of its own interest rates. This puts it in just about the worst of all possible positions. Indeed, it is in a similar position to many emerging market countries that, in the past, have been forced to borrow in dollars.”
“Egypt on Saturday increased fuel prices by up to 66.6 percent to meet an International Monetary Fund (IMF) loan deal and push the implementation of economic reform plans, the Oil Ministry said in a statement.”
“Earlier this week Saudi Arabia, the United Arab Emirates and Kuwait offered $2.5 billion in aid for Jordan to ease its economic crisis following a wave of anti-austerity protests, according to Saudi state media.”
“Affordable housing in India is a corner of finance that’s expanding almost 40 percent a year, and even more for some hyperactive lenders. The borrowers are subprime, their collateral is of dubious value, financiers’ cost of capital is rising, and yet the government is whipping up a home-buying frenzy. Investors beware. You’ve seen similar stories play out before; this one, too, isn’t likely to end well.”
“A falling tide lowers all boats, it seems. Overseas funds are pulling out of six major Asian emerging equity markets at a pace unseen since the global financial crisis of 2008 — withdrawing $19 billion from India, Indonesia, the Philippines, South Korea, Taiwan and Thailand so far this year, according to data compiled by Bloomberg.”
“Dislocations, and maybe bankruptcies, do seem possible as Emerging Market economies raise interest rate spreads on dollar debt to compete with a surge in American credit. Mr Patel says that the “giant sucking sound” of capital flowing into America will be accompanied by a sudden stop in the world economy, unless the Fed abandons its plans to reverse quantitative easing by shrinking its balance sheet.”
“Argentina sought to inject some confidence back into its beleaguered currency and calm markets on Friday after the peso plunged more than 6% against the US dollar, leaving it at a record low.”
“The balance sheets of three of Canada’s leading commercial banks in Barbados may take a billion-dollar hit as a result of the suspension of loan payments to foreign lenders.”
“The bull market in highly leveraged US companies could be coming to an end. For most of the decade since the financial crisis, shares in companies with weak balance sheets performed much better than the stocks of their stronger peers, according to Goldman Sachs strategists. But that trend has started to change recently…”
“China is set for a sharp slowdown in the coming months as credit dries up and Donald Trump’s trade war threatens to damage confidence. The slowdown is expected to be widespread, after worrying figures released this week revealed that investment, consumption and exports all cooled last month.
“As the Trump administration imposes tariffs on allies and rivals alike, provoking broad retaliation, global commerce is suffering disruption, flashing signs of strains that could hamper economic growth. The latest escalation came on Friday, when President Trump announced fresh tariffs on $50 billion in Chinese goods, prompting swift retribution from Beijing.
“As the conflict broadens, shipments are slowing at ports and airfreight terminals around the world. Prices for crucial raw materials are rising. At factories from Germany to Mexico, orders are being cut and investments delayed. American farmers are losing sales as trading partners hit back with duties of their own…”