“The Turkish lira fell almost 9% in early trading on Monday and the euro hit a one-year low as investors feared that the country’s financial crisis could spread to European markets.
“Despite defiant words by the Turkish president Recep Tayyip Erdoğan over the weekend pledging as yet unspecified action to reverse the slide, the currency slipped alarmingly against the US dollar on Monday.”
“”Just to put it in context: the amount of money borrowed by Turkey is similar to the amount of money that was borrowed by Bear Stearns-it’s about $400 billion. Bear Stearns of course had off-sheet liabilities as well, but on-sheet liabilities of $400 billion. Lehman Brothers was $600 billion, so that puts it in context. This is a big number and it’s lent from outside the system so it does have issues for financial stability, particularly in Europe and we need to make that clear.””
“Italy’s bonds led losses among euro-area sovereign debt markets as the Turkish currency turmoil fueled fears of a contagion effect across riskier assets. Yields on two-year securities climbed to the highest levels in more than a week as stocks worldwide declined following a tumble of more than 28 percent in Turkey’s lira this month. The Italian 10-year spread over German bunds hit the highest since May. Deputy Prime Minister Luigi Di Maio was reported as saying in an interview Monday that his country won’t be subject to an attack by speculators.”
“The plunge in the Turkish lira has set off a wave of selling across emerging market assets, reviving the spectre of contagion that has been the sector’s Achilles heel for decades… the South African rand and Brazilian real tumbled in its wake… “It’s the usual classic emerging markets story where people wake up, see bad news in one country and start selling everywhere,” said Bart Turtelboom, chief executive at APQ Global.”
https://af.reuters.com/article/investingNews/idAFKBN1KW04Z-OZABS
“The rupee on Monday joined the emerging market currencies rout as the domestic unit opened at a low of 69.47 against the US dollarNSE -0.96 %. The rupee nosedived to its life-time low of 69.62…”
“In spite of President Cyril Ramaphosa’s attempts to revive the country’s struggling [South African] economy, there is a strong possibility it may slip into recession. Economists have predicted negative growth for the second quarter (April to June), which would throw the country into recession. The rand fell to its worst level against the dollar in nearly 18 months this week…”
https://www.iol.co.za/weekend-argus/economy-teeters-on-the-brink-of-recession-16511517
“The Australian dollar fell to an 18-month low against the US dollar on Monday, as worries about an impending financial crisis in Turkey prompted selling in the currency with strategists warning of more downside ahead.”
“The bid-ask spread or the difference between the price bidders are willing to buy and sell the lira at, has widened beyond the gap seen at the depths of the Global Financial Crisis, following the collapse of Lehman Brothers.”
Meanwhile the trade war rumbles on:
“China is not just another front in President Donald Trump’s war on trade. Unlike Mexico, Canada, Europe and other targets of the president, China will be a source of economic conflict for years to come.”
And the UK continues to fumble the ball on Brexit:
“Sterling’s decline has recently resumed, albeit gently. Perhaps the only surprising thing about that statement is its last word. Seasoned market watchers are surprised that the pound is not a lot lower, such is the utter chaos surrounding the UK’s preparations for its imminent departure from the EU.”
An additional stress for an already struggling economy:
“…the UK has experienced a slump in productivity growth since the financial crisis that shows no sign of coming to an end. The slowdown has been more acute than any other western country.”
https://www.ft.com/content/6ada0002-9a57-11e8-9702-5946bae86e6d
“U.K. house prices fell for a fifth month in a row in July, the longest stretch of declines since the financial crisis.”
“I think we’re bound for something a lot worse than a recession. We’re going to continue what we began in 2008… the central banks around the world are going to have to raise interest rates. And that’s when there’s really a disaster, because we can’t afford the higher interest rates. We can barely afford the higher interest rates we have now.”
https://www.salon.com/2018/08/12/the-end-is-near-a-play-by-play-of-the-coming-economic-collapse/
