“On Thursday, the British government will begin to publish eighty-four guidelines, for civilians and businesses alike, setting out what will happen if the negotiations over the United Kingdom’s departure from the European Union end in failure. Since the vote to leave the E.U., in 2016, the prospect of a “no deal” Brexit has always been the nightmare scenario. Forty-six years of deep economic, political, and social coöperation would end—papers flying, the door slamming, lights out—at midnight, Brussels time, on March 30, 2019…
“If the U.K. and the E.U. can’t agree, then economic relations between the two sides will default to the rules of the World Trade Organization. Britain will become just another “third country” in its dealings with the bloc, subject to tariffs and border checks. The W.T.O. regime hardly covers services, which make up eighty per cent of the British economy.
“Meanwhile, four decades of intricately devised shared regulations—for drugs, citizens’ rights, security, food standards, the Internet—will cease to function from one minute to the next. A British airline will not be licensed to land a plane in Paris. An insurance contract underwritten in London may no longer be valid in Greece. Three million E.U. citizens living in Britain would have every cause to panic. Food prices will rise by an estimated twenty per cent, and financial markets will turn red, as the U.K. immediately tumbles out of sixty-three trade agreements that the E.U. holds with other nations around the world.
“Earlier in the summer, the Prime Minister’s office was forced to deny that, in the event of no deal, the Army would be deployed. Last week, a leaked letter from NHS Providers, which represents ambulance services and hospitals, warned that a collapse in the talks could undermine “the entire supply chain of pharmaceuticals” in Britain. “Public health and disease control co-ordination could suffer.”
“…We are always warned. We see the calamity coming. But we do not believe it until it is here.”
“All sections of UK society now think that it is more likely than not the country will crash out of the EU without a trade deal, a new survey has revealed. Every demographic, employment status and political group believes a no-deal Brexit is the likely outcome as negotiations continue to stall, KPMG found.”
“Italy has now turned into the weak link of the euro zone and market participants shouldn’t rule out the possibility of a debt crisis further down the road, one economist told CNBC Wednesday. Traders are increasingly wary of developments in Italy, where a recently established populist coalition has vowed to spend more, despite carrying the second largest public debt pile in the euro area.”
“High volumes, high yields, wide spreads — these are the ingredients for a stormy autumn in Italian markets.”
“The crisis has cost Greece 25 per cent of its gross domestic product — unprecedented for any European nation during peace time — the unemployment rate sits at almost 20 per cent, even after hundreds of thousands of people have migrated, and national debt is about 180 per cent. Even without its lending arrangements in place, Greece is not totally free from the creditors.”
“The amounts are not small. Turkish borrowers owe Spanish banks in excess of $82 billion, while French banks are owed $38.4 billion and Italian banks are owed $17 billion. Turkey’s private-sector debt is substantial – within a year it must pay $220 billion to service this debt. An inability to make these payments as well as a further collapse of the lira could set off a crisis in Europe, which would then have an impact on the global financial markets.”
“Sudan’s central bank has attempted to tighten its control of government finances, despite still not announcing a replacement for its late governor, who died in June. The Central Bank of Sudan has also tried to cut the amount of currency in circulation as the country’s economic crisis deepens.”
“Nigeria is badly divided and it needs a unifier and a bridge builder. Nigeria’s economy needs to be rescued from complete collapse.”
“A top US policy think tank has warned that South Africa is on the path to a Zimbabwe-style land disaster and has called on US President Donald Trump to take action.”
“The Trump administration’s latest round of tariffs on Chinese goods kicked in Thursday, drawing immediate retaliation from Beijing.”
“In the current quarter, the U.S. economy was forecast to grow 3 percent and then 2.7 percent in the next, a slight upgrade from the previous poll. But the short-term boost to growth from those enormous tax cuts was expected to wane. Economists trimmed their growth projections across most quarters next year leaving the outlook broadly unchanged and vulnerable to the trade spat with China.”
“Concern about the political future of President Donald Trump following the plea deal of Michael Cohen and the guilty verdict of Paul Manafort may put the dollar’s ascent in jeopardy, analysts say.”
“Federal Reserve officials had a lengthy discussion in early August of what to do if they are forced to push interest rates back down to zero in the next recession, according to minutes of their meeting released Wednesday. Officials said there was a “meaningful risk” rates could go back to zero during the next decade.”
“…there are many people wondering just what will derail [the current economic recovery], given that at some point it will end. My bet for the past few years has been that it will probably be the result of an oil price spike… I also think that… there [is] another major candidate, namely rising interest rates, which might in fact lead to a new global economic crisis, which could be far worse than the last one.”
“The delinquency rate on credit-card loan balances at commercial banks other than the largest 100 – so at the nearly 5,000 smaller banks in the US – rose to 6.2% in the second quarter. This exceeds the peak during the Financial Crisis by a full percentage point and was up from 4.0% a year ago.”
“Record levels of corporate and household debt, combined with the prospect of rising interest rates, are putting the [global economy] on a knife’s edge, warns Jamieson Coote Bonds director of investment, research and strategy Paul Chin, who is also concerned about the prospect of ‘contagion’ from the collapse of the Turkish lira last week.”
“Ten years ago, hubristic Wall Street geniuses came this close to destroying the global economy, saved largely by the Fed feeding trillions of dollars into banks in the U.S. and around the world.
“Why it matters: This time, unlike in 2008 and 2009, it may be that no one comes to the rescue, given new U.S.-China tensions, frayed trans-Atlantic relations, and Trump Administration hostility to multi-lateral actions.
“The 2008 financial crisis is not really over: Even as the U.S. stock market bull run made history today, the crash continues to reverberate in the form of still-recovering economies and massive global distrust in institutions.”