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Global debt has risen from  $84 trillion at the turn of the century, to $173 trillion at the time of the 2008 financial crisis, to $250 trillion a decade after Lehman Brothers Holdings Inc.’s collapse:

“In many ways, all the talk about global central banks beginning a “great unwind” of their extraordinary monetary stimulus is positively quaint.

“After all, how can officials from the Federal Reserve to the Bank of Japan even pretend to know how to reverse what they’ve done over the past decade? I’m speaking specifically about propping up financial markets with easy money and allowing the world’s debt burden to balloon to almost $250 trillion.

“They kept interest rates at or below zero for an extended period — probably too long, if they’re being honest with themselves — and used bond-buying programs to further suppress sovereign yields, punishing savers and promoting consumption and risk-taking. Global debt has ballooned over the past two decades: from $84 trillion at the turn of the century, to $173 trillion at the time of the 2008 financial crisis, to $250 trillion a decade after Lehman Brothers Holdings Inc.’s collapse…

“This is the post-Lehman legacy. To pull the global economy back from the brink, governments borrowed heavily from the future. That either portends pain ahead, through austerity measures or tax increases, or it signals that central-bank meddling will become a permanent fixture of 21st century financial markets.”

[…or it signals that the entire edifice of modern finance is inherently unstable and on the verge of collapsing under the weight of its own contradictions.]

https://www.bloomberg.com/graphics/2018-lehman-debt/?srnd=premium


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“A decade after the collapse of Lehman Brothers sparked a plunge in markets and a raft of emergency measures, strategists at the bank have created a model aimed at gauging the timing and severity of the next financial crisis. And they reckon investors should pencil it in for 2020.”

https://www.smh.com.au/business/markets/the-next-financial-crisis-will-strike-in-2020-says-jpmorgan-20180914-p503o7.html


A popular prediction today:

“The leverage in many emerging markets and some advanced economies is clearly excessive. Commercial and residential real estate is far too expensive in many parts of the world. The emerging-market correction in equities, commodities, and fixed-income holdings will continue as global storm clouds gather. And as forward-looking investors start anticipating a growth slowdown in 2020, markets will reprice risky assets by 2019.”

https://www.theguardian.com/business/2018/sep/13/recession-2020-financial-crisis-nouriel-roubini


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“When emerging markets run into trouble, the trouble can keep getting worse until the Federal Reserve rides to the rescue. But what if the Fed never shows up?”

https://www.wsj.com/articles/the-fed-wont-save-emerging-markets-1536859244


“Turkey‘s central bank has raised its key interest rate to 24% in a dramatic bid to control rocketing inflation and prevent a currency crisis. Ignoring calls for restraint from President Recep Tayyip Erdoğan, the bank raised its main short-term rate from 17.5% following weeks of pressure from international investors. Financial markets have grown increasingly concerned that Turkey is in danger of adding its name to the list of countries seeking a rescue loan from the IMF.”

https://www.theguardian.com/business/2018/sep/13/turkey-raises-interest-rates-to-24-in-startling-bid-to-curb-inflation


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“Consumer prices in Argentina rose at their fastest pace in August since the nation’s statistics agency regained credibility in 2016, another sign that South America’s second-largest economy is heading for a recession this year… Prices rose 34.4 percent compared to a year ago, according to data published Thursday.”

https://www.bloomberg.com/news/articles/2018-09-13/argentina-s-inflation-rate-hits-highest-level-of-macri-era


“Some Asian countries have been hit hard by the selloff of emerging market assets, with their currencies plunging in value against the US dollar. The situation has stoked fears that Asia is on the verge of facing another financial crisis like the one seen during 1997-98. The Indonesian rupiah has slumped to its lowest level since the Asian financial crisis in the late nineties… But the worst performing Asian currency this year has been the Indian rupee.”

https://www.dw.com/en/are-we-about-to-face-a-new-asian-financial-crisis/a-45473441


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“Inflation is putting poor children at risk of malnutrition, a children’s rights group said Thursday, as it sought the passage of a bill that seeks to provide health and nutrition services for the underprivileged. In a statement, Save the Children Philippines said the rising prices of goods have “put millions of children at risk of malnutrition as more poor families experience hunger.””

https://news.abs-cbn.com/news/09/13/18/inflation-putting-poor-children-at-risk-of-malnutrition-save-the-children


“China will not buckle to U.S. demands in any trade negotiations, the major state-run China Daily newspaper said in an editorial on Friday, after Chinese officials welcomed an invitation from Washington for a new round of talks… “The Trump administration should not be mistaken that China will surrender to the U.S. demands. It has enough fuel to drive its economy even if a trade war is prolonged,” the newspaper said in an editorial.”

https://www.cnbc.com/2018/09/14/china-will-not-surrender-to-us-demands-in-trade-talks–state-media.html


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“Investment in factories, railways and other projects in China so far this year grew at its slowest pace in more than a quarter-century, pointing to challenges in government efforts to arrest an economic slowdown.”

https://www.wsj.com/articles/china-economic-activity-indicators-mixed-in-august-1536892284


“Ten years ago, China shielded itself from the global financial crisis with a wall of stimulus. Facing U.S. President Donald Trump’s tariff onslaught, that feat of self-preservation looks much harder to repeat. The simple reason is that even if President Xi Jinping’s government were to conclude that the economy needed massive spending to keep growth on track, he is hamstrung by China’s huge debt.”

https://www.japantimes.co.jp/news/2018/09/14/business/high-debt-limits-chinas-range-weapons-defending-trumps-tariff-blitz/#.W5tqs-hKjIU


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“Debt stalks Africa once again. Over the past six years sub-Saharan governments have issued $81bn in dollar bonds to investors hungry for yield. Piled on top of this are murkier syndicated loans and bilateral debts, many to China and tied to big construction projects… Consider Zambia. In 2012 this southern African country could borrow more cheaply than Spain. Now bond yields have jumped above 16%, suggesting that investors fear that it will default…”

https://www.economist.com/leaders/2018/09/15/zambias-looming-debt-crisis-is-a-warning-for-the-rest-of-africa


“…not everything is rosy in this credit-fuelled affair. Kenya is the third biggest borrower from China in Africa and the strain of the mounting debt is showing. In fact, public outcry is still reverberating following the Jubilee government’s widely unpopular decision to impose a 16 per cent levy on petroleum products to fund the ballooning budget deficit. China has been on a massive lending spree, gifting it an iron grip on Kenya and other African countries that collectively owe the Asian giant more than Sh20 trillion.”

https://www.standardmedia.co.ke/business/article/2001295448/how-china-is-feeding-off-poor-africa


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“Ten years from the global financial crisis of 2008, the links between public debt and banks still remain, Peter Wuffli, the former CEO of UBS, told CNBC on Friday. Wuffli said that remains a major risk for Europe.”

https://www.cnbc.com/2018/09/14/the-links-between-public-debt-and-banks-remain-says-former-ubs-ceo.html


“Italian bonds declined for the third day amid reports that Finance Minister Giovanni Tria threatened to quit over the country’s budget negotiations, and after an auction of government debt drew weaker demand. The minister’s offer to resign followed pressure from the Five Star movement over a proposal to fund a basic income for the poor, newspaper La Stampa reported Thursday, and comes as the nation risks a stand-off with the European Union over fiscal deficit rules.”

https://www.bloomberg.com/news/articles/2018-09-13/italy-bonds-dip-on-report-tria-offered-to-quit-on-budget-discord


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“The governor of the Bank of England has warned the cabinet that the impact of a no-deal Brexit could be as catastrophic as the financial crisis that crippled the UK economy a decade ago. During a special cabinet meeting on Thursday to discuss preparations for the UK crashing out of the union, Mark Carney told Theresa May and her senior ministers of the potentially dire economic consequences of leaving on poor terms.”

https://www.theguardian.com/politics/2018/sep/13/no-deal-brexit-could-be-as-bad-as-2008-financial-crash-carney-says


“Ratings agency Fitch said on Thursday that it saw a growing risk of a bitter and economically damaging Brexit that could lead to a further downgrade of Britain’s sovereign credit rating.”

https://www.insurancejournal.com/news/international/2018/08/17/498451.htm


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Moody’s agrees:

“British households would face a renewed squeeze on living standards from a no-deal Brexit that could tip the country into recession, according to a report. Issuing a stark warning for Britain that crashing out of the EU without a deal next year would have widespread ramifications, the credit ratings agency Moody’s said the risks to the British economy had “risen materially” in recent months.”

https://www.theguardian.com/business/2018/sep/13/no-deal-brexit-uk-recession-moodys


Read yesterday’s ‘Economy’ thread here.