“If you thought the 2008 global financial crisis was a story about excessive debt, today you might be feeling a little nervous. There’s even more debt sloshing around the global economy than there was 10 years ago. True, some countries have managed to repay some of what they had borrowed — the Republic of Ireland, Spain and Portugal, thanks to years of austerity, and the US, thanks to the effect of the subprime lending crisis on household borrowing.
“Overall, however, debt has gone up, due both to huge additional corporate borrowing, particularly in emerging economies, and to post-crash fiscal stimulus in the developed world.
“There’s nothing particularly wrong with borrowing so long as the money raised is put to good use. Recent evidence, however, is not encouraging. Productivity growth has been disappointingly weak in both developed and emerging economies, suggesting increases in debt have done little to transform people’s living standards. If anything, the debt “addiction” that contributed to the global financial crisis has become even worse…
“And other odd things have been happening in the financial world. Until recently, the US stock market had been racing ahead, increasingly divorced from an economy that, on many measures, was just limping along, and investors have been happy to lend at remarkably low interest rates to countries with chequered financial histories. Lessons from the eurozone crisis have not been learnt.
“…I suspect policymakers are very nervous. Having used up much of their policy ammunition 10 years ago, there’s little left to fight another financial war. And yet the faultlines are there for all to see.”
“Wage growth in 2017 slowed to its lowest rate since 2008, the year of the financial crisis, despite solid economic growth and falling unemployment in major economies, the International Labour Organization said Monday.”
[UK worst of G20 nations]
“More than a quarter of Britain’s pubs have closed their doors since the turn of the millennium, according to “shocking” official figures that have prompted fresh calls for the government to step in…
“Small independent pubs have borne the brunt of the decline, disappearing in droves as large commercial chain venues have grown in number.”
“…how on earth does Theresa May expect to secure the consent of MPs to her agreement? Through the extraordinary spectacle of a Conservative prime minister precipitating an economic crisis to force through what she wants. George Osborne’s former chief economic adviser, Rupert Harrison, describes the approach as the “Tarp model…
“Tarp (Troubled Asset Relief Progamme) was the term used to refer to the US plan to bail out the banks in 2008 in the midst of the global financial crash. Initially, Congress rejected the plan, causing the markets to tank and financial chaos to ensue. So President Bush brought it back to Congress and it passed on the second attempt three days later.”
“Paris was burning. France was in revolt. It was a sharp contrast to the vast popular wave that swept President Emmanuel Macron into office with a stunning 66% of the vote… Even before his proposed reforms, his popularity began to plunge to half its sky-high numbers when he first took office. But since he has undertaken such an agenda, Macron’s popularity has hit a new low — 26%, which is below his predecessors François Hollande (48% ) and Nicolas Sarkozy (29%) at this point in their presidencies. Neither won re-election to a second term.”
“The German economy is cooling down. That is the standout assessment from a key business climate survey, published by the Munich-based Ifo Institute on Monday.
“The Ifo Business Climate Index fell to 102.0 points in November from 102.9 points in October, marking its third consecutive decrease.”
“Italy’s government says it will stick to its high-spending budget plans, setting up a potential stand-off with the European Union over its deficit.
“PM Giuseppe Conte, who held talks with deputies Matteo Salvini and Luigi Di Maio on Monday, said the objectives for 2019 had already been fixed.”
“Greece’s asylum system is hamstrung by public sector cuts imposed during the country’s EU bailouts, a UN envoy has said, as campaigners warned of a looming winter crisis for refugees and migrants.
“MEPs blame Europe’s asylum system for humanitarian conditions in Greece, where thousands are stranded in squalid camps that are a danger to physical and mental health.”
ECB tightening not ideal, you’d think, in the context of all the above:
“The European Central Bank is unlikely to go back on its plan to end bond purchases next month and a rate hike sometime next year remains on the cards, ECB board member Sabine Lautenschlaeger told AFP in an interview.”
“It’s enough to bring tears to the eyes of an economist. Turkey’s government is hunting for onions as part of efforts to fight crippling inflation, blaming unauthorized stockpiles for pushing up prices for shoppers.
“The country is in the grip of an economic crisis driven by a weakened currency, soaring debt, and a rift with the U.S. that saw President Donald Trump impose new trade tariffs.”
“Until last year, Nicaragua was a tourism hot spot and home to one of Latin America’s fastest-growing economies, ticking upward at about 5 percent per year. President Daniel Ortega, who for years had consolidated power through nepotism and graft, maintained popular support by administering welfare programs for the nation’s poor. Things began to turn, however, after longtime benefactor Venezuela pulled its aid in 2017 amid an economic collapse of its own.”
“President Donald Trump seemed ready to escalate the trade war with China in an interview with the Wall Street Journal on Monday. Trump said it is “highly unlikely” that an upcoming meeting with Chinese President Xi Jinping at the G20 summit will yield a deal to prevent a forthcoming increase in tariffs. Trump also said he is prepared to hit another $267 billion worth of Chinese goods with tariffs — and he is not afraid to put tariffs on consumer goods like iPhones.”
“Cui Tiankai raised the spectre of a repeat of the 2008 global financial crisis… ahead of the high-stakes meeting between US President Donald Trump and Chinese leader Xi Jinping… “Although the current economic situation in the US is good, people cannot rule out the possibility of another – I don’t want to use the word ‘crisis’ – a similar situation to what happened 10 years ago,” Cui said. “But, under the current circumstances, do you think people will still be as ready and open as they were in 2008 to have effective international policy coordination and coordinated stimulus actions? I’m not sure about that.””
“Juiced by US President Donald Trump’s tax cuts, business investment helped deliver a robust US economy in the first half of 2018, but signs have multiplied that the growth driver is faltering. Companies face tariff-related uncertainty, cooling global demand and rising borrowing costs, while plunging oil prices are menacing the energy sector. Meanwhile, the US and China are settling in for a protracted trade war…”
“General Motors Co will cut car production, stop building several slow-selling models, and slash its North American workforce, its biggest restructuring in North America since its bankruptcy a decade ago. GM plans to halt production next year at three assembly plants – Lordstown, Ohio, Hamtramck, Michigan, and Oshawa, Ontario. The company also plans to stop building several models now assembled at those plants, including the Chevrolet Cruze, the Cadillac CT6 and the Buick LaCrosse.”
“How General Electric (GE) resolves its debt problem will be “critical” to the wider Investment Grade (IG) market, an analyst said Monday. The General Electric Company has witnessed an exodus of investment from both its equity stock and corporate debt as its future has been called into question. The U.S. behemoth has piled on the debt in recent years as it looked to buy companies, pay off its pension deficit and buy back shares.”
“…there are signs that a contraction in global trade is deepening.
“September data just released by the Netherlands Central Planning Bureau show a clear deceleration in global trade, with Europe and Japan showing the weakest results.”
“As monetary tightening reveals the vulnerabilities in the real economy, the collapse of asset-price bubbles will trigger another economic crisis – one that could be even more severe than the last, because we have built up a tolerance to our strongest macroeconomic medications.
“If history is any guide, the consequences of this mistake could extend far beyond the economy. According to Harvard’s Benjamin Friedman, prolonged periods of economic distress have been characterised also by public antipathy toward minority groups or foreign countries – attitudes that can help to fuel unrest, terrorism, or even war…
“Against this background, we must take seriously the possibility that the next economic crisis could lead to a large-scale military confrontation.”