“Having fixed the liquidity crisis of 2008-09 and kept a perversely unequal “recovery” staggering forward for a decade, central banks now believe there is no crisis they can’t defeat.
“China’s central bank created over $1 trillion in January alone to flood China’s faltering credit system with new credit currency.
“The pool of qualified borrowers who are willing to bet on another decade of central-bank goosed “growth at any cost” is shrinking rapidly.
“Thus will end the central banks’ bombastic hubris and the public’s faith in central banks’ godlike powers.”
“China’s spending spree during the global financial crisis helped pull the world economy out of recession. This time, Beijing’s stimulus might not pack the same punch…
“Behind the more modest growth push is a realization in Beijing that China’s traditional debt-driven growth model has reached its limit… China is getting less output from its borrowing than before.”
“As China’s $9.1tn shadow lending industry cools for the first time in a decade, private corporate defaults are on the rise… Shadow funds have been the lifeblood of private companies in China for years, because as state-owned banks tend to prefer to lend to government-controlled companies.
With access to shadow funds cut off, many private companies will face financial strain and defaults are expected to rise this year…”
“Japan’s exports fell for a third month in February in a sign of growing strain on the trade-reliant economy, suggesting the central bank might be forced to offer more stimulus eventually to temper the effects of slowing external demand and trade frictions.”
“Japan’s government debt in 2018 hit the US$10 trillion mark, an ominous milestone. In the same year the nation’s population saw a record decline. Despite all this, 10-year yields are -0.04%. Punters, in other words, are effectively paying Tokyo for the opportunity to hold its debt.”
“Treasurer Josh Frydenberg has warned Australia’s housing market collapse could destroy small businesses and hit family budgets ahead of the next federal election.
“House prices have plunged by around 15 per cent in parts of Sydney and Melbourne in recent months amid fears the fall will harm the wider economy. In particular, small business owners that took out loans against the value of their houses may be badly affected.”
“The [South African] utility, which is struggling to emerge from a severe financial crisis and suffered a series of unplanned breakdowns, began rolling blackouts last week because of a shortage of generating capacity.
The situation worsened on Saturday after it lost 900 megawatts of electricity imports from Mozambique, which is cleaning up after a powerful cyclone knocked out communications and electricity pylons last week.”
“British companies look set to cut investment by the most in 10 years in 2019 because of Brexit, even if Prime Minister Theresa May gets a deal to ease the country out of the bloc, an employers group said on Monday…
“Weak investment by companies drags on productivity which puts a brake on wage rises and weighs on the overall economy.”
“As for Germany, over-reliance on the auto sector has left the economy cruelly exposed to the slowdown in China, by far the industry’s biggest export market.
“For Germany, a decline of just 10pc in Chinese car sales, which is what has happened, is equal to the entire size of its UK market. It would be most unwise to count on this being just a temporary setback.”
“Deutsche, the largest bank in Germany, Europe’s biggest economy, emerged unscathed from the financial crash but later lost its footing. In 2016, the International Monetary Fund called the bank the world’s biggest potential risk among peers to the financial system because of its links to other banks.
“German officials fear that a recession or big fine, for example, could derail the bank’s fragile recovery.”
France is sounding an alarm for the world’s advanced economies: capitalism is tearing them apart.”
“At one point during this partnership, Cuba was receiving more than 100,000 bpd of Venezuelan crude, an analysis by Oliver Pieper for Deutsche Welle said. Now, however, this is probably down by a half as Venezuela struggles to keep its fields producing.
“Even so, Venezuelan crude is an important part of Cuba’s energy mix and its elimination from this mix would almost certainly lead to power outages for Cuba as well.”
“It has been pointed out that extended periods of ultralow interest rates can have adverse effects. One of these is an increase in global debt. According to the Organisation for Economic Co-operation and Development (OECD), global outstanding debt in the form of corporate bonds issued by non-financial companies stood at almost 13 trillion U.S. dollars at the end of 2018 — more than double the amount outstanding in real terms before the 2008 global financial crisis.
“If investor sentiment turns around and a full-scale increase in interest rates resumes, then there is a risk that many companies will find it impossible to service and pay back this debt.”
“Here’s another disaster waiting to happen: Globally, financial markets today are seeing a rebirth of “collateralized loan obligations” (CLOs), instruments broadly similar to the “collateralized debt obligations” (CDOs), which helped to blow up the financial system in 2008.
“CDOs were asset-backed instruments, a “blended” security comprised of risky mortgage-backed bonds and much of the rest from theoretically safer tranches. The theory underlying them was that the lower the investment quality, the higher the compensating yield, but in reality most turned out to be toxic junk. What distinguishes CLOs from their CDO “cousin” is that instead of repackaging mortgages, subprime and otherwise, CLOs repackage corporate loans, and consumer credit, such as car loans.
“Unfortunately, in yet another instance of lessons unlearned from 2008, the collateralized loan obligations, like the CDOs, have virtually non-existent investor protection, “with over 70 percent lacking any covenants that would allow monitoring of financial condition and early intervention to manage problem borrowers.”