“In all corners of the globe, warning signs are flashing about the state of the economy. The IMF recently downgraded its forecast for global economic growth for the fourth time in nine months. We are now in a “significantly weakened global expansion,” according to IMF chief economist Gita Gopinath.
“Some 70% of the global economy (as measured by GDP) will experience a slowdown this year, the IMF forecasts. That would make it the most extensive synchronized slowdown since 2011.”
“The global economy is highly vulnerable to a debt crisis as dangerous levels of business and government borrowing could crush growth and exacerbate any slump, the International Monetary Fund has warned.
“Record corporate borrowing in the US could turn boom into bust in the world’s largest economy.
“Risky links between banks and governments in the eurozone threaten to restart the sovereign debt crisis. This is a particular risk in Italy where government debt is still rising and its banking sector is weak.
“And China’s government, business and household debts all pose a risk to this engine of global growth.”
“Many European countries haven’t recovered yet from the financial crisis of 2007-2008 like Italy, Portugal, Spain, Greece. Lots of uncertainty for a Brexit Deal. UK parliament still has not approved Theresa May proposal and a NO Deal seems closer than ever.
“European Banks for the past three quarters have reported negative numbers , like Deutsche Bank, and the ECB has kept interest rate at minimum without obtaining the expected results.”
“Italy is one small shock away from a sovereign default of global scale. The International Monetary Fund is not allowed to state this openly but that is the message of its latest Fiscal Monitor.
“The public debt ratio is to ratchet up from 132.1pc of GDP in 2018, to 134.4pc in 2020, and 138.5pc in 2024.
“The final figure is academic…
“Bond vigilantes will take matters into their hands long before then.”
“Few Greek households would have celebrated the end of the financial bailouts last year, however, with citizens well aware that tough times remain ahead.
“Despite some improvement, unemployment is still far too high (see Fig 1) and the country’s economy remains more than 25 percent smaller than it was when the financial crisis erupted in 2008.”
“The European Central Bank (ECB) held interest rates steady on Wednesday, shortly after the International Monetary Fund (IMF) sharply downgraded its economic growth forecast for the euro zone economy. The ECB has been forced to backtrack on its plans to tighten monetary policy, amid an intensifying climate of economic gloom.”
“The Fed went on to say “some” officials thought it would be appropriate to raise the target range for the fed funds rate “if the economy evolved as currently expected” with growth above its longer-run trend.
“That contrasted with the January minutes when officials said it wasn’t clear what adjustments to rates would be appropriate this year, but added “several participants would view it as appropriate” to raise interest rates if the economy followed its forecast path.”
“American savers have lost $500 billion to $600 billion in interest payments on bank accounts and money market funds thanks to the Federal Reserve’s post-financial crisis policies, according to Wells Fargo analyst Mike Mayo.
“Mayo included the statistic in a research note about the congressional hearing scheduled for Wednesday called “Holding Megabanks Accountable:
“A Review of Global Systemically Important Banks 10 Years After the Financial Crisis.””
“Turkey’s biggest financial pledge in 18 years to bolster its banks may not be the silver bullet needed to pull the Middle East’s largest economy out of recession.
“The government plans to inject fresh capital into state-owned lenders and oversee the formation of two funds to take on some of the sector’s bad loans, Treasury and Finance Minister Berat Albayrak told reporters in Istanbul. To back the effort, the government will issue 28 billion liras ($4.9 billion) of bonds and place them at state banks.”
“India is witnessing a listless growth in electricity demand, possibly signaling more slowdown in Asia’s third-largest economy.”
“The middle class is shrinking and its economic power diminishing in the U.S. and other rich countries, a development that threatens political stability and economic growth, according to a report by the Organization for Economic Cooperation and Development.
“At the peak of its powers in 1985, the aggregate income of the middle classes was four times that of the richest group. Three decades later, it had fallen to less than three times.”
“There are similarities with 2008 that we should not ignore.
“A massive China stimulus inflates risky assets and commodities.
“Poor macro and earnings data is ignored by markets assuming that all will improve in the second half of the year.
“Yield curves invert. 15 economies now have 30-year yields lower than LIBOR overnight rates.
“The figure of negative yield debt rises to $11 trillion.
“Financial repression is at all-time highs while leading indicators point to a growing risk of recession.”
“Central banks are running the risk of a severe financial crisis through policies aimed at boosting short-term economic growth, the International Monetary Fund has warned.
“In its half-yearly global financial stability report, the IMF said the removal of the threat of higher interest rates had prompted a rapid recovery in financial markets after last autumn’s turbulence but would lead to a fresh buildup in already high levels of debt.”
“All is not well in the global economy…a deeper global downturn could result in some dangerous solutions”
“Financial regulators have done a lot to reform the derivatives markets that helped turn the financial crisis of 2008 into a global disaster. But their work is unfinished — and there’s even a danger that, in one way, they might have made things worse…
“…because [derivatives] enable big wagers with little money down, they can quickly generate losses and cash demands large enough to destabilize the entire financial system.”