“The next recession, whenever it arrives, could be deepened by Corporate America’s debt-riddled balance sheet.
“Encouraged by insanely low interest rates, US businesses have taken on record amounts of debt that funded hiring, acquisitions and generous rewards to shareholders. That borrowing doesn’t seem to matter much now because the economy is strong, and companies are minting more than enough money to pay down debt.
“But the next recession will expose Corporate America’s debt problem, revealing that many businesses binged on too much debt. Those companies will need to rapidly deleverage by slashing jobs, shutting facilities and selling assets. Some will even go out of business…
“”A highly leveraged business sector could amplify any economic downturn as companies are forced to lay off workers and cut back on investments,” Federal Reserve Chairman Jerome Powell warned in a speech on Monday night.
“Those laid-off workers would then cut their own spending, creating a cascading effect through the rest of the economy. And investors that enabled the business borrowing will retrench, making it harder for other companies to get financing.
“”The pain that investors are going to feel will be quite enormous,” said Gayeski.”
“Brian Blackstone reports in the Journal that a remarkable government effort to conjure prosperity by distorting credit markets still isn’t working…
“He believes that because of massive entitlement promises plus huge debt, “the entire developed world is insolvent.””
“In the years after the financial crisis, banks were under orders from regulators to amass huge piles of capital to help guard against another downturn.
“Now, as regulatory requirements have eased, many banks are moving quickly to unload that excess capital, largely by repurchasing their own stock.”
“The US auto industry has announced 19,802 in workforce reductions this year through April.
“That’s more than triple — up 207% — than the 6,451 jobs cuts announced during the same time last year, and the most for the first four months of a year since 101,036 cuts were announced through April of 2009, according to data provided by Challenger, Gray & Christmas.”
“Venezuela’s ambassador to Italy has resigned his post, saying US sanctions have reduced him to penury and have made it impossible to keep running the diplomatic mission.
“Isaías Rodriguez lamented that his financial situation is now so dire that his wife has started selling off the designer clothes that were given to her “by her ex-husband”.”
“The South Sudan government plans to close a number of its overseas embassies due to financial constraints.
“Mr Mawien Makol, the spokesman for the Foreign Affairs Ministry, told local media Juba is finding it difficult to manage most embassies abroad.”
“The [Nigerian] economy will eventually return to recession because of massive unproductive general spending. Many foreign investors have quietly left Nigeria in some cases relocating to Ghana where necessary.
“On the other hand, many local investors out of fear of the prolonged political instability and the growing high level of insecurity…”
“The Zimbabwe Energy Regulatory Authority (ZERA) has increased prices of fuel by between 46 and 49 percent with immediate effect, a situation that may result in steep increases of prices of basic commodities.
“In a statement, ZERA said the new prices are based on the interbank market rate set on Monday by the central bank with an intention of stopping galloping inflation fueled by the black money market.”
“Turkey’s consumer confidence dropped to the lowest level on record in May, damping hopes for a sustainable economic recovery in the country….
“Consumer confidence in Turkey is now lower than it was at the height of a currency crisis last year and during the global financial crisis of 2008. Sentiment has worsened after the lira dropped by almost 13 percent against the dollar this year, curtailing spending power. It had lost almost one third of its value in 2018.”
“Saudi Arabia’s Public Investment Fund (PIF) is attracting only tepid interest in plans for its latest multibillion-dollar debt sale, banking sources told the Reuters news agency. This suggests the kingdom may be losing its appeal for some lenders…
“”Banks had been made a lot of promises, on the equity side mostly, and what is happening is just sovereign borrowing,” one banker with an international lender told Reuters.”
“He Qiang should be manning his convenience store, but today he’s collecting tiny green berries along the road and shooting them at birds with his slingshot.
“The 26-year-old is distracting himself from his worries. He spent all his savings — the equivalent of $35,000 — on a store that no longer has any customers…
“Assembly lines have shut down, workers have left, and Hechuan’s streets, shops and many residents’ pocketbooks are now empty.”
“Australian economic growth looks set to remain sluggish for some time yet, continuing the slowdown seen in the second half of last year.
“The Westpac-MI Leading Index, an indicator that uses a variety of local and international economic indicators to predict Australian economic growth looking three to nine months into the future, slumped to -0.47% in April, down from -0.13% in March.”
“The pound declined against its major counterparts in the European session on Tuesday, as U.K. cabinet meeting kicked-off amid deep divisions over whether the government should opt for no-deal Brexit, if Prime Minister Theresa May couldn’t pass her Withdrawal Agreement Bill through Parliament next month.”
“That’s the global economy’s outlook, according to Laurence Boone, the chief economist of the Organization for European Cooperation and Development…
“Most countries can ill afford any additional drags on growth. The OECD already forecasts zero economic growth in Italy this year, the growth rate in Germany to halve from last year to 0.7%, and Japanese growth to slow to 0.7%.”
“Recent history suggests it’s a good time to take some chips off the table, but instead, bond traders are doing the opposite…
“Given the bond market’s track record over many years in accurately forecasting the economy and inflation, it’s hard to doubt traders in this area. Even so, it’s hard to justify current yields if a recession isn’t imminent.”