“Policymakers pulled out all the stops to fix the financial crisis, but they may have to get even more extreme when the next downturn hits.
“Future crises could see a “radicalization” of the types of measures taken to jolt the economy out of its last malaise, according to an analysis by AB Bernstein that looks both at the waning effectiveness of current attempts and the shape future efforts will take.
“Essentially, the view is that next time around policymakers will go even further. That means the use of “Modern Monetary Theory” — in which even more government debt is used to spur growth — along with negative interest rates and the possible step of distributing “helicopter money” or direct cash from central banks like the Federal Reserve.”
“A key slice of the Treasuries yield curve became the most inverted since 2007, as growing angst over trade friction is overshadowing expectations that the Federal Reserve will cut interest rates by year-end.
“The gap between three-month and 10-year rates dipped Wednesday to negative 12.3 basis points, breaking past a March level, when it first reached levels last seen in the global financial crisis…
“Historically, an inverted curve has been a signal that a recession is looming.”
“After the crisis, banks initially shunned the business of selling and trading slices of loans tied to residential property, autos or commercial real estate, as such securitizations were demonized for their role in the crash.
“But now Barclays is preparing to make its comeback, having assembled a team of over 140 securitization bankers and traders with plans to hire more as investors clamor for the higher returns such deals offer compared with traditional stocks and bonds.”
“CNBC’s Jim Cramer said Tuesday that investors should balance exposure to the market with storing cash on the sidelines, because there are “some real worries here.”
““I think we could be on the verge of a significant slowdown in the U.S. economy if something doesn’t change soon,” the “Mad Money” host said. “Consumer and corporate confidence [is] waning. Things just don’t feel right in this country.””
“Beijing is gearing up to use its dominance of rare earths to hit back in its deepening trade war with Washington.
“A flurry of Chinese media reports on Wednesday, including an editorial in the flagship newspaper of the Communist Party, raised the prospect of Beijing cutting exports of the commodities that are critical in defense, energy, electronics and automobile sectors.
“The world’s biggest producer, China supplies about 80% of U.S. imports of rare earths…”
“The People’s Bank of China is acting to increase the supply of short-term funding to banks after the seizure of a regional lender rattled domestic markets.
“China’s central bank injected a net amount of 150 billion yuan (US$21.7 billion) through open-market operations on Monday and Tuesday.”
“For the last decade, the city of Zhengzhou has been getting a taste of the Chinese dream. But an economic slowdown that began in late 2018 appears to have accentuated uncertainties in the city.
“With momentum slowing across the board from real estate to the consumer and tech sectors, some here feel their chances of moving up the social ladder have diminished as the cost of living outpaces income growth. Once abundant opportunities now seem to be drying up.”
“Thailand still doesn’t have a new government in place following March’s divisive election, and the delay is pushing out the timeline for big infrastructure projects just as the economy slows.”
“Thanks to their small, trade-dependent economies and open capital markets, ripples from Australia and New Zealand are often some of the earliest signs of trouble emerging in major northern hemisphere countries.
“In late 2008, the savage rate cuts by the country’s central banks in response to the developing global financial crisis were an early indicator of the rich world’s plummet toward a zero interest-rate policy. Now’s another time to watch what’s happening down under.”
“Official interest rates could be slashed to just 0.5 per cent to deal with an economy growing at its slowest since the depths of the Global Financial Crisis, markets and economists have warned as investors bet the economy needs more financial support. Economists at JP Morgan on Wednesday became the first to predict the Reserve Bank of Australia will eventually take the cash rate to 0.5 per cent…”
“We have just been through an election that saw Labour wiped out in Scotland, trounced in Wales, and under siege in London, while the party of government trailed behind the Greens.
“Between them, the two main parties took less than a quarter of all votes…
“We are fast approaching the third anniversary of the Brexit referendum and Westminster has still barely bothered to respond to the grievances that drove a result campaigned against by the entirety of the political and economic establishment.”
“The [Algerian] government is in a state of paralysis as officials scramble for survival. The burden of a transitional government lacking the legitimacy to govern – and the financial clout to reform the economy – is weighing heavily on the energy sector.”
“Resentment has mounted in Sudan for years over an economic crisis marked by sky-high inflation and foreign currency shortages.
“Government austerity measures provoked the first string of protests in December when it tripled the price of bread.
“Those demonstrations quickly spiraled into a country-wide protest movement…”
““Last week, sabotage was committed against ten tankers [with gasoline] to prevent them from reaching the Venezuelan coast,” Russian news outlet Sputnik quoted Maduro as saying.
“Amid political chaos and a raging economic crisis, Venezuela’s oil production has been crumbling, and most refineries and upgraders have stopped producing entirely, operating at zero capacity merely to keep the facilities from being damaged as its buyers look for alternate supplies in the face of US sanctions.”
“As long lines outside shops with mostly bare shelves are increasingly common in Cuba, and the government has indeed signaled that things are going from bad to worse, Havana is blasting president Donald Trump’s administration for the hardship and misery…
“…the increase in sanctions, which have hit the key tourism sector and added to investor and bank jitters about dealing with Cuba, has some economists predicting the economy will slip from stagnation into a full-blown recession later this year.”
“A decline in global car sales likely reduced world gross domestic product by 0.2% last year, and a flat auto market will continue to dampen global manufacturing indicators in 2019, according to a report by Fitch Ratings on Tuesday.
“Demand for autos declined in 2018 for the first time since 2009…”
“Since the financial crisis, central bank balance sheets and bank reserves have grown hugely, but broader monetary aggregates have not. …The reason for borrowing is to manage demand, by altering interest rates, or the supply of reserves to banks. This analysis is correct, up to a point…”
“Risk aversion has increased globally in recent days as fears of world recession resurfaced amid disappointing macro data in major economies.
“Wins for eurosceptic parties in EU elections as well as a snap poll in Greece and political turmoil in Austria have added to the gloomy outlook. Italy’s dispute with the European Commission over its budget is also a major overhang for world markets.”