“The elephant in the room that no one wants to acknowledge is that the “unconventional” policies that were introduced to fight a “once in a century” crisis are now the conventional policies of choice to combat the normal fluctuations of the business cycle. But zero percent interest rates and quantitative easing only worked a decade ago because people thought they were temporary. If they knew that the policies were permanent, the dollar may have plummeted and the resulting inflation may well have overwhelmed any benefits the stimulation delivered.
“But the naïve belief that the Fed could reverse course, unwind its bloated balance sheet and normalize interest rates, kept the game going and kept the dollar strong. Now that the illusion may about to be shattered, the dollar may not survive the next round of enhanced QE and ZIRP.
“QE4 will have to be larger than the three earlier rounds combined, as the annual Federal budget deficits could exceed 3 trillion. However, while China, Russia, and many emerging market nations were eager buyers of Treasuries during those initial rounds, they may likely be sellers of Treasuries during the next round. That means none of the inflation created to finance QE would be exported. So the big price increases next time may take place in the supermarket rather than the stock market. Americans would finally be forced to deal with the adverse effects of inflation that we have been spared for the past 10 years. It’s not going to be pretty.”
“On Friday, the 7th of June 2019, the Central of Chile had unprecedentedly slashed its benchmark interest rate by 50 points to 2.5 percent, as the world’s largest copper producing nation, long-cherished for its bulk of natural resources, had been bracing for a sharp economic slowdown in the wake of a withering Sino-US trade spat.”
“South Africa’s rand fell again early on Friday, reaching a new 2019 low…
“Data on Tuesday showed first-quarter growth contracted 3,2%, the most in a decade, almost immediately followed by the ANC’s announcement that it wanted the bank to consider quantitative easing to lower government debts, sending the rand crashing.”
“A campaign of civil disobedience to demand civilian rule left the streets of Sudan’s capital Khartoum largely deserted as the working week began on Sunday, while a 20-year-old man was shot dead in Omdurman, witnesses and opposition medics said…
“…current conditions and the failure to form a transitional civilian government made it difficult for the central bank to implement measures to address Sudan’s economic crisis.”
“Conditions in Lebanon’s private sector economy deteriorated in May as company output dropped amid ever-slowing national growth, according to a survey. The Blom Lebanon Purchasing Managers’ Index (PMI) from Blominvest Bank, Lebanon’s largest lender, with research firm IHS Markit, dipped to 46.3 in May, down from 46.7 in April [below 50 denotes contraction].
“The latest reading pointed to a continued decline in operating conditions…”
“China’s import unexpectedly contracted by -8.5% yoy in May. That’s the large contraction since July 2016, indicating underlying weakness in the economy. Exports did unexpectedly rose 1.1% yoy. But that was likely because of front-loading ahead of new US tariffs. Trade surplus, thus, widened to USD 41.7B.
“Meanwhile, trade with US continued to deteriorate.”
“The [UK] economy contracted in April, hit by a plunge in car production.
“City forecasters predict a 0.1% drop in output compared with March when official data is published tomorrow — a second successive monthly decline as the positive effects of Brexit stockpiling at the start of the year slam into reverse… car production slumped by 45% in April…”
“A source close to French President Emmanuel Macron said on Sunday that failing to pay a 39 billion pound ($50 billion) Brexit bill when Britain leaves the European Union would amount to a sovereign debt default…
“Boris Johnson, the leading candidate to succeed Theresa May as leader of Britain’s Conservative party and therefore its next prime minister, said in a newspaper interview that he would withhold the previously agreed Brexit payment until the EU gave Britain better exit terms.”
“Germany is braced for catastrophic car tariffs that could send the country into a deep economic shock and create a perfect storm for Europe, experts have warned. US taxes on car imports could act as a massive jolt to the bloc’s economy, wiping €14.5bn (£12.9bn) off GDP, according to analysis from investment advisers, Redburn.
“The firm’s economists believe a “nasty turn” in EU-US trade tensions is coming, which when combined with market nerves over Italian debt, could shake the eurozone.”
“Matteo Salvini, the bombastic leader of the far-Right Lega and one half of the populist government, wants to shock Italy’s stagnant economy back into life with sweeping tax cuts that would break the EU’s deficit limits.
“But Brussels refuses to budge – an uncompromising stance it could eventually regret.”
“International Monetary Fund head Christine Lagarde has warned that global growth is under threat from mounting trade tensions and climbing debt levels.
“She urged the US and China to remove tariffs affecting goods worth hundreds of billions of dollars to “give more certainty and confidence to their economies and to help, not hinder, global growth”.”