“Whether the world’s central banks are prepared to combat another slump is becoming less of a hypothetical question as the global economy shows signs of strain. The chances that the United States will enter a recession by next year have grown as manufacturing weakens and trade uncertainty drags on. In Germany, the unemployment rate has ticked higher, and industrial production is slowing. In Japan, weak factory production and waning exports heighten vulnerability…
“Central bank officials insist that they are prepared to act aggressively if another recession flares. The E.C.B. stands prepared to stimulate the eurozone, and the Fed is signaling that it could soon cut interest rates to try to get ahead of mounting risks in the United States.
“But economists across the globe say central banks can no longer be sole saviours the next time a downturn hits. That reality is colliding with political constraints in the United States and Europe, where lawmakers may prove unable — or unwilling — to quickly roll out expensive stimulus packages.
“When it comes to monetary policy, “surely there is not enough room to respond to even a run-of-the-mill recession,” said Olivier Blanchard, a former International Monetary Fund chief economist…
“While the Fed is in comparatively good shape because it has gotten rates off rock bottom — they’re at 2.25 to 2.5 percent — that leaves it just half as much room to cut borrowing costs as policymakers had back in 2007. In fact, the Fed’s chair, Jerome H. Powell, has started a yearlong review of just what its options are.
“Having low interest rates really challenges the existing tool kits of central banks,” Mr. Powell said during remarks in New York last month.
“Central banks in major economies are in their diminished positions largely because sustainable growth, inflation and interest rates have all fallen, trends that are attributable to long-running structural forces in the economy including ageing populations and weakening productivity.”
“The U.K. economy probably shrank for the first time since 2012 in the second quarter, according to Bloomberg’s latest survey of economists.
“The prediction for a 0.1% contraction marks a downgrade from June, when economists only predicted stagnation. The survey came as retail industry reported another drop in sales and said “the picture is bleak.””
“Retail sales suffer ‘worst June on record’, says lobby group. UK retail sales experienced their “worst June on record”, according to a key industry body, as uncertainty over Brexit continued to affect the economy.”
“The scene was solemn at Deutsche Bank’s offices in London, New York and Tokyo on Monday as scores of employees, belongings in hand, left their desks for the final time as the German lending giant began one of the largest rounds of layoffs since the financial crisis.
“Carrying boxes and envelopes containing personal effects and A4 forms, Deutsche workers started their work week by collecting their belongings and emptying their desks.”
“Investors consider an economic recession in Germany inevitable, according to economic research group Sentix. Its index measuring current conditions and expectations for Europe’s largest economy fell to its lowest level in almost a decade. A similar gauge for the eurozone dropped to the lowest since 2014.
“The data suggests that de-escalating tensions between the US and China at last month’s Group of 20 meeting in Japan has failed to inspire investors.”
“After the 2008 financial crisis, as the American central bank dropped interest rates to zero to spur revival, Turkish banks took advantage of free money by borrowing dollars.
“They lent greenbacks to Turkish businesses eager for an alternative to the lira’s high borrowing costs… in recent years, as the lira has fallen, companies with revenues in lira and debts in dollars have seen their burdens expand.”
“Cotton and cotton products are one of Pakistan’s main exports, accounting for $11.7bn of the country’s $24.7bn in exports last year, according to central bank data…
“For the past month, authorities have been battling a swarm of desert locusts which has been threatening the country’s main cash crop…
“Pakistan is already going through a major economic crisis, with slowing growth, a skyrocketing exchange rate and rising inflation.”
“Chinese companies are facing a reality check after years of ramping up debt… “China’s default risks are still seen as rising, due in part to slowing economic growth… How big is the problem? It’s big, with the potential to worsen…”
“The DHL Global Trade Barometer, an early indicator of global trade developments calculated using Artificial Intelligence and Big Data, suggests weakening ocean trade — which slipped 8 points to an index value of 47 — will drive the decline in overall Chinese trade…”
“Congratulations, debt slaves! Today’s G19 Fed report on [US] Consumer Credit shows that you owe the banks and other creditors yet another record high amount of money.
“Total: $4.1 Trillion
“Revolving: $1.1 Trillion
“Non-Revolving: $3.0 Trillion
“With more than 10 years having passed since the financial crisis, leading to the longest bull market in history, it’s crazy to think ‘the greatest economy anywhere in the world’ is panicking over the difference between a 25 bps or 50 bps rate cut, let alone any rate cut at all.
“For the first time ever, the universe of negative yielding debt has surpassed $13 trillion and isn’t showing any signs of slowing down.
“40% of global bonds are now yielding less than 1%, according to Bloomberg.”
“It’s yet another example of the craziness in the bond market right now. It costs less to borrow money for a period of decades than just a few months — a phenomenon known as an inverted yield curve.”