“Global debt is officially $184 trillion, which is 225% of global GDP. This is $86,000 for every person in the world, which is 2.5 times annual income.
“We estimate that official figures are understated by a factor of 2.5, so debt is actually $460 trillion, which is 560% of GDP and $215,000 per person.
“These numbers are astronomical, raising the risk of economic blowback once interest rates and inflation rise, as they eventually will…
“No one knows when the debt spiral will end, but it’s a virtual certainty that it will not end well.”
“It’s hard to wrap your head around just how low U.S. interest and bond yields are—still are—a decade after the Great Recession ended… Where low rates really bite isn’t in current returns but in the future gains investors can reasonably expect. Interest rates set a kind of baseline for the return on all assets. As they fall, bond values rise and stocks often do, too. But once rates have settled at or near rock bottom, there’s less room for that kind of price appreciation.
“All this has sent investors looking under every available rock for more return—even if it means taking more risk. The fear is this could lead to the formation of bubbles and eventually destabilize the financial system.”
“Markets are turning up the pressure dial on central banks to boost policy easing. Benchmark bond yields have in unison dived below or close to key interest rates in the world’s biggest economies.
“While this has happened before in the U.S., it’s never been seen before in the euro area. That show investors expect the Federal Reserve and European Central Bank to deliver stimulus soon.”
“With inflation subdued in Latin America and its top economies flirting with recession, central banks are gearing up to join emerging market peers from Asia to Africa in cutting interest rates.
“Brazil is expected to reduce borrowing costs next week for the first time in over a year, after yet another inflation reading surprised economists to the downside. A slowdown in Mexico’s annual consumer price index on Wednesday reinforced the outlook for monetary easing, whether sooner or later, and Peru said it’s considering the same.”
“European Central Bank President Mario Draghi will move back into the spotlight as stock-market investors cheer a shift back toward easier monetary policy by major central banks, with the ECB widely expected on Thursday to at least lay the groundwork for an interest rate cut, and possibly further action, later this year.”
“The Reserve Bank of India is set to cut interest rates in August for the fourth meeting in a row, according to a Reuters poll of economists, a majority of whom said risks to their already-modest growth forecasts were skewed more to the downside.”
“The U.S.-China trade war is threatening to drag export-reliant Singapore into a recession and aggravating underlying risks facing the former tiger economy. Singapore’s economic data have gone from bad to worse this month.
“Exports slumped to their second-worst rate since the global financial crisis, the purchasing managers index slipped into contraction for the first time since 2016, and the economy shrank the most in almost seven years in the second quarter.”
“Caterpillar Inc. shares fell after the heavy-equipment maker projected 2019 earnings at the low end of its forecast amid rising costs, declining sales in Asia and a slowdown in oil and gas spending in the prolific Permian Basin…
“The results from Caterpillar, considered an economic bellwether, come amid a slowdown in manufacturing and simmering trade tensions that helped prompt a cut this week in the International Monetary Fund’s global growth forecast.”
“Boeing reported a massive second-quarter loss of $2.9 billion on Wednesday — its worst ever — as costs pile up for the aerospace giant while its flagship 737 Max jet remains grounded after two fatal crashes. Shares of Boeing declined 3.1% from its previous close of $373.07, helping to drag down the Dow Jones Industrial Average.”
“Things are moving clearly and quickly negative. Manufacturing in 2 of the world’s 3 largest economies — China and the eurozone — is contracting (at an unprecedented pace in the eurozone), with the U.S. hanging in positive territory by less than half a percent.
“A global measure of the manufacturing industry from IHS Markit showed its weakest reading in nearly 7 years last month. Emerging markets, responsible for most of the world’s growth, also are beginning to slow notably…”