“Every year the Federal Reserve Bank of Kansas City hosts a symposium in the Grand Teton resort of Jackson Hole. Some years, guests have little to do but chew the fat and listen to distinguished speakers explain points of economic importance. Sometimes, though, the conclave in Wyoming takes place with a crisis looming. One such year was 2008. This year is shaping up to be another…
“…as things stand the question is whether the global economy is heading for a slowdown or a recession.
“On average, there has been one serious downturn per decade since the early 1970s. One is due.”
“The weirdness in financial markets at the moment seems boundless.
“In the past two weeks the proliferation of negative-yielding bonds has erupted — 30 per cent of the global, tradeable bond universe is being sold with a guaranteed loss attached to the coupon.”
“Donald Trump and his chief trade advisers insisted on Sunday the US is not facing a recession which markets appear to fear and which could prove costly at the polls next year.
““I don’t see a recession,” Trump said, preparing to fly to Washington. “We’re doing tremendously well. Our consumers are tremendously rich. They’re loaded up with money. Walmart is through the roof. We’re not going to have a recession – the world is in a recession right now.””
“Investors are anticipating a fresh wave of stimulus measures to tackle flagging growth, as the White House said it was considering a new round of tax cuts to boost the economy.”
“The problem is, central bank policy isn’t what’s holding back the global economy, and more monetary stimulus won’t help, according to Peter Boockvar, chief investment officer at Bleakley Advisory Group. “The Fed doesn’t have the cure for what ails us, just as the [European Central Bank] and the [Bank of Japan] don’t at this point,” he told me.
“Cheap borrowing really isn’t the problem.
“”There’s no business investment that’s being held back because of where rates are,” Boockvar said.”
““Leverage in Europe is low and it could stay that way — even though many companies are able to issue debt with negative or record-low yields,” said Mahesh Bhimalingam, a credit strategist at Bloomberg Intelligence.
““It’s hard to see the appeal of loading up on debt to make an investment when the potential return on that investment looks highly uncertain, given the outlook in Europe.””
“The failure of Germany and France to amend rules related to the treatment of some over-the-counter derivatives contracts ahead of the UK’s exit from the European Union could cause unnecessary stress to the European financial system, according to Mark Carney, governor of the Bank of England.
“Carney calls on European lawmakers to address the matter before October 31.”
“Germany’s pain has been central to bond market convulsions around the world. Very disappointing data on German economic growth has acted as the most direct catalyst for the buying of long-dated U.S. Treasuries that briefly caused an inversion of the U.S. yield curve, with the 10-year yields falling below two-year yields for the first time in 12 years…
“A further problem for Germany, which can become a vicious circle, is its banking system.”
“Finance Minister Olaf Scholz suggested Germany could muster 50 billion euros ($55 billion) of extra spending in an economic crisis, putting a number on a possible fiscal stimulus for the first time.”
“Thailand’s economy grew at the slowest pace in almost five years in the second quarter as exports and tourism were buffeted by U.S.-China trade tensions and a strong local currency.”
“South Korea’s household debt extended by deposit banks and non-banking savings institutions increased 15.40 trillion won (US$12.73 billion) in the second quarter of this year from a year earlier.
“The balance of household debt is estimated at more than 1,467.30 trillion won (US$1.21 trillion) as of the end of June.”
“Japanese exports fell for an eighth straight month in July, weighed down by shipments of auto parts and semiconductors, as slowing economic growth and trade battles raise fears of a global recession.”
“Despite outrage from the banks, president Cyril Ramaphosa signed the Credit Amendment Bill this week.
“While the details of how it will be implemented still need to be finalised, it is estimated that some 9.5 million South Africans may have their debts written off completely.”
“Macri, a millionaire businessman, is paying a heavy price for failing to deliver [for Argentina] on his emphatic promise of zero inflation and zero poverty when he took office in December 2015. Inflation hit 54% over the last 12 months, twice the rate when he took office.
Foreign debt has also more than doubled, after a loss of investor confidence in emerging markets forced Macri to seek a $57.1bn rescue package from the IMF last September, the largest loan it has ever handed out.”
“Before the 2010s, it was common for one in every five economies to be growing at 7 percent or more annually. Now, among the world’s 200 economies, just eight, or one in 25, are on track to grow 7 percent this year. Most of those are small economies in Africa.”
“The trade wars and a breakdown in international economic diplomacy cause businesses around the world to pull back.
“This leads to further tumbles in markets and job losses, prompting American consumers to become more cautious.
“High corporate debt loads create a wave of bankruptcies. And central bank policy proves impotent, combined with fiscal policy that is nonexistent.”