“The global economy is a zombie walking towards a cliff. Bizarrely, the world’s stock markets are watching an unfolding disaster but don’t seem perturbed.
“The zombie walk is driven by a US-initiated tariff war aggravating a cyclical slowdown that is bringing to an end a decade of economic expansion. As Democrats prepare for the 2020 presidential election they espouse the same protectionist policies as Donald Trump. In America, it’s all aboard the Zombie Express.
“If this analysis appears too sombre, consider last Thursday’s OECD report which sharply downgraded its 2019 global economic growth forecast… Earlier in the month the World Bank also downgraded its growth forecasts, its president warning just last week that US$15 trillion of bonds with zero or negative yields indicated that investors accept “the market’s premise of very low or even negative returns for years, even decades”, adding that “this frozen capital implies slower future growth”. Zombie capital locked into zombie firms and zombie economies…
“After the 2009 recession the global economy was on life support. Every time it looked like dying the monetary authorities applied the defibrillator, shocking it back into life. But if achieving economic growth was just a matter of injecting more money into an economy, we should just fire up the printing presses and stay at home. No need to work, invest, trade or innovate.
“In truth, the global economy has never properly recovered from the great crash of 2009. The life-draining effects of feeble productivity growth have been disguised by the extraordinary stimulus from unconventional monetary policy applied after interest rates plummeted to zero.
“The zombie economy can’t be brought back to life simply by further unconventional monetary stimulus. Federal Reserve chairman Jerome Powell knows this and for his reluctance to reapply the defibrillator he has earned the presidential titles of ‘Bonehead’ and ‘Enemy’ of the United States…
“As the global zombie shuffles ever closer to the cliff, Trump will realise he is in a race against time. He will need a trade deal with China to reassure investors and voters ahead of the November 2020 presidential election, but if he relents with China he will be pilloried at home by his supporters and quite possibly his Democratic opponent.”
“Business and consumer confidence is at its lowest level since the British economy was mired in the global financial crisis, according to a leading economic consultancy.
“Fathom Financial Consulting’s economic sentiment indicator for the UK, which is derived from a range of survey measures of confidence, dropped to -0.2% last month. That was its lowest point since September 2009…”
“The Euro came under selling pressure at the start of a new week following the release of fresh data from the Eurozone’s largest economy that suggested an ongoing slump could be worsening, and the prospect for a turnaround in fortunes remains elusive.
“German Manufacturing PMI read at 41.4[!)] in September, down on August’s 43.5 [sub 50 denotes contraction].”
“Profits for European private banks dropped by the most since the global financial crisis last year as muted investor inflows, weakness in financial markets and rising costs combined to reduce earnings.”
“Denmark is about to become a test case for what happens when banks start charging a lot of customers to store their money.
“That’s because one of the country’s biggest banking groups just changed the rules of the game, by removing the floodgate that had shielded most retail depositors. Until Friday, only people with roughly $1 million in surplus cash at their banks were facing a negative rate. Now, the threshold has been reduced to just over $100,000, with no guarantee it won’t go lower.”
“The dozens of banners, announcing 80 and 90 percent discounts, on shop windows in Lebanon’s Zalka region failed to attract any clients, amid an unprecedented economic slowdown in the country…
“…in 2018, 10 percent of Beirut’s commercial institutions shut down, and that the number was higher is other areas.”
“Zimbabwe’s annual inflation rate has surged passed the 900%/yr barrier. Yesterday’s annual inflation rate reached a whopping 918%.
“Since Zimbabwe’s government stopped reporting official annual inflation statistics for Zimbabwe, I am the only source for Zimbabwe’s annual inflation rate. Since February, when Zimbabwe issued its new RTGS dollar currency as legal tender, inflation, by my calculation, has skyrocketed from 269%/yr to its current 918%/yr rate.”
“According to the Union Labour Ministry data, released in May after the Lok Sabha election, the unemployment rate stood at a 45-year-high, confirming a pre-election leaked report…
“Loss of jobs means less money available with people. This means less consumption, which, in turn, impacts production in factories affecting the manufacturing sector.”
“As the global economy crawled out of the wreckage of the financial crisis, Beijing’s huge stimulus efforts were vital in kickstarting growth again.
“China’s fiscal and monetary boost was unprecedented in scale… this time China is struggling to revive its ailing economy, warn senior economists. China’s biggest tax cuts package ever has not had “any impact on the real economy”, said Commerzbank chief economist Joerg Kraemer.”
“Protesters and police have clashed in Hong Kong in another weekend of unrest as tensions escalate in the run-up to a significant political anniversary for Beijing…
“The confrontations mark the 16th consecutive weekend of mass protest for the semi-autonomous Chinese territory…”
“One of Australia’s biggest money managers has used this month’s sell-off in Treasuries as an opportunity to buy longer-dated U.S. bonds, amid rising concern that a global recession may be around the corner.
“Monetary policy will be loosened further around the world as growth slows, ensuring a continuation of the “global downdraft in rates,” said Susan Buckley at Brisbane-based QIC Ltd…”
“… it has clearly been Fed policy that has caused the wealth and income gaps to widen. Worse yet, such unconventional techniques are now being used as the main engine of monetary policy in every major central bank in the world, now even to the point of seemingly irrational negative interest rates.
“My gut tells me that this can’t end well.”