“it is still only a matter of time before some shock triggers a new recession, possibly followed by a financial crisis, owing to the large build-up of public and private debt globally.
“What will policymakers do when that happens?
“…They will be under intense political pressure to prevent a full-scale depression and the onset of deflation. If anything, then, another downturn will invite even more “crazy” and unconventional policies than what we’ve seen thus far.
“In fact, views from across the ideological spectrum are converging on the notion that a semi-permanent monetisation of larger fiscal deficits will be unavoidable – and even desirable – in the next downturn. Left-wing proponents of so-called modern monetary theory argue that larger permanent fiscal deficits are sustainable when monetised during periods of economic slack, because there is no risk of runaway inflation…
“[However], fiscal and monetary loosening is not an appropriate response to a permanent supply shock. Policy easing in response to the oil shocks of the 1970s resulted in double-digit inflation and a sharp, risky increase in public debt. Moreover, if a downturn renders some corporations, banks, or sovereign entities insolvent – not just illiquid – it makes no sense to keep them alive. In these cases, a bail-in of creditors (debt restructuring and write-offs) is more appropriate than a “zombifying” bailout.
“In short, a semi-permanent monetisation of fiscal deficits in the event of another downturn may or may not be the appropriate policy response. It all depends on the nature of the shock. But, because policymakers will be pressured to do something, “crazy” policy responses will become a foregone conclusion. The question is whether they will do more harm than good…”
“Amid a global slowdown in economic growth that has seen central banks lower interest rates near zero or below in an effort to provide stimulus, here’s a look at which of the major economies are on high recession alert – Hong Kong, UK, Germany, Italy, China…
“Other highly stressed economies around the world include Turkey, Argentina, Iran, Mexico and Brazil, among others.”
“China’s room to ease monetary policy to aid the slowing economy is being limited further by price rises due the ongoing swine fever epidemic, economists said.”
“Restaurants, hotels and retail outlets like Lam’s [Hong Kong], many of which cater to mostly mainland Chinese tourists, form a central pillar of a small business sector that employs more than one million people in the city.
“But with visitors deterred by months of violence, many firms have closed or are struggling to turn a profit.”
“Lebanon is on the verge of economic collapse unless an “immediate solution” can be found to end days of nationwide protests that have paralyzed the country, Central Bank Governor Riad Salame told CNN in an exclusive interview Monday.
“Lebanon’s banks have been closed since the demonstrations, sparked by a series of proposed austerity measures including a tax on WhatsApp calls, began nearly two weeks ago.”
https://edition.cnn.com/2019/10/28/middleeast/lebanon-salame-economy-collapse-intl/index.html
“The political and economic crisis in Haiti was triggered by the publication in January 2019 of a report on the Venezuela-funded PetroCaribe Oil initiative, under which Caracas provided oil and other petroleum products to Haiti under a preferential agreement.
“Moïse, who came to power in 2017, has denied any wrongdoing…”
https://haitiantimes.com/2019/10/28/us-urge-haitians-to-end-political-and-economic-crisis/
“They’ve been keeping the U.S. economy afloat for over 12 months, according to analysts. However, the U.S. consumer may not be able to maintain the burden much longer.
“Non-housing debt in the U.S. has experienced 20 consecutive quarters of increase, and is at the same level as its last peak, in the third quarter of 2008. For most analysts, the consumer slowdown is simply a matter of time. “
https://www.bloomberg.com/news/videos/2019-10-28/are-u-s-consumers-running-out-of-steam-video
“The U.S. has been in “an industrial recession for over a year now,” according to Bradley Jacobs, CEO of XPO Logistics, one of the largest global transportation and warehouse companies in the world.
“Industrial output has fallen, “that’s a direct result of the tariffs,” Jacobs told CNBC in an interview Monday as the company released its third-quarter earnings.”
“Pemex recorded a loss of 87.85 billion pesos (US $4.6 billion) in the third quarter…
“Chief financial officer Alberto Velázquez said in a call with investors that the company’s third-quarter loss can be mainly attributed to two external factors: lower prices for Mexican crude and a stronger US dollar.”
https://mexiconewsdaily.com/news/pemex-records-88-billion-peso-loss-in-third-quarter/
“The cartel just waged all-out war against the government and they won.
“These narcos literally shut down an entire city of 800,000 people and forced the government to surrender to them.
“This is history unfolding in Mexico.”
https://medium.com/navigating-life/what-the-fuck-just-happened-in-mexico-b98eff2b340c
“Customers at three Australian banks were left stranded after mobile and internet banking services were hit by a major outage. St George bank announced just before 9am on Tuesday that services were affected.
“…customers angrily revealed they had been unable to complete essential transactions during the outage. ‘Haven’t eaten all day because I haven’t been able to access my money,’ one person wrote.”
“…central bankers have already shown signs that they are willing to get creative to force interest rates lower which, if successful, will exacerbate the dilemma that long-term investors face: accept lower returns or seek out higher yields in riskier assets?
“A danger here is that investors attempt to maintain their portfolio’s yield by taking on a greater amount risk… This is at odds with what investors should generally do amid a deteriorating global economy.”
https://www.cityam.com/what-do-negative-bond-yields-mean-for-investors/
“…the tide of angst about the unintended consequences is rising… Concerns have focused on the pain negative rates might be inflicting on the banking system… Yet the real damage is surfacing in another corner of the financial system.
“The pension industry is caught in a tightening vice of lengthening life expectancies and falling expectations for investment returns. It is this pension predicament that may also explain why sub-zero interest rates are not having the stimulative effect central bankers intended.
“Bonds are the bedrock upon which large parts of the global pension system is built. Although the rally in bonds and stocks since the financial crisis has lifted the value of pension funds’ holdings, what they really care about is generating the returns to match their future liabilities. With bond yields beaten down and equity markets having rallied for years, the ability to harvest those returns looks grim.”
https://www.ft.com/content/a730ce84-f95e-11e9-98fd-4d6c20050229
Read the previous ‘Economic’ thread here and visit my Patreon page here.
