“Europe needs to come up with emergency plans, since monetary policy has all but exhausted its arsenal and risks spread, the fund warned.
“Given elevated downside risks, contingency plans should be at the ready for implementation,” the IMF said in its Regional Economic Outlook for Europe. “A synchronized fiscal response” may be necessary, the fund said in the report, highlighting the dangers from trade protectionism, a chaotic Brexit and geopolitics.
“The former head of the ECB, Mario Draghi, repeatedly called on euro zone countries to add fiscal support to stoke growth, saying because monetary policy could only do so much, and Wednesday’s readings suggest additional support may be needed….
“We expect growth to slow across the board,” said Melanie Debono at Capital Economics.”
“German industrial output fell more than expected in September, data showed on Thursday, pointing to ongoing weakness in the sector and indicating that Europe’s largest economy will slip into recession in the third quarter… Industrial output dropped by 0.6% on the month…
““It’s not a nice number. The decline in industrial production in September makes a technical recession almost official now,” said Thomas Gitzel, economist at VP Bank.”
“A slowdown in global car sales and the threat of U.S. tariffs are curbing economic expansion in eastern Europe, a critical manufacturer for Europe’s auto industry.”
“The World Bank said on Wednesday it stood ready to back a new Lebanese government, warning the country had no time to waste to tackle an emerging economic crisis worsening by the day.
“The bank called for the rapid formation of a new cabinet and said it expected a recession in 2019 to be even more significant than an earlier projection of a 0.2% contraction in the economy.”
“Year after year, the economic effects of the world’s current environmental path are bearing out in New Delhi. Flights are canceled and schools closed. Car owners are limited to driving only on certain days.
“Construction is stalled, and hospitals are flooded with disease, as they will be flooded with chronic effects in coming decades. People miss work, become disabled, and exit the workforce. They consume more medical care and rely on safety nets.”
“Civil servants in Zimbabwe are demanding higher pay as economic conditions in the southern African country continue to deteriorate.
“Growing discontent in the public sector is a further challenge to the government of President Emmerson Mnangagwa as it struggles to battle soaring inflation, collapsing confidence in the country’s multiple currencies, the effects of an acute drought and rolling power cuts.”
“The weakest economic growth since the global financial crisis is fuelling speculation the Reserve Bank of Australia will join its global peers and kick-start quantitative easing.
“No fewer than seven countries around the world have used QE according to the Bank of International Settlements.”
“A financial meltdown in China would probably cause a painful economic downturn in that country, which would impart a significant shock to global growth via the exports that China takes in from the rest of the world.”
“The productivity of American workers fell in the third quarter for the first time in almost four years, reflecting a cutback in production as the U.S. economy slowed toward the end of summer.
“Productivity declined at a 0.3% annual rate from July to September, the government said Wednesday.”
“More millennials in the United States are suffering from chronic health problems, potentially restraining the lifetime economic potential of a generation.
“A jump in conditions such as depression, hypertension and high cholesterol among younger people could increase healthcare costs and lower incomes in coming years…”
“Income inequality in America is the highest in decades, and the highest of all high-income countries. It’s also growing rapidly—meaning that, as the saying goes, the rich are becoming richer and the poor poorer…
“…evidence highlighted by the study suggests that inflation is much higher for people at the lower end of the income scale.”
“This year’s flood of monetary easing is slowing to a trickle as the world’s central banks judge they’ve done enough to avoid a recession, giving investors cause to think sovereign bond yields have finally bottomed.
“Federal Reserve Chairman Jerome Powell last week said policy had reached an “appropriate” level after three cuts in interest rates this year. Mounting criticism of the European Central Bank’s negative rates leaves its new president, Christine Lagarde, under pressure to hold fire on additional stimulus, and Bank of Japan Governor Haruhiko Kuroda may be even closer to the limits of monetary policy.”
Cheapening money to incentivize economic activity is no longer working. European central banks in particular are out of ideas to jump-start economic activity. The near negative and declining interest rates in developed countries around the world have caused the dollar to soar, which has a knock-on effect in developing countries like Indonesia, Turkey and Nigeria that have borrowed heavily in dollars and must repay them from earnings in local currencies that have steadily devalued.“
“Negative rates have a mal-effect on consumers and savers, though “real rates,” which account for inflation, are what they ultimately feel. Cheaper money does not necessarily filter down to the consumer at a retail level. Banks with interest-rate shortfalls in a world of near or actual negative rates will charge their customers higher fees for any service, whether overdrafts or use of out-of-network ATMs.
Savers, in particular older people who rely on interest income receive nominal payments for saving, and struggle to make ends meet. About 25 percent of Europeans and 30 percent of Japanese are aged 60 or older. More alarming, pension funds – historically conservative investors – struggle to meet benchmarks of 7 to 8 percent returns, a common threshold for solvency, so shortfalls are emerging.“
“The big test may be if the United States as the world’s largest economy tries negative rates. Allianz Economist Mohamed El-rian said recently, negative yields in the world’ largest financial market would “break things.” By break, he means a systemic failure or bank collapse.”