“The coronavirus is a shock for both supply and demand. Some areas are more affected than others. Monetary policy is not effective at addressing such a complicated blow to the system.
“Potentially, trillions of dollars in loans could go bad… and trigger another global financial crisis.
“The coronavirus is a painful reminder to the financial world that risk is real. As central banks have been providing an increasing amount of liquidity since 2008, governments, businesses and speculators have piled on debt, believing that risk doesn’t exist.”
“Coronavirus’s economic danger is exponentially greater than its health risks to the public. If the virus does directly affect your life, it is most likely to be through stopping you going to work, forcing your employer to make you redundant, or bankrupting your business.
“The trillions of dollars wiped from financial markets this week will be just the beginning, if our governments do not step in.”
“Something bad is now happening. As the coronavirus outbreak spreads, halting factories from China to Italy, sending stock markets plunging and prompting fears of a worldwide recession, historic levels of corporate debt threaten to intensify the economic damage.
“Companies facing grave debt burdens may be forced to cut costs, laying off workers and scrapping investments, as they seek to avoid default.”
“The deepening Wall Street rout is adding to pressure on U.S. banks, as the retreat of investors from risky assets saddles lenders with securities they are struggling to sell at desired prices.
“The crunch has been evident in the share prices of the largest U.S. financial firms, which have fallen 30% or more in many cases over the past month.”
https://www.wsj.com/articles/wall-street-plunge-stresses-banks-treasury-markets-11583971700
““We’ve seen the carnage in the equity market, we’ve seen it in the high yield market, but there’s a ticking nuclear bomb in the reserve lending market, and that’s like the subprime of shale,” when oil prices are this low, Hosseinzadeh said.”
“During the financial crisis of 2007 and 2008, it was the U.S housing sector that pushed the economy over the edge and into a period of a prolonged recession.
“People were out of jobs and couldn’t keep up with their payments, and the U.S housing refinance rate skyrocketed. The same housing refinance rate has touched a level that hasn’t been seen since the financial crisis.”
“Market measures of inflation expectations have collapsed in the US, cementing a sense among analysts that the Federal Reserve will be forced to follow Europe and Japan by pushing interest rates towards zero.
“On Wednesday a swap rate that measures expectations of the average level of inflation over five years, five years from now, sank to 1.16 per cent, its lowest level since the data series began in 1999…
“The collapse in inflation expectations gives the Fed a greenlight to be really, really aggressive,” said Ashok Bhatia, deputy chief investment officer for fixed income at Neuberger Berman. “There is now the potential for a very significant recession.””
https://www.ft.com/content/481645ba-63a7-11ea-b3f3-fe4680ea68b5
Before the impact of the coronavirus:
“UK gross domestic product (GDP) was flat in the three months to January 2020, according to the Office of National Statistics.
“The numbers, revealed ahead of Chancellor Rishi Sunak’s first budget, show services showed no growth and production (including manufacturing) fell by 1 per cent.”
“Italy’s financial sector and public finances are uniquely vulnerable to the Covid-19 crisis.
“Business loans, above all, are under threat, as Italy’s economic structure is particularly reliant on small and medium-sized businesses, while its judicial system has routinely proved itself incapable of processing collateral claims sufficiently quickly.”
“The economy is exhibiting a number of warning signs, and Estonia must be ready to face a possible crisis, Prime Minister Juri Ratas said.
“”What is undoubtedly primary today are the lives and health of the people of Estonia,” the premier noted during parliament question time on Wednesday. “There is no way around the warning signs in the economy, and there are at present many of them.””
https://www.baltictimes.com/we_must_be_ready_for_a_possible_economic_crisis/
“As a result of the epidemic of Chinese coronavirus Covid-19 in the world, Ukraine stands on ‘the threshold of financial and economic crisis’ as 112 Ukraine reported citing Prime Minister of Ukraine Denys Shmygal.
““Concerning the council of financial stability. The issue was about the challenges, which result from, let’s say, from coronavirus in the world. In fact, we stand on the road, in some countries it is the beginning of such a financial and economic crisis. Ukraine enters this world crisis tougher than in it was, for example, in 2008,” Shmygal said.”
“Russia has come close to a financial crisis, Gazeta.ru and other Russian media cited Russian credit rating agency ACRA as warning.
“The recent collapse of OPEC-Russia talks with global oil prices plunging, the rouble dropping and the Russian stock market plummeting, and the havoc played with the world economy by the coronavirus have resulted in a “heightened probability” of a financial crisis in Russia, ACRA said…”
http://emergingmarkets.me/russia-close-to-financial-crisis-russian-credit-agency/
“With economic circumstances becoming increasingly difficult in Lebanon now also hit by a coronavirus outbreak, and with little hope of resettlement abroad, an increasing number of Syrian refugees have loaded their belongings onto buses and returned to their country and to an uncertain fate.”
“Crashing oil prices are likely to put a massive strain on Iraq’s economy, including a severe budget shortfall that could further undermine the government’s ability to respond to myriad crises.”
https://www.iraqoilreport.com/news/iraqi-economic-crisis-looms-as-oil-prices-collapse-42577/
“China’s central bank is expected to cut key rates soon, following a directive from a meeting led by the country’s second-in-command, Premier Li Keqiang. Li chaired an executive meeting of China’s highest administrative body, the State Council, on Tuesday.”
https://www.cnbc.com/2020/03/12/chinas-central-bank-to-cut-rates-soon-analysts-predict.html
““Credit blows up when the price of the collateral behind it stops rising,” he said. “How far are we from the peak of Chinese property prices? . . . That’s when the plumbing of Chinese credit becomes a problem, and with it all of EM credit.”
“…it is not only the magnitude of the coronavirus crisis and the world’s ability to deal with it that remain in doubt, but also the ability of the post-crisis economy to deal with the debt overhang that preceded it.”
https://www.ft.com/content/17943d46-62fa-11ea-b3f3-fe4680ea68b5
“Against the backdrop of the COVID-19 outbreak and a looming global economic slowdown, major Japanese firms are tightening their belts in influential annual wage deals that were hammered out with unions yesterday.”
https://www.taipeitimes.com/News/biz/archives/2020/03/12/2003732521
“Fears of the coronavirus impact on the global economy have rocked markets worldwide, plunging stock prices and bond yields.
“Here are six charts that show the impact the outbreak has had on the global economy and markets so far.”
https://www.cnbc.com/2020/03/12/coronavirus-impact-on-global-economy-financial-markets-in-6-charts.html
Read the previous ‘Economic’ thread here and visit my Patreon page here.
