This is an example of the ill-founded (and actually somewhat bonkers) optimism I mentioned in yesterday’s post:

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“By all suppositions, the Covid Crisis should have butchered the economy. Fear, panic, and hysteria gripped even the smartest, most logical people like no other time in recent history, for good reason: according to every textbook, the pain should have been intolerable.

“Instead, everyone got a check. It’s truly extraordinary. To many, it is still – in a very literal sense — incredible. Policymakers around the world, led by the U.S. in both our swiftness and size, decided to stop calamity in its tracks. Now, supported by the most disruptive technology companies since the invention of the internet, the stock market came back.

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“This was only possible because the marketplace of investors around the world continue to acknowledge America’s economy as the most stable…

America is on top… Being able to sidestep economic collapse means saving livelihoods; the ability to stop a depression is the economic touch of God.”

https://www.forbes.com/sites/oliverrenick/2020/07/01/the-second-quarter-comeback-shows-america-has-the-economic-touch-of-god/#5cebbacd19a8


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“About 11.9 million Americans who are unemployed as a result of the pandemic, or about 7.2% of the workforce, have no hope of returning to their old jobs, while 5.7 million workers, or 3.5% of people, expect to get called back to work but probably won’t, writes Heidi Shierholz, senior economist and director of policy at EPI.

That puts the share of the workforce currently out of work with no reasonable chance of returning to their jobs at roughly 11%, or about 17.6 million people.”

https://www.cnbc.com/2020/07/01/millions-of-unemployed-americans-wont-return-to-their-old-jobs.html


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At least 4 million private-sector workers have had their pay cut during the pandemic, according to data provided to The Washington Post by economists who worked on a labor market analysis for the University of Chicago’s Becker Friedman Institute.

“Workers are twice as likely to get a pay cut now than they were during the Great Recession…”

https://www.washingtonpost.com/business/2020/07/01/pay-cut-economy-coronavirus/


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A senior Federal Reserve official has warned that a wave of business failures owing to the pandemic could still trigger a financial crisis, as he justified the central bank’s continuing efforts to prop up capital markets.

““We’re still in the middle of the crisis here,” James Bullard, president of the Federal Reserve Bank of St Louis, said…”

https://www.ft.com/content/04ee5988-7864-431a-95ff-f18388f29894


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Federal Reserve policymakers are looking at reviving a Great Recession-era promise to keep interest rates low until certain conditions are met, in a bid to deliver a more rapid recovery from the recession triggered by the coronavirus pandemic…

The Fed has repeatedly said the U.S. economic outlook remains highly uncertain and reiterated that a full economic recovery hinges on the battle to control the spread of the novel coronavirus.”

https://www.reuters.com/article/us-usa-fed-minutes/fed-policymakers-committed-to-providing-open-ended-support-to-us-economy-minutes-show-idUSKBN24270I


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Major automakers reported a more than 30% drop in US sales in the second quarter, the biggest plunge in sales since the Great Recession and the auto bankruptcies of 2009.

“Several of the top automakers reported quarterly sales Wednesday, and the weeks of pandemic-forced dealership closures hit them hard. Sales were also hurt by record job losses limiting spending money…”

https://edition.cnn.com/2020/07/01/business/car-sales-coronavirus-covid-19/index.html


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The United Kingdom has passed the point of no return. It has less than six months to reach a new trade deal with the European Union or risk heaping more pressure on companies that are already laying off tens of thousands of workers because of the coronavirus pandemic…

UK companies in aviation and retail have cut over 10,000 jobs in just two days.”

https://edition.cnn.com/2020/07/01/business/uk-economy-brexit-deal/index.html


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Wirecard bonds are slated to join a deadly ‘no coupon club’ and miss it’s very first payment on bonds worth 500 million euros ($561 million).

“…an interest payment of 0.5% is due in September, and the scandal ridden firm is almost certainly due to miss this payment following the insolvency filing of the German fintech last week.”

https://markets.businessinsider.com/news/stocks/wirecard-very-likely-to-miss-first-payment-561-million-debt-2020-7-1029358150#


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Europe’s businesses are desperately hoping they can save something of the summer holidays as coronavirus infections drop and lockdown measures are loosened across much of the continent

“As José Luis Yzuel, who represents an association of Spanish hotels and restaurants, says: “If the tourism industry can recover 50 per cent of last year’s sales that will be a triumph — but then if you compare something with complete annihilation, anything looks good.””

https://www.ft.com/content/f20f0b0a-200d-40ff-8d26-894dc97dc6c0


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Israel’s national airline El Al has stopped flights altogether, canceling two passenger and four cargo flights that were scheduled for Wednesday, the Globes daily reported, after labor talks blew up between the pilots committee and management.

“Tensions at the airline have been high after it slashed the vast majority of its workforce and dipped into pension funds to stay afloat amid the coronavirus crisis.”

https://www.timesofisrael.com/el-al-said-to-ground-all-flights-amid-labor-dispute-financial-crisis/


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As accelerating poverty fuels anger, despair and fear of a social explosion, efforts by Lebanon’s ruling elite to salvage the country from a financial meltdown with IMF help seem to be going in reverse

“A country known across the Middle East for its glamorous lifestyle and commercial savoir faire now projects images of people begging on the streets, scavenging in the garbage for something to eat or trading furniture for food.”

https://uk.reuters.com/article/uk-lebanon-crisis-imf-analysis/rescue-talks-with-the-imf-hit-the-rocks-as-lebanese-suffer-idUKKBN242668


China’s policy makers have been walking a tightrope between countering the economic damage caused by the Covid-19 crisis and fueling another debt bubble from the latest spending spree.”

https://www.bloomberg.com/news/articles/2020-07-02/china-s-corporate-debt-defaults-uncover-hidden-soft-spots


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“Hong Kong has become a focal point in tensions between the US and China, which means that the linked exchange-rate system in place for the past few decades — tying the local dollar to the US dollar — is also in the spotlight.

Speculators including Kyle Bass have talked of a collapse in Hong Kong’s currency under pressure from heavy outflows.”

https://www.ft.com/content/ec01b9e5-f1ae-44e8-9344-56b41ecd7223


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A record 1.4 million desperate Australians are relying on food banks to put dinner on the table amid fears the end of JobKeeper in September will see charities overwhelmed by migrants, students and the unemployed.

“Foodbank chief executive Brianna Casey on Wednesday told the Senate’s coronavirus committee there had been a 78 per cent jump in people needing food relief since the advent of the pandemic.”

https://www.smh.com.au/politics/federal/record-1-4-million-people-relying-on-food-charity-as-recession-bites-20200701-p55821.html


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The World Bank projects the recession in Latin America and the Caribbean will be the worst downturn since reliable data began in 1901

“[It expects a] gross domestic product contraction of more than 7% for 2020, making it worse than any crisis of the past century, including the Great Depression, the 1980s debt crisis and the global financial of 2008-2009, President David Malpass said.”

https://www.aljazeera.com/ajimpact/latin-america-caribbean-face-worst-downturn-100-years-200701202047239.html


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Some cautious optimism here:

A slump in global manufacturing showed signs of easing in June as a rebound in Chinese and U.S. activity offered some hope the world’s two largest economies may have passed the worst of the devastation caused by the novel coronavirus pandemic, while the collapse in European factory activity abated.”

https://business.financialpost.com/pmn/business-pmn/manufacturing-slump-eases-as-world-emerges-from-pandemic-2


Allianz’s latest Global Insurance Report predicts that global premium income will shrink by 3.8% this year, compared with growth of 4.4% in 2019. The decrease is more than three times larger than the 1% fall in global premium income caused by the last global financial crisis.”

https://www.theactuary.com/2020/07/01/covid-19-hit-insurers-three-times-harder-last-financial-crash


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The unprecedented economic crisis caused by the coronavirus pandemic has led to a dramatic increase in global corporate defaults, Fitch Ratings says. The number of defaults registered in the first five months of 2020 has already exceeded the 2019 full-year number, and the crisis continues in many parts of the world.

“At the current rate, the annual volume of corporate defaults could exceed the record set during the global financial crisis in 2009.”

https://www.fitchratings.com/research/corporate-finance/2020-global-corporate-defaults-to-date-top-2019-full-year-total-01-07-2020


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“The current COVID-19 pandemic is set to change the pace of the world economy. Countries have voluntarily staged dramatic, synchronized and persistent economic shocks to curb the spread of the virus.

No corner of the world has avoided a recession of as yet undetermined dimensions.”

https://internationalbanker.com/finance/the-crisis-will-be-lengthy-and-no-sharp-upturn-lies-ahead/


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