“Having rushed to engineer a massive policy response to the initial virus shock which briefly threatened to unleash a financial crisis, the world’s leading central banks face the next economic phase of the pandemic with a dwindling arsenal of monetary weapons and rising frustration that some key drivers of the recovery — both health and fiscal — are beyond their control…
““The Fed is running up against the long-term issue that when things are bad they are pushing on a string with monetary policy,” said Adam Posen, president of the Peterson Institute for International Economics in Washington.
““You can alleviate liquidity problems, you can put a floor under some asset prices, you can stabilise credit markets, all of which is constructive but none of which is sufficient to create recovery,” Mr Posen added.”
https://www.ft.com/content/269eec67-1145-41b8-b97c-f43b293017fd
“Long-term unemployment helped define the Great Recession. Countless networks, relationships and skills that bound employee to employer were ripped apart in the global financial crisis. It took about eight years for the unemployment rate to recover from that brutal dislocation.
“Now economists fear it’s happening all over again.”
“Cody Waymack and his wife are struggling to survive with their two children after the extra $600 a week in federal unemployment benefits expired in late July.
“Now the family is living off each of their weekly state unemployment checks: $96 and $48.”
“Over the next few weeks, Congress and the Trump administration will decide whether a quarter of America’s children will have enough to eat each day.
“Widespread hunger is being driven by unemployment rates that are the highest they have been since the Great Depression.”
“U.S. bank profits were down 70% from a year prior in the second quarter of 2020 on continued economic uncertainty driven by the coronavirus pandemic, a regulator reported Tuesday.
“Bank profits remained small as firms build up cushions to guard against future losses and business and consumer activity dropped, according to the Federal Deposit Insurance Corporation.”
“The large increase in US corporate debt could lead to a financial crisis if several corporations risk defaulting on their debt obligations…
“With a large amount of debt still existing and “zombie companies” continuing operation, the economy will be more inefficient, and growth will be stunted [if the Fed bails them out].”
https://seekingalpha.com/article/4370458-next-crisis-corporate-debt
“UK retail employment balance dropped to lowest since 2009.”
“Vanishing Jobs and Empty Offices Plague Britain’s Retailers.”
“The UK’s nightclub industry is begging the Government for support and warning that if nightspots are not allowed to reopen soon it will put 754,000 jobs at risk.”
https://www.business-live.co.uk/enterprise/government-warned-nightclub-industry-brink-18821462
“If there is a typical EU 11th-hour [Brexit] fix, it will be a thin unfriendly deal, which Hayward warns will still mean massive border disruption.
“The EU will still need to stop around 5,000 goods entering via Ireland, to stop unfair competition as the UK has lowered tariffs.”
https://www.theguardian.com/commentisfree/2020/aug/24/irish-sea-border-chaos-brexit-northern-ireland
“Norway’s gross domestic product (GDP) contracted in the second quarter at the fastest pace ever recorded as efforts to contain the coronavirus plunged the economy into a deep recession…”
“The German economy contracted by a record 9.7% in the second quarter as consumer spending, company investments and exports all collapsed at the height of the COVID-19 pandemic, the statistics office said on Tuesday.”
“The coronavirus crisis will cause long lasting damage to the Dutch economy, even if the virus is completely under control soon, according to central planning office CPB.”
https://nltimes.nl/2020/08/25/dutch-economy-will-take-years-recover-covid-19-crisis-planning-office
“Cuts to the JobSeeker payment will send thousands of Australians into homelessness and hamstring the social services system…
“The JobSeeker payment was doubled from $550 to $1,100 a fortnight in March, but is scheduled to fall to $815 on 25 September, with the Australian Council of Social Services warning the cuts will have alarming consequences.”
https://au.finance.yahoo.com/news/jobseeker-cuts-threaten-social-services-sector-061137613.html
“Qantas will shed thousands of extra staff and even begin selling luxury pyjamas as the airline seeks to cut the costs needed to survive a longer than expected disruption to air travel owing to Covid-19…
“The measures are in addition to 6,000 redundancies and 20,000 staff already put on furlough, announced by Qantas in June.”
https://www.ft.com/content/fdcde4f1-5d1a-4614-a731-ade7fdb69fc3
“Finnish national carrier Finnair plans to cut up to 1,000 jobs, or about 15% of its workforce, and seek further savings across its operations, joining airlines across the world in making cut backs to cope with the COVID-19 crisis.
“Airlines are scrambling to slash costs and bolster their finances after lockdowns to contain the pandemic brought global air travel almost to a halt.”
“American Airlines has said it will cut 19,000 jobs in October when a government wage support scheme extended to airlines during the pandemic comes to an end. The world’s biggest airline said the cuts… would leave its workforce 30% smaller than it was in March.
“Other carriers have warned of similarly large cuts amid a slump in air travel.”
https://www.bbc.co.uk/news/business-53910936
“Earlier this summer, United Airlines said that it could furlough as many as 36,000 employees in the fall. And, on Monday, Delta Air Lines warned that it might have to furlough as many as 1,941 pilots in October…
“While weak demand is spurring these announcements, the airlines are also seeking to put pressure on Congress and the Trump administration to strike a deal on another coronavirus stimulus package.”
https://www.nytimes.com/2020/08/25/business/american-airline-furlough-19000.html
“Global trade flows collapsed in the spring, marking the largest fall in two decades, as coronavirus lockdowns disrupted air and sea transport and dealt a blow to the demand for many consumer and investment goods…
“Global trade had weakened before the crisis, hobbled by trade tensions and fresh tariffs. Coming on top of those disruptions, the pandemic has raised fresh questions about the resilience of supply chains that stretch across the globe and drive a third of world trade.”
https://www.wsj.com/articles/covid-crisis-drives-historic-drop-in-global-trade-11598368752
A good overview of our current economic predicament, the ill-founded optimism in the final paragraph not withstanding:
“The International Monetary Fund predicts for the year 2020 a very sharp slump in the global economy real global GDP which is expected to fall at -4.9%. The unique magnitude of this shock is confirmed by a marked difference between the current recession and the one following the Global Financial Crisis, which reached only a – 0.8% fall in real GDP in 2009.
“Another element of difference with the GFC of 2008 and of great concern regarding the current sharp recession is represented by the global average cumulative debt levels on the onset of the COVID-19 crisis. In fact, as indicated below in figure 3, the global debt (financial, sovereign, and private non-financial) at the beginning of the coronavirus crisis reached a record level of over $250 trillion in 2019…
“Of course, due to the damage of the COVID-19 pandemic the average cumulative debt levels of the post-COVID-19 era are expected to be even higher than those reported in 2019.
“These figures alone give a clue on the magnitude of this unprecedented shock to the global trade, economy, and financial markets and provide clear warning signs about a potential gloomy scenario for the poorer and more fragile emerging and developing economies, the ones more likely to be hit by a looming sovereign-debt crisis.”
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