“The next financial crisis may be coming soon: Fears of a credit crunch have already hit business confidence and worried banks…
“…a financial crisis does not always materialise in the same way it did with the Lehman Brothers’ collapse. Sometimes financial stress emerges in a more insidious manner…
“One problem haunting finance, as Carmen Reinhart, chief economist of the World Bank, notes, is that leverage at many institutions was sky-high even before Covid-19. “If you look at financial sector vulnerabilities, in the longer term it is difficult to not be pretty bleak,” she told me.”
https://www.ft.com/content/c95e5a72-8322-4cfc-b36a-69e8998aea01
“…to find the point of vulnerability in the US financial markets, I believe we have to look for the least legally flexible credit securities that can move the fastest from low risk to visibly defaulted.
“Those would be the commercial mortgage-backed securities (CMBS), particularly those floated in the market between 2012 and 2017.”
https://www.ft.com/content/f9ff9ed0-c7ff-4718-a65b-8be712379e84
“Debt collectors for US property loans have been on a hiring spree to deal with a deluge of defaults and prepare for lenders to assume control of shops and hotels…
“an alarming omen for owners of billions of dollars worth of commercial mortgage-backed securities.”
https://www.ft.com/content/8b61193a-38fc-400a-bbf1-d6862ea709bf
“There’s a housing bubble lurking in the recession. We’re making it almost too easy for people to borrow. Sound familiar?
“…To grease the skids of the refi boom, lenders are increasingly doing away with pesky human appraisers, who tend to need “money” and “time,” relying instead on algorithms to spit out estimated home values.
“Increasingly those are overinflated, raising the risk of a painful reckoning for borrowers and banks when values sink to meet reality but loan balances don’t.”
“…But away from the capital markets, there are signs of tightening credit… With banks’ net-interest margins shrinking as a result of Fed rate cuts, the percentage of them tightening credit-card standards is higher than it was during the dot-com bubble or the Great Financial Crisis…
“Especially vulnerable is subprime auto lending…”
“The number of Americans making new claims for unemployment benefits rose slightly last week amid worrying signs that the economic recovery was stalling.”
https://www.cityam.com/us-jobless-claims-rise-as-economic-recovery-stalls/
“From Los Angeles and Chicago to Boston and New York, central business districts find themselves deserted in the seventh month of a pandemic that has killed more than 200,000 Americans and left millions unemployed.
“And as hopes of a quick recovery sputter, fear is rising that a long-term collapse of downtown economies could soon become irreversible.”
“The oil and gas sector leads the overall corporate default tally so far in 2020 with 37. Of these, nearly 70% are from the U.S., where oil demand and prices plunged this year due to excess crude oil supplies and the COVID-19 pandemic.
“Oil and gas companies were highly vulnerable heading into the crisis…”
“Too Many Pipelines, Too Little Demand:
“The Wall Street Journal reports that even without the detrimental effects of Covid 19 on the market there would likely have been too many pipelines, since producers already were beginning to slow production as investors pressured them to prioritize returns over growth.”
https://www.pipeline-journal.net/news/too-many-pipelines-too-little-demand
“The UK’s national debt hit a record £2.024 trillion at the end of August, £249.5 billion more than the same time last year.
“To put the figures in some perspective, the debt level works out at roughly £30,000 per person living in the UK.”
https://www.standard.co.uk/business/uk-borrowing-hits-coronavirus-a4555851.html
“If Croydon Council cannot get a bailout from central government it could have to declare bankruptcy, its finance chief has said.”
https://www.mylondon.news/news/south-london-news/croydon-council-cash-crisis-debt-18993508
“Britain’s financial watchdog has warned that hundreds of small and medium-sized City firms are at risk of collapse due to the economic pressures of the Covid-19 crisis.”
“A further 1m people will lose their jobs by the end of the year, with chancellor Rishi Sunak’s new work support scheme failing to stop a wave of redundancies that will hit young and low-skilled workers the hardest, economists predicted on Friday…
“…economists warned that Mr Sunak’s new measures would not be enough to counteract the effect of new Covid-19 restrictions on economic activity…”
https://www.ft.com/content/867c45e4-10ac-4121-9f68-e3e55406e350
“Britain’s coming commercial property slump:
“Covid-19 has accelerated the growth of online retailing, hamstrung the hospitality sector and thrown the future of the office into question. None of this is good news for commercial-property owners.”
https://www.economist.com/britain/2020/09/24/britains-coming-commercial-property-slump
“Car factory production in the UK fell by a massive 45 per cent in August as weak demand for new motors during the Covid-19 pandemic continued to strangle the automotive industry.”
“At least 15,000 protesters have descended on Trafalgar Square and Hyde Park in London as part of an anti-lockdown demonstration.
“Attendees of the ‘We Do Not Consent’ rally gathered earlier today after a quarter of Britain’s population was put under some form of lockdown.”
“Efforts to contain a second wave of coronavirus in Europe’s worst affected areas were in disarray on Friday as national and regional governments clashed over the severity of new restrictions and their economic costs.
“Many countries in Europe are witnessing a sharp increase in confirmed Covid-19 cases, but there is widespread reluctance to repeat the stringent lockdown measures that appeared to bring the virus under control in the early summer.”
https://www.ft.com/content/5d46d911-aa45-408e-a14e-b4b82a75fd6d
“Air travel’s “precious role” in modern life is at risk because of coronavirus, according to Airbus’s boss.
“Guillaume Faury, chief executive of the pan-European plane-maker, warned that the longer borders remain closed and flights grounded, the greater the danger of long-term damage to society, the global economy – and even peace.”
“As the United States seeks to ramp up economic pressure on Iran via renewed economic sanctions, the nation’s already slipping currency, the rial, has gone into a virtual free fall.
“New reports suggest that Iran’s rial has lost at least 49% of its value so far in 2020, a devastating collapse of the local unit.”
https://asiatimes.com/2020/09/iran-in-turmoil-as-rial-goes-into-free-fall/
“Iranian oil exports have risen sharply in September in defiance of U.S. sanctions, three assessments based on tanker tracking showed…”
“Sri Lankan Prime Minister Mahinda Rajapaksa sought an additional currency swap facility and deferment of debt payments from India during an online bilateral summit with Prime Minister Narendra Modi…
““An additional request for a bilateral currency swap arrangement worth around $1 billion by the Sri Lankan side remains under discussion,” said the Indian foreign ministry in a statement.”
“China consumes roughly half of the world’s industrial metals, according to analysts.
“As the country emerged from the worst of the pandemic in March, the Chinese government unleashed a program of enormous fiscal stimulus aimed at building bridges, roads, utilities, broadband and railroads across the country…”
“Waning demand at recent debt sales suggests next quarter is going to be a difficult one for Southeast Asian bonds…
“There are plenty of factors contributing to the worsening bond-sale metrics.
“These include speculation local investors are getting close to filling this year’s order books, signs the cycle of interest-rate cuts is nearing its end, the specter of debt monetization, and the re-emergence of political risks.”
“Mid-year stocktaking by the Switzerland-based Internal Displacement Monitoring Centre finds escalating conflict and violence in the first half of this year have triggered an upsurge in the numbers of people fleeing their homes and becoming newly displaced within their own countries.
“Around 14.6 million people in 127 countries have been newly displaced between January and July…”
https://www.voanews.com/africa/millions-newly-displaced-escalating-conflict-violence-year
“The coronavirus pandemic could cause a global ‘tsunami’ of mental health problems worse than the 2008 financial crash, Harvard scientists have warned…
“And they fear the world may see a rise in suicides and substance abuse similar to that seen after the 2008 recession, when there was a wave of so- called ‘deaths of despair’.”
https://www.telegraph.co.uk/news/2020/09/26/coronavirus-will-cause-global-tsunami-mental-health-problems/
You can read the previous ‘Economic’ thread here and visit my Patreon page here. I’ll be back on Monday with a ‘Climate’ round-up.
