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Huge government spending and other steps to boost coronavirus-stricken economies have limited immediate risks to global financial stability while fueling a debt buildup that could spell trouble later, the International Monetary Fund said Tuesday.

“The COVID-19 pandemic could be a major resilience test for the global financial system,” the IMF economists wrote in the Global Financial Stability Report. “Triggers such as new virus outbreaks, policy missteps, or other shocks could interact with pre existing vulnerabilities and tip the economy into a more adverse scenario.”

https://www.wsj.com/articles/coronavirus-pandemic-could-pose-major-resilience-test-for-global-financial-system-imf-says-11602599401


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Economists analyzing the U.S. path to recovery are worried that inside national measures of economic growth lie deepening divisions between industries and people as some sectors recover fast, while employment in the leisure and hospitality industry, for example, remains 20% below where it was in February.

“Such service sector workers, the EIG found, made up a disproportionate share of workers in areas already falling behind economically.”

https://www.reuters.com/article/us-usa-economy-distress/after-two-lost-decades-u-s-s-weakest-local-economies-may-face-worse-from-pandemic-idUSKBN26Z15X


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“Millions of Americans have headed back to work since the depths of the coronavirus-induced recession in the spring.

“But nearly 13 million Americans remain unemployed — about 7 million more workers than pre-pandemic levels. And there are worrying trends emerging among this group.”

https://www.cnbc.com/2020/10/13/covid-related-unemployment-is-now-permanent-for-almost-4-million.html


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As the pandemic-sired recession persists into 2021, even-lower inflation if not deflation looms. That would be accompanied by even-lower yields on U.S. Treasury securities.

“Commodity prices, not just crude oil, would fall. Online retailers would continue to benefit from stay-at-home consumers but the pressure on shopping malls would intensify.

“Many more heavily-leveraged retailers and others with huge debt service would fold. “

https://www.bnnbloomberg.ca/deflationary-trends-are-growing-more-powerful-1.1507608


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This could break a generation’: UK’s unemployed young people tell of despair.

“The number of people being made redundant in the UK has risen at the fastest rate on record as the economic consequences of the coronavirus pandemic continue to bite, with the number of people aged 16-24 in work falling particularly sharply.”

https://www.theguardian.com/society/2020/oct/13/uk-unemployed-young-people-tell-of-despair


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UK firms risk collapse on a “significant” scale if Brexit leaves them struggling to raise cash in the sectors most exposed to trade disruption, a think tank has warned.

“A new report by the Institute for Fiscal Studies (IFS) sounds the alarm over the economic toll as Britain’s EU trade relationship unravels when it sees Brexit ‘go live’ at the end of the year.”

https://uk.finance.yahoo.com/news/brexit-impact-uk-economy-companies-jobs-ifs-093654385.html


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Germany’s financial system should prepare for increasing strains as a result of company failures and rising indebtedness, ensuring that credit will continue to flow, according to the Bundesbank.

““The effects of the real economic crisis have not yet fully arrived in the German financial system,” the central bank said in its Financial Stability Review published Tuesday.”

https://uk.investing.com/news/economy/bundesbank-says-banks-must-ready-for-greater-crisis-strains-2231778


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Coronavirus: Europe’s banks struggle to survive a second wave.

“Although the current crisis was not triggered by the financial sector, the fallout from a prolonged second wave is a bigger threat to banks than the eurozone debt crisis. The sector is preparing for a spike in bad loans.”

https://www.dw.com/en/coronavirus-europes-banks-struggle-to-survive-a-second-wave/a-55269838


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A record 96,000 households in Japan have received rent support from the government due to falling incomes amid the novel coronavirus pandemic, welfare ministry data showed Thursday.

“The number of approvals in the five months was already 2.6 times the fiscal 2010 total of 37,151, in the wake of the global financial crisis triggered by the 2008 collapse of Lehman Brothers Holdings Inc.”

https://japantoday.com/category/national/record-96-000-households-receive-gov’t-support-for-rent-amid-pandemic


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Thailand’s prime minister has declared a “severe” state of emergency in Bangkok, while police have arrested more than 20 people… in a crackdown on the country’s pro-democracy movement.

“Under the new emergency measures, gatherings of five or more people have been banned, as has the publication of news or online information that “could create fear” or “affect national security”.”

https://www.theguardian.com/world/2020/oct/15/thailand-uses-emergency-decree-to-ban-gatherings-after-bangkok-protests


Slump in diamond exports is much worse than 2008… Diamond exports from India are set to tumble by as much as a quarter this year as the pandemic crushes demand and breaks supply chains. Overseas sales of cut and polished diamonds may slump 20% to 25% in the year ending March from $18.66 billion last year.”

https://www.livemint.com/news/india/slump-in-diamond-exports-is-much-worse-than-2008-colin-shah-11602664590605.html


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The Group of 20 nations, representing the world’s biggest economies, have agreed to extend the suspension of debt payments by an additional six months to support the most vulnerable countries in their fight against the coronavirus pandemic. [They’re going to need more than that.]

“The G-20 says the extension will provide ongoing relief for the $14bn in debt payments that would have come due at the end of the year otherwise.”

https://www.aljazeera.com/news/2020/10/14/g20-suspends-poor-countries-debt-payments-for-another-6-months


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Zambia has warned it is ready to become the first African country to default as a result of the coronavirus pandemic if investors in its $3bn worth of US dollar bonds reject a request by the southern African nation to suspend payments…

“Zambia’s bonds, which are due in 2024, fell more than 3 per cent to 46 cents on the dollar on Wednesday after the default warning.”

https://www.ft.com/content/e56c2a34-16e4-4974-9df8-a72c092c5ee2


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Sudan’s annual inflation has hit a new record peak [of 212%] as prices of bread and other staples keep surging, according to official figures

Meanwhile, tensions escalated in the country’s east on Wednesday, following Prime Minister Abdalla Hamdok’s decision to fire Saleh Ammar, the newly appointed governor of Kassala province… authorities imposed 16-hour curfews in the cities of Port Sudan and Suakin, after angry protesters blocked major roads.”

https://www.aljazeera.com/economy/2020/10/14/sudan-annual-inflation-tops-200-in-sept-as-food-prices-soar


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Nigerian protesters demanding an end to police brutality returned to the streets on Wednesday, saying they were unconvinced by the creation of a new police unit and a pledge not to use violence against demonstrators.

“Protesters have staged daily marches nationwide for a week. Police have responded to the demonstrations with beatings, tear gas and gunfire…”

https://uk.reuters.com/article/uk-nigeria-protests-police/more-nigerian-protests-against-police-brutality-as-reforms-fail-to-convince-idUKKBN26Z2AV


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Veteran Guinea President Alpha Conde’s hugely controversial bid to extend his grip on power for a third term has sparked a year of harshly repressed protests in the West African country, costing dozens of lives.

“The octogenarian incumbent’s candidacy was confirmed after a referendum – a vote that raised concerns that Guinea will follow in the footsteps of other African nations whose rulers refuse to cede power.”

https://www.aljazeera.com/news/2020/10/14/timeline-a-year-of-bloody-protests-in-guinea


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Hundreds of stone-throwing protesters clashed with police in a provincial Tunisian town on Tuesday after authorities bulldozed an unlicensed cigarette kiosk, killing its owner sleeping inside, witnesses said.

“Street protests are frequent in Tunisia, where a popular uprising toppled autocratic rule nearly a decade ago and ushered in democracy but little economic progress, with living standards for many still low, unemployment high and corruption rife.”

https://uk.reuters.com/article/uk-tunisia-protests-idUKKBN26Y1SG


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ACI World and IATA have issued a joint call for non-debt-generating financial support to “prevent the systemic collapse of the aviation industry”.

““The Covid-19 pandemic remains an existential crisis, and airports, airlines and their commercial partners need direct and swift financial assistance to protect essential operations and jobs,” says ACI World director general Luis Felipe de Oliveira during a briefing today.

““Without this action, it is not an exaggeration that the industry is facing collapse.””

https://www.flightglobal.com/strategy/aviation-faces-systemic-collapse-without-support-aci-and-iata/140592.article


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Regulators will discuss next month how to ease pressure on global banks to hold unnecessarily large levels of capital in every country they operate, the Financial Stability Board said on Wednesday.

“Banks complain of having to “ring fence” large amounts of capital and liquidity at every foreign branch because local regulators don’t trust the lender’s home authority in a crisis to free up capital being held at group level.”

https://uk.reuters.com/article/g20-markets/global-regulators-eye-actions-to-ease-capital-burden-on-banks-idUKL8N2H4593


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The ongoing collapse of corporate dividends is unprecedented and at the time of writing, FTSE 100 dividend futures are pricing a 62 per cent reduction in dividends this year.

“This compares to a peak drop of 20 per cent globally in the Great Financial Crisis just over a decade ago. Behind the collapse we have witnessed British banks, which constitute 13 per cent of dividends in the UK market, cancel their payments indefinitely.”

https://www.ftadviser.com/investments/2020/10/14/solving-the-global-dividend-puzzle/


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Most advanced economies that can borrow freely will not need to plan for austerity to restore the health of their public finances after the coronavirus pandemic, the IMF has said in a reversal of its advice a decade ago

The favourable debt projections rely on a strong bounceback in economic growth after the pandemic, and interest rates remaining much lower than growth rates [and pigs might fly! The IMF is advocating this because we literally have no alternative but to pile on more debt.]”

https://www.irishtimes.com/business/economy/no-need-for-austerity-after-covid-in-most-advanced-countries-imf-1.4380742


You can read the previous ‘Economic’ thread here and visit my Patreon page here. I’ll be back tomorrow with a ‘Climate’ thread.

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