“The surging coronavirus is stoking fears of a fresh downturn for the world economy, heaping pressure on central banks and governments to lay aside other concerns and do more to spur demand.
“Hopes are mounting that Covid-19 vaccines will become available as soon as December, but widespread delivery will take months and infections are rising again in many large economies. Authorities are responding with more restrictions to limit the virus’s spread at the price of weaker economic activity…
“…policy makers hearing calls for more stimulus, even when central banks are already stretched and starting to worry about froth in financial markets. Meantime, politicians from the U.S. to Europe are clashing over just how much they can and should do with fiscal policy.”
“Policymakers are often accused of preparing to fight the last war. But now, for once, perhaps that’s exactly right. The aftershocks left by the 2008 financial crisis have only been exacerbated by coronavirus.
“Central bankers and finance ministers are still faced with a triple threat of secular stagnation, liquidity trap and a growth model centred on leverage.”
https://www.ft.com/content/55161e29-27cd-4f9f-ae03-ab6ade9bc04d
“Low global interest rates are here to stay: …As global monetary easing is prolonged, it inevitably becomes a zero-sum game as the room for front-loading future demand diminishes. Further, since investment is undertaken according to the order of profitability, productive investment will decline over time.
“The credit spread will be suppressed by aggressive monetary easing, which could lead to lower productivity growth resulting from hampering the allocative efficiency of credit markets. Lower potential growth coupled with bloated debt due to front-loading will increase the likelihood of a financial crisis.”
https://asia.nikkei.com/Opinion/Low-global-interest-rates-are-here-to-stay
“President-elect Joe Biden’s economic advisors are reportedly pressing congressional Democrats to quickly strike a stimulus deal with Republicans, fearing the US is on course for a recession as virus cases surge and a new aid package remains elusive.
“The New York Times reported on Sunday that the Biden team was also increasingly worried about the prospect of millions of Americans losing unemployment benefits next month, along with the expiration of federal eviction protections and student-loan deferrals.”
“Investors fret over future of Fed crisis lending – Markets concerned response to potential virus surge will be curtailed due to Treasury rift with central bank.
“…The central bank made no secret of the fact that it wanted to preserve the credit facilities being axed by the Treasury secretary as a key weapon in its arsenal to keep markets healthy…
“if financial markets were to experience new turmoil in the coming months, the Fed might struggle to limit the damage to investors in corporate debt, municipal and state debt, and asset-backed securities, whose markets were propped up by the lapsing facilities. And the fallout could be broader, given the nearly $40tn US equity market has been buoyed by the Fed’s intervention as well.”
https://www.ft.com/content/336eaa2e-29e4-47dc-b2dd-a4175013435e
“Bank of Canada deputy downplays risks of consumer default wave:
“The massive policy response from the Bank of Canada and the federal government successfully prevented the country’s financial system from buckling, though vigilance is still needed, according to a top central banker.”
https://www.bnnbloomberg.ca/covid-recession-could-strain-household-debt-bank-of-canada-1.1526684
“Canada’s stagflation problem: Stagflation is an economic ordeal characterized by the combination of rising inflation levels amidst low growth and therefore high unemployment. In this environment, the rising cost of goods and services outpaces the purchasing power of individuals and households in the real economy.
“Canada is a nation burdened by some of the highest debt levels of any advanced economy today. A confluence of record-high leverage levels for households, provincial and federal governments, and the private sector will complicate Canada’s economic recovery moving forward.”
https://www.fxstreet.com/analysis/canadas-stagflation-problem-202011221451
“The UK’s economic recovery is facing a ‘double-dip’ downturn as coronavirus lockdowns batter firms, according to a leading business survey.
“Industry data released on Monday points to the sharpest decline in private sector output since May as economic restrictions left firms reeling after four months of expansion.”
https://ca.news.yahoo.com/uk-economy-england-lockdown-impact-jobs-093743372.html
“Let’s not pretend a vaccine means a miracle cure for the economy: If we are facing stagflation, the [UK’s] public finances are in dangerous waters.”
https://www.telegraph.co.uk/business/2020/11/22/not-pretend-vaccine-means-miracle-cure-economy/
“In case no one has told you yet, debt’s piling up and there’s only one way out — growth… the chancellor, and the UK [are] in a perilous position — even though no one has yet explained to the public quite how bleak things really are.
“Debt is still cheap. But the Treasury fears that, given the scale of the sums involved, even a small increase in the rates charged by those lending us the cash would blow a hole in the public finances. A significant rise would mean either massive cuts or borrowing to pay for borrowing — a path to the abyss.”
“The UK Treasury will borrow almost £500bn this year as it scrambles to cover costs of the pandemic…
“The staggering sum – equivalent to almost a quarter of the entire economy – is likely to be more than double the £227bn gilt sales in the year after the financial crisis…
“In a sign of the uncertainty over the eventual sums needed to fund the pandemic response, the Treasury’s Debt Management Office took the unprecedented step of not publishing the gilt sales planned for the full year.”
https://www.telegraph.co.uk/business/2020/11/21/treasury-braced-500bn-covid-borrowing-hit/
“The [financial] risks UK councils are running are eye-watering.
“Take Spelthorne, a small authority near London, with a core annual budget of around £11m. It borrowed more than £1bn to build a property portfolio mainly outside its own locality.”
https://www.ft.com/content/168ae76c-5cd9-495b-80f2-0eb5d49a9a6b
“The eurozone economy plunged back into a severe decline in November amid renewed efforts to quash the rising tide of coronavirus disease 2019 (COVID-19) infections.
“The data add to the likelihood that the euro area will see GDP contract again in the fourth quarter.”
“Eurozone firms are increasingly vulnerable amid a pandemic-induced recession but public support, including cheap cash from the European Central Bank, have limited the damage so far, a new ECB report showed on Monday.”
“Over 10% of Belgian businesses fear imminent bankruptcy.”
“German Finance Minister Olaf Scholz plans to take on at least 160 billion euros ($190 billion) in new debt in 2021 to help stave off the economic impact of the COVID-19 pandemic…
“This is at least 64 billion euros higher than the 96 billion euros initially foreseen by Scholz for next year.”
https://uk.reuters.com/article/uk-health-coronavirus-germany-debt-idUKKBN2820F1
“Italy’s Bank Troubles Are Back to Haunt It:
“The public outcry against bank bailouts during the financial crisis prompted European governments to constrain the use of public money to help lenders in crisis. New trouble at the region’s oldest bank [Monte dei Paschi di Siena] will test whether these rules can outlast the pandemic.”
https://www.bloombergquint.com/gadfly/italy-s-bank-troubles-return-to-haunt-it-with-monte-paschi
“Spanish banks seek mergers as outlook darkens.” [Spanish banks are the most exposed to Turkish debt ($64 billion).]
https://www.trtworld.com/business/spanish-banks-seek-mergers-as-outlook-darkens-41693
“According to Goldman Sachs, Ankara spent more than $100 billion of its currency reserves in 2020 to support the Turkish Lira.
“The Turkish government’s inability to deliver on its vague promises to secure the strengthening of national currency will accelerate the depreciation of the Turkish Lira, which could further worsen Turkey’s fragile external financial situation.”
https://moderndiplomacy.eu/2020/11/22/imminent-collapse-of-erdogans-economic-policy/
“Turkey has become a geopolitical balancing act between an increasingly capable and active military, and an increasingly volatile economy…
“The risk now is that a step too far militarily, or a mis-step economically could trigger a full blown crisis…”
“India and China are engaged in an eight-month standoff at LAC in Eastern Ladakh. Both the countries are also engaged in military and diplomatic talks to resolve the border dispute…
“Amid this, apart from aggressively developing infrastructure, China has started installing radars from Ladakh to Sikkim region.”
“China’s military used microwave weapons to force Indian troops to retreat during a months-long border standoff in the Himalayas, according to an account that has emerged in Beijing.”
“A string of defaults by Chinese state-owned companies has sent shockwaves across the world’s second-largest credit market…
““Most of the onshore bonds hit hardest this time share a common symptom: their profitability has lagged far behind their debt growth,” said Li Yunfei, credit analyst at Pacific Securities Co.”
“South Africa’s finance ministry said on Saturday the ratings downgrade by Moody’s and Fitch will increase the country’s borrowing costs and constrain its fiscal framework.
“”The decision by Fitch and Moody’s… is a painful one,” Tito Mboweni, Minister of Finance, said in a statement.”
https://finance.yahoo.com/news/south-africas-painful-ratings-downgrade-094826502.html
“‘Whites-only school prom’ protesters hit with tear gas and rubber bullets in South Africa:
“Some of the mainly black demonstrators are seen carrying machetes, sticks and golf clubs, but are met by a heavy police presence.”
“Ivory Coast Tests Euro Debt Market in First Foray Since Pandemic:
“Ivory Coast is preparing to sell sub-Saharan Africa’s first euro-denominated bonds since the start of the Covid-19…”
“Ghana Central Bank Says Options Waning as Debt Hits Four-Year High:
“Ghana is running out of fiscal space as its debt-to-GDP ratio reached 71% by Sept. 30, the highest in nearly four years, following early attempts to cushion the population from the impact of the coronavirus pandemic, its central bank said Monday.”
“Africa’s largest economy [Nigeria] has slumped into a recession in the third quarter as oil production dropped to a four-year low.
“Nigeria’s gross domestic product shrank 3.6% in the three months through September from a year earlier, compared with a 6.1% contraction in the previous quarter…”
https://uk.finance.yahoo.com/news/nigerian-economy-falls-recession-3-100809411.html
“A judicial panel investigating claims that Nigerian soldiers shot dead peaceful protesters in Lagos viewed videos on Saturday appearing to show people hurt or saying that they were being fired on, but an army general dismissed the footage [as fake].”
https://uk.reuters.com/article/uk-nigeria-protests-idUKKBN2810UQ
“Iraq is seeking an upfront payment of about $2 billion in exchange for a long-term crude-supply contract, the latest sign of Baghdad’s growing desperation for cash as its economy unravels.
“The Middle Eastern country is grappling with a crisis brought to a head by low oil prices and OPEC+ output cuts. As state coffers dwindle and school teachers go unpaid, the country risks a repeat of upheaval last year that brought down the government and saw hundreds of protesters killed.”
“Oil-rich Kuwait faces reckoning as debt crisis looms:
“Kuwait, one of the world’s wealthiest countries, is facing a debt crisis. The pandemic has sent the price of oil crashing to all-time lows and pushed the petrostate toward a reckoning with its longtime largesse, just as a parliamentary election approaches in December.”
https://egyptindependent.com/oil-rich-kuwait-faces-reckoning-as-debt-crisis-looms/
“Could OPEC’s House of Cards Collapse?
“As the cartel’s oil ministers prepare to meet in just over a week to decide on the next step in their record-breaking output deal, officials in the United Arab Emirates, normally a loyal Saudi ally, are privately questioning the benefits of participating, and may even be considering whether to leave the Organization of Petroleum Exporting Counties.”
https://financialpost.com/pmn/business-pmn/could-opecs-house-of-cards-collapse
“Faltering Oil Demand Is Wreaking Havoc On The Tanker Industry:
“The tanker market is in “cash burn mode”, said the chief executive of Diamond S Shipping, as quoted by Lloyd’s List.”
“More than a hundred pro-government civilians on Sunday mobbed a handful of protesters who showed up at Havana’s Central Park [Cuba] to support a group of dissidents on a hunger strike, while security forces watched on, according to a Reuters eyewitness.
“Police detained more than a dozen people for attempting to protest…”
“Hundreds of protesters broke into Guatemala’s congress and burned part of the building amid growing demonstrations against President Alejandro Giammattei and the legislature for approving a budget that cut educational and health spending.
“The incident on Saturday came as about 10,000 people were protesting in front of the National Palace in Guatemala City against corruption and the budget…”
“Protests in Bogota [Colombia] marking a year since 2019’s national strike against Ivan Duque’s government end with riots around a university site.”
Video:
https://uk.news.yahoo.com/colombian-protests-marking-2019-strike-134237912.html
“Police violence in Chile has reached a shocking nadir, with reports that two young people, aged 14 and 17, were shot by armed police in the southern city of Talcahuano, in Chile, on Wednesday afternoon…
“In Chile’s capital Santiago, hundreds of protestors took to the streets to demand an end to police violence but were met with repression, tear gas and arrests.”
“Peru is planning to raise new public debt in the short term in order to finance the Andean country’s deep fiscal deficit and repay interest on old debt in 2021, interim President Francisco Sagasti told Reuters.”
https://uk.reuters.com/article/instant-article/idUKKBN2802FK
“The funeral of a black man who died after being beaten by supermarket security guards in Brazil has been held following protests that echoed those of the racial justice movement in the United States.
“”On Friday, demonstrators painted “Black Lives Matter” on the pavement of Paulista Avenue, one of the most famous in Sao Paulo, following a series of protests across the country.”
“Researchers investigating a little-known deadly virus [Bolivia] that causes a fever, vomiting and internal bleeding have found that it can be spread from person to person.
“The recently-discovered Chapare virus, which claimed three lives during an outbreak in Bolivia last year, is thought usually to be spread to people through contact with infected rodents.”
“The COVID-19 pandemic signals that civilization has breached a major ‘tipping point’ that could pave the way for a dangerous new era of interacting ecological emergencies.
“Scientific evidence accumulated over the last five years suggests that the pandemic didn’t come out of the blue, but is a direct consequence of industrial civilization’s breaching of key ‘planetary boundaries’…”
You can read the previous ‘Economic’ thread here. I’ll be back tomorrow with a ‘Climate’ thread.
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