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The ‘black swan’ Covid catastrophe shows us just how fragile our world is:

“Covid-19 has forced us to rethink the way we work, how we shop, the role of government, how the economy works at a national and global level.

“Above all, it has shown us how fragile everything is.”

https://www.theguardian.com/business/2021/jan/03/the-black-swan-covid-catastrophe-shows-us-just-how-fragile-our-world-is


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America’s dangerous reliance on the Fed:

“…the risk is that each new chapter tightens a doom loop in which the US sovereign must eventually reckon with the ever-widening class of risk it is underwriting. America’s national debt is already past 100 per cent of gross domestic product for the first time since the second world war. It nearly doubled after 2008 and is rising sharply again…

The most visible threat, however, is to US political stability [because] the Fed’s inescapable bias towards asset owners has combined with the financial sector’s preference for size to produce a very skewed recovery.”

https://www.ft.com/content/bcb8d4d9-ca6d-45b7-aafc-9e9ecf672a5b


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Some Republicans who once scolded about fiscal austerity are now embracing government spending, underlining that the public supports more generous relief

“The political rethinking about the deficit — especially in times of economic weakness — is a stark change from earlier eras.”

https://www.nytimes.com/2021/01/02/business/economy/republicans-deficit.html


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Economists expect the UK economic recovery in 2021 to be slower than in peer countries, because of a lower starting point, a larger services sector, low business investment and the impact of Brexit…

“Many economists say the government should not raise taxes at least until the economy has fully recovered…”

https://www.ft.com/content/21abdaf0-b3b6-4cf9-93f2-007fc1b1b1c8


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European airlines are stepping up pressure on airports to slash landing charges, leading to warnings of a race to the bottom in an industry decimated by the pandemic.

“Ryanair, Wizz Air and easyJet are among the carriers pushing airports to discount fees as they decide where to fly when passengers begin returning in significant numbers.”

https://www.ft.com/content/a1374141-97c6-4162-88d4-a5240f49c8a0


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The coronavirus crisis has devastated the tourism sector in Spain, creating a kind of volcanic fissure of considerable dimensions that oozes lava, destroying almost everything in its path.

“The figures speak for themselves, with revenues plunging by more than 75%…”

https://english.elpais.com/economy_and_business/2021-01-04/the-spanish-tourist-sector-closes-its-worst-year-since-the-1970s.html


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Valuation Caution Returns as Emerging Markets Face 2021 Reality: Rarely, if ever, can a year have started with price levels in emerging markets looking so divorced from the fundamental backdrop…

“Rising Covid-19 case numbers and uneven rates of recovery in the biggest of the developing economies underscore a nagging concern that this will be about as good as it gets for stocks, bonds and currencies.”

https://www.bloomberg.com/news/articles/2021-01-03/valuation-caution-returns-as-emerging-markets-face-2021-reality


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“The COVID-19 pandemic will undoubtedly be remembered as one of the most difficult episodes in the history of modern capitalism… nowhere are the difficulties greater than in highly indebted countries.

“In Argentina, the pandemic hit at a time when the country had no access to credit.”

https://www.japantimes.co.jp/opinion/2021/01/03/commentary/world-commentary/debt-disease/


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Is there a new wave of inflationary risk [for Indonesia]? …recently, many economists have started expressing their concern again about the increasing inflationary risk after the pandemic.

“There are a number of factors that can cause higher inflationary risk in Indonesia during the post-pandemic era… the central bank has… been buying a vast amount of public debt as part of its monetary expansion…”

https://www.thejakartapost.com/academia/2021/01/02/is-there-a-new-wave-of-inflationary-risk.html


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“While vaccines remain a source of great hope in 2021 against the new wave of the Covid-19 virus outbreak, there is a fundamental problem that poses a risk of becoming a ticking time bomb for the Thai economy.

The Bank of Thailand revealed last week the critical problem concerning skyrocketing household debt.”

https://www.bangkokpost.com/opinion/opinion/2045035/debt-levels-are-a-time-bomb


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Has COVID-19 killed Asia’s growth miracle? …The COVID-19 pandemic has brought the global economy to a standstill, disrupting supply chains and highlighting the vulnerabilities of a system of interdependent national economies — many of which are set to experience a deep recession this year.

“The pandemic has shown that disruption of one critical part of a supply chain can shut down an entire industry or sector.”

https://www.japantimes.co.jp/opinion/2021/01/03/commentary/world-commentary/coronavirus-asia-growth-miracle/


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The People’s Bank of China has taken steps to ease financial conditions after interbank rates doubled in the second half of the year, reflecting the challenge it faces in navigating a return to normal monetary conditions…

Concerns over the creditworthiness of some borrowers compounded existing concerns about overall high levels of leverage in China. JPMorgan estimates that the country’s ratio of debt to economic output has risen 27 percentage points to 306 per cent in 2020, based on all government, corporate and household borrowing.”

https://www.ft.com/content/7e48cf70-d727-4122-a977-941d89b26f23


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A Chinese court ruled that a local ratings firm should help compensate some creditors for a construction firm’s 1.4 billion yuan (US$216 million) bond defaults three years ago, a first in the country as Beijing raises pressure on agencies to improve their due diligence.

“Dagong Global Credit Rating is responsible for repaying up to 10 per cent of at least 494 million yuan of combined debt claims…”

https://www.scmp.com/business/banking-finance/article/3116321/china-makes-debt-rating-agency-pay-default-precedent-legal


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Regional governments across China are evading borrowing limits by transferring assets on to the books of local investment companies to lower their official debt-to-asset ratios, according to executives and officials.

“The practice has allowed local government finance vehicles to raise more money for infrastructure and other construction projects. But analysts warn that many of the assets are of poor quality, setting the stage for a surge in bad debts after a wave of bond defaults at government-backed companies in recent weeks.”

https://www.ft.com/content/93bd1857-e488-4bb9-a2a0-b2e8841bfe40


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Chinese oil majors may be next in line for delisting in the U.S. after the New York Stock Exchange said last week it would remove the Asian nation’s three biggest telecom companies.

“China’s largest offshore oil producer CNOOC Ltd. could be most at risk as it’s on the Pentagon’s list of companies it says are owned or controlled by Chinese military…”

https://www.bloomberg.com/news/articles/2021-01-03/china-oil-majors-may-face-u-s-delisting-after-nyse-drops-telcos


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Defaults by American oil and gas producers are set to outstrip all other sectors again in 2021 as an industry battered by this year’s price crash faces yet more pain, according to a forecast from a rating agency.

“Energy will account for $15bn-$18bn of US high-yield bond defaults in 2021, Fitch predicted. That is more than double both healthcare and industrials…”

https://www.ft.com/content/a2b9e67c-dbd6-4c00-89bc-564d0e3d6082


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OPEC sees plenty of downside risks for oil markets in the first half of 2021, its secretary general said on Sunday, a day before meeting allies led by Russia to discuss output levels for February.

““Amid the hopeful signs, the outlook for the first half of 2021 is very mixed and there are still many downside risks to juggle,” said OPEC Secretary General Mohammad Barkindo.”

https://uk.reuters.com/article/uk-oil-opec/opec-sees-oil-outlook-for-first-half-of-2021-full-of-downside-risks-idUKKBN2980FO


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Parts of the Middle East could see conditions further deteriorate in 2021, with a warning from a leading NGO that the world must step up assistance to these countries in order to prevent conflict, poverty and Covid-19 claiming thousands of more lives.

“The International Rescue Committee (IRC) named Yemen, Afghanistan, and Syria as the three countries most at risk of humanitarian deterioration this year.”

https://english.alaraby.co.uk/english/indepth/2021/1/3/2021-could-be-even-worse-for-the-middle-east


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Bitcoin has topped $30,000 for the first time, extending a rally that saw its value climb by 300% in 2020.

The cryptocurrency rose to as high as $31,824 early on Saturday – just two weeks after passing the $20,000 mark.”

https://news.sky.com/story/bitcoin-extends-rally-to-top-30-000-for-first-time-12177784


The Russian Energy Giant Mining Bitcoin With Virtually Free Energy:

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Gazpromneft recently began a cryptocurrency mining operation based in one of its Siberian oil drilling sites, “unlocking the power of Russia’s oil and gas resources for the needs of bitcoin mining,” Yahoo! Finance reported this week.

In slightly better news for Bitcoin’s carbon footprint, Russia’s new mining operation will be powered by natural gas from the oil field, located in the Khanty-Mansiysk region of northwestern Siberia, which has its own power plant to convert the gas into electricity for Bitcoin production.”

https://oilprice.com/Energy/Energy-General/The-Russian-Energy-Giant-Mining-Bitcoin-With-Virtually-Free-Energy.html


You can read the previous ‘Economic’ thread here. I’ll be back tomorrow with a ‘Climate’ thread.

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