Bubble warnings everywhere just keep getting louder: It seems like asset bubble warnings are emerging everywhere you look these days. In the U.S., big names including Tesla Inc. have soared to dizzy new heights, while Bank of America Corp. strategists have warned that a bubble is forming in asset prices and a market correction is looming. “
“Meanwhile, a growing legion of retail investors are challenging Wall Street orthodoxy and sending shares of previously unheralded stocks into the stratosphere (yes, of course we mean you GameStop Corp.).
“Trendy bets are all over the place, with cash pouring into assets from solar power and cloud computing… And who could overlook the rollercoaster ride that is Bitcoin, everyone’s favorite bubble from 2017, back at it again and hitting new highs early in 2021 after quadrupling in value last year.
“So what’s behind all the speculation? In a nutshell, the global pandemic. Policy makers have rolled out trillions of dollars in stimulus to cushion the economic blow, money that could well end up pumping asset bubbles…
“A market collapse and depression now, as much of the world already grapples with the effects of the pandemic, could have dire consequences for years to come.”
Banding together on WallStreetBets, a rambunctious stock-market community on the popular social media site Reddit, an army of amateur traders decided to work against the financial professionals, who had bet that GameStop was about to collapse… “
“…amid signs of a dangerous stock market bubble, commentators warn it may all end in tears.”
The US economy suffered its worst annual decline for 74 years in 2020 as the pandemic crushed business activity and pushed millions of Americans out of work, official figures have shown.“
“Gross domestic product (GDP) shrank by 3.5%, the biggest fall since 1946 when America was demobilising after the Second World War.”
“More than 6 million Americans went on food stamps between February and September of last year as the pandemic-induced economic slowdown pushed families into poverty.”
Britain’s economy is suffering the most damage since the first wave of Covid-19 as persistently high infection rates and renewed lockdown measures delay the economic recovery from the pandemic, according to a Guardian analysis.“
“…pressure is mounting on the chancellor, Rishi Sunak, to provide further financial support before the 3 March budget as the economic damage intensifies during the prolonged lockdown at the start of 2021.”
“Britain saw the biggest rise in vacant shops in over two decades late last year and the sharpest increase in empty offices since the financial crisis.”
The European Central Bank’s views on the euro this week amount to a declaration of “currency war,” according to research from one of Germany’s biggest banks…“
“The euro has slid in recent days after policy maker Klaas Knot said the central bank has the tools to prevent any further strengthening of the currency undermining inflation…”
The European Central Bank on Thursday effectively warned eurozone banks to clean up their acts, saying that many are complacent about losses they may suffer from a surge in problem loans caused by the pandemic.“
“…[saying that] many banks lacked a clear plan to address chronically weak profits.”
Japan’s industrial output extended declines in December as factories struggled with a hit to demand from expanded COVID-19 lockdown measures globally, suggesting the economic recovery was slowing… “
“The output slowdown may fan worries that the world’s third-largest economy has failed to secure a firm footing after last year’s sharp recession…”
COVID-19 epidemic widens China’s North-South economic divide: “
“China’s northern provinces were disproportionately hit by the pandemic in 2020, with the region’s heavy industries devastated by demand shocks and logistical nightmares, while the south got off comparatively lightly, cushioned by a large digital economy.”
China has warned that attempts by Taiwan to seek independence “means war”.“
“The warning comes days after China stepped up its military activities and flew warplanes near the island. It also comes as new US president Joe Biden reaffirmed his commitment to Taiwan, and set out his stance in Asia.”
Clashes over lockdowns, inequality escalate in Lebanon’s Tripoli after protester’s death: “
“A man was killed in the Lebanese city of Tripoli on Thursday in clashes between security forces and protesters angry over a strict lockdown that has cut off livelihoods in a collapsing economy.”
“S&P Global Ratings warned this week it could very soon downgrade the ratings on some of the world’s biggest oil firms, citing increased risks coming from the energy transition, price volatility, and weaker profitability.”
In the wake of the coronavirus pandemic, global tourism had its worst year ever in 2020, with international arrivals down 74% compared to 2019.“
“According to the United Nations World Tourism Organization (UNWTO), the drop meant $1.3 trillion less in revenues, which is 11 times more than the drop caused by the 2009 economic crisis.
“The U.N. said the drop in global tourism has put between 100 and 120 million tourism jobs at risk.
“The outlook for a rebound is cloudy.”
The world is currently experiencing unprecedented levels of debt, as governments continue to battle the coronavirus. But this is not the first time global debt has spiked. There have been four waves of debt accumulation in the global economy since 1970, according to the World Bank.“
“These have occurred across more than 100 countries and have, so far, always culminated in financial crises in many emerging and developing economies. The fourth debt wave, which is still ongoing, started in 2010 and – even before the COVID crisis – looked like being the worst yet.”
“Developing economies borrowed at a blistering pace at the start of the year after a record 2020, prompting questions among investors about whether they are building up debt problems for the future.”
Global foreign direct investment plummeted last year to its lowest level in more than 20 years, tumbling 42% to an estimated $859 billion from $1.5 trillion in 2019… “
“Developed nations were hit the hardest, with FDI tumbling 69% from 2019.”
This is probably news to no one here but worth remembering:
“UNCTAD Reveals Economic Slowdown Before COVID-19… Although COVID-19 severely disrupted the world economy, UNCTAD notes that trade tensions between the US and China, fears over Brexit, and a negative global output outlook each contributed to a widespread trade downturn in 2019 that preceded the pandemic.”
Governments and central banks must maintain their pandemic rescue programmes or risk triggering a stock market crash,” says IMF.“
“Warning that there were legitimate concerns about a share price bubble, the Washington-based organisation said that without continued low interest rates and government subsidies it was possible a “correction” in stock markets would occur.”
Covid is a 1914 moment for the post-Cold War globalised order: Vaccine nationalism and border closures mark a paradigm shift with vast implications for freedom…“
“Many of the freedoms we had taken for granted have been revealed as temporary privileges, revocable at any time, by states that are flexing muscles we thought had atrophied. A liberal era is over; a new phase of managed globalisation is upon us. It will affect all of us hugely, in two major ways.”
The majority of central banks around the world are examining whether to launch nationally-backed digital currencies, a senior Asian policymaker has said.“
“Tharman Shanmugaratnam, Singapore’s senior minister, said most central banks were looking into the space in response to the rise of e-commerce and alternative payment companies.”
You can read the previous ‘Economic’ thread here. I’ll be back over the weekend with a ‘Climate’ thread.
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