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How China is prepping for global financial meltdown

“…With interest rates still near the lowest levels in history and stock market valuations at all-time record highs, according to some indicators, it’s understandable why there are such high levels of concern in China that it may all come crashing down one day.”

https://www.nzherald.co.nz/world/how-china-is-prepping-for-global-financial-meltdown/YJAYXETW3NQKWO4Y6JZG532OKA/


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Multiple-whammy: China’s looming crises… Since when did China start acknowledging its challenges? Something serious is afoot

“Reputed experts estimate China’s debt to be over USD 40 trillion, three times its GDP.”

https://www.sundayguardianlive.com/news/multiple-whammy-chinas-looming-crises


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China Moves Forward on Credit Rating Rules as Defaults Climb… China’s ratings firms have long been criticized for issuing inflated grades…

“About 96% of onshore credit scores are the equivalent of investment grade. What’s more, a recent report by industry watchdogs showed that a higher proportion of higher-quality borrowers defaulted compared to lower-rated firms.”

https://www.bloomberg.com/news/articles/2021-03-28/china-seeks-feedback-on-rules-to-improve-credit-rating-industry


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China’s daily yuan fixing is once again drawing attention.

“The currency is set for its biggest monthly slide since last March, spurring traders to look closely at the reference rate again to scour for policy signals.”

https://www.bloomberg.com/news/articles/2021-03-28/china-s-yuan-fixing-once-again-draws-attention-as-rally-falters


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Biden suggests creating initiative to rival China’s Belt and Road:

“US President Joe Biden says he suggested that democratic countries band together to fund infrastructure in less developed countries during a call with British Prime Minister Boris Johnson.”

https://www.aljazeera.com/economy/2021/3/26/biden-suggests-creating-initiative-to-rival-chinas-belt-and-road


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M1 [money supply] has been soaring but is not having any effect on short-term interest rates because they are zero percent. It is making the current economic and financial environment more fragile than in the past

“Business and consumers respond to the price of money. What they see is rising interest rates. This perception and reality are a form of tightening because it discourages borrowing.

“The Fed cannot do anything about it.”

https://www.fxempire.com/forecasts/article/the-bond-market-is-tightening-the-fed-is-in-a-box-the-economy-will-pay-714186


Investors are fretting over inflation. Scores of US companies are saying they are right to. A growing list of businesses are warning that supply-chain bottlenecks, increasing raw material costs and higher labour expenses are beginning to bite.”

https://www.ft.com/content/f0bbed31-bea8-4542-b953-096762d2e59f


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UK ministers have turned down a plea from metals tycoon Sanjeev Gupta for an emergency loan to prevent his group from collapsing as it searches for rescue financing

Unions have urged the government to consider all options to help protect the 5,000 jobs at risk in the UK.”

https://www.ft.com/content/d81769e0-a9c9-4384-9c33-32dd19d8a78b


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Greensill turned a mundane finance practice into an ultra-lucrative business in part because it was able to shuffle around the risk, pushing some of it onto insurance companies and other financial firms.

“It has echoes of the asset-backed securitization that was at the heart of the 2008 financial crisis.”

https://www.nytimes.com/2021/03/28/business/greensill-capital-collapse.html


The Bank of England has urged banks to keep credit flowing to businesses once the government-backed Covid-19 loan schemes end this month over fears of a cliff-edge fall in lending that could choke the economy.”

https://www.ft.com/content/dffe2944-0e5c-40cb-9baa-68093f4293f5


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Dozens of anti-lockdown protesters have been arrested in cities across the UK after clashing with police.

“A total of 41 people were arrested in Bristol, Bradford and Manchester as protest groups took to the streets to campaign against lockdown and a new police bill.”

https://uk.movies.yahoo.com/dozens-arrested-uk-cities-police-clash-anti-lockdown-kill-the-bill-protesters-091430676.html


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European tourism: ‘With another lost summer, many businesses will disappear’… southern Europe’s tourist industry — a large part of the region’s economy — has been left in limbo as the slow rollout of vaccinations and the latest rise in cases make a second lost summer increasingly likely.”..

…the sector accounts for 11 per cent of southern European economic output and one in six jobs in southern European nations, including France.”

https://www.ft.com/content/8b0f0347-d715-4bab-bc55-a07ad4bcac49


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Italy’s economy suffers as tourist gems are becoming ‘dead cities’

“The collapse in the number of tourists to Italy was jaw-dropping last year, with only 25.5 million foreign visitors spending at least one night in the peninsula, versus 65 million in 2019 – a drop of more than 60 percent…

““The situation is really dramatic and everything must be done to revive a sector so vital for our country,” said the president of the Italian Union of Chambers of Commerce, Carlo Sangalli.”

https://www.thelocal.it/20210328/covid-19-italys-economy-suffers-as-tourist-gems-are-becoming-dead-cities/


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Australia on Sunday ended a pandemic wage subsidy scheme despite official warnings that up to 150,000 people could lose their jobs as a result

Treasurer Josh Frydenberg said the programme had been an “economic lifeline” that has achieved the aim “of saving lives and saving livelihoods” over the past year.”

https://uk.finance.yahoo.com/news/australia-ends-pandemic-wage-subsidy-030757023.html


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In the last quarter of 2020, Australia exported nearly $14bn less than it had a year earlier – a 12% fall… there really is one thing that is keeping our trade surplus going – iron ore. Over the past year, iron ore made up 41% of our total goods exports.

While everything – including coal and gas exports – fell, the demand for iron ore kept on keeping on… it means Australia’s economic base has become very narrow – we are incredibly reliant upon iron ore exports to power growth.”

https://www.theguardian.com/business/grogonomics/2021/mar/25/australias-economy-is-more-reliant-on-iron-ore-than-ever


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UN chief warns of coming debt crisis for developing world:

“The world faces severe problems of debt sustainability in the wake of the coronavirus crisis that have not been properly understood or addressed, and which threaten to tip developing countries into a rising wave of hunger, poverty, social unrest and conflict, António Guterres, secretary-general of the UN, has warned.”

https://www.ft.com/content/abcd97d3-fb65-47e5-973a-598514f1fd5a


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Four-fifths of Sudan’s £861m debt to UK is interest:

“Sudan, ruled by an unelected military-led transitional government after longtime ruler Omar al-Bashir was deposed in 2019, owes the UK almost £900m. But the Observer can reveal that almost 80% of that was accrued from interest, leading to calls for an unconditional debt amnesty.”

https://www.theguardian.com/world/2021/mar/28/four-fifths-of-sudans-861m-debt-to-uk-is-interest


Thousands of the Hirak movement returned to the streets of the Algerian capital on Friday as they demanded significant changes to the country’s government and political system — chanting slogans such as “let the system fall.””

https://www.africanews.com/2021/03/27/algerians-protest-against-government-in-new-hirak-demonstration/


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Tensions on the border between Colombia and Venezuela continued to escalate on Thursday, amid military operations that sent thousands of Venezuelans fleeing to Colombia from their homes located along the border.

“Thousands of Venezuelans have fled to Colombia from the province of Apure in the wake of continuing military operations…”

https://www.aljazeera.com/news/2021/3/25/thousands-of-venezuelans-flee-to-colombia-amid-border-operations


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At least 114 people have been killed across Myanmar after security forces opened fire on protesters, according to local media reports

“The shootings came as people took to the streets again to protest against the 1 February coup, in defiance of a warning that they could be shot “in the head and back”, as the junta celebrated Armed Forces Day.”

https://news.sky.com/story/myanmar-at-least-50-protesters-shot-dead-by-security-forces-reports-12258013


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Violent protests spread in Bangladesh after Modi visit… Five people had died on Friday, and another six on Saturday, after police shot at demonstrators in several major districts across the Muslim-majority nation of 168 million people.

“The protesters – mostly from the Hefazat-e-Islam group – were angry at the visit of Indian Prime Minister Narendra Modi…”

https://www.aljazeera.com/news/2021/3/28/violent-protests-spread-in-bangladesh-after-modi-visit


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Killing of youths sparks protests in northwest Pakistan:

“Thousands of protesters broke through a police blockade in northwestern Pakistan on Sunday as they tried to march on the city of Bannu and then on to Islamabad to demand a government probe into the deaths of four young men who they allege were tortured and killed by security forces.”

https://www.reuters.com/article/us-pakistan-killings-protests-idUSKBN2BK0K2


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Hundreds of Lebanese demonstrated in the capital Beirut on Sunday over deteriorating economic and living conditions in the country.

“The protest was organized by the Lebanese Communist Party with demonstrators carrying banners demanding housing services, education and healthcare services.”

https://www.aa.com.tr/en/middle-east/hundreds-protest-poor-economic-conditions-in-lebanon/2190830


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Huge ship blocking Suez Canal partially refloated, more work needed:

“A massive container ship blocking Egypt’s Suez Canal for nearly a week has been partially refloated, the Suez Canal Authority (SCA) said on Monday, raising hopes the busy waterway will soon be reopened for a huge backlog of ships.”

https://www.reuters.com/article/us-egypt-suezcanal-ship/stranded-suez-canal-ship-re-floated-inchcape-idUSKBN2BL0A3


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Global shipping was in chaos even before the Suez blockage. Shortages and higher prices loom… disruptions are adding billions of dollars to supply chain costs…

These expenses could soon mean higher prices for consumers, adding upward pressure to rising inflation — a nightmare scenario for Wall Street, which is already fearful that a spike in prices could force the Federal Reserve to hike interest rates sooner than expected.”

https://edition.cnn.com/2021/03/26/business/global-shipping-supply-chains/index.html


Up to $4 Trillion in Revenue May Have Evaporated in Supply Chain Disruptions.”

https://www.mhlnews.com/global-supply-chain/article/21159294/up-to-4-trillion-in-revenue-may-have-evaporated-in-supply-chain-disruptions


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With a drop to less than 78 million units sold, the global auto sector faced “its worst crisis ever,” the president of the International Organization of Motor Vehicle Manufacturers, Fu Bingfeng, said…

The full-year figure was “equivalent to 2010’s sales levels,” it added while Fu said: “The 2020 results wipes off all the growth made over the last 10 years.””

https://www.iol.co.za/motoring/industry-news/2020-global-vehicle-production-plunged-in-worst-crisis-ever-c75c11cd-4c72-4adb-a6f9-39cac5a7689d


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A global food crisis is brewing:

““Acute hunger is set to soar in over 20 countries in the coming months… Yemen, South Sudan and northern Nigeria top the list and face catastrophic levels of acute hunger, with families in pockets of South Sudan and Yemen already in the grip of or at risk of starvation and death according to the Hunger Hotspots report”.”

https://www.dawn.com/news/1615235


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A global population crash is coming – global depopulation is the looming existential threat that no one is talking about:

“Some East Asian countries have fertility rates near or even below 1.0, while much of the core population of Europe is shrinking. In the U.S., fertility rates have fallen below replacement rates, hitting a historic low of 1.7 in 2019, and will likely fall even further in 2020 in part due to Covid. Many of the world’s poorer countries are seeing their birth rates plunge at unprecedented rates.”

https://www.bloomberg.com/opinion/articles/2021-03-29/global-fertility-rate-a-population-crash-is-coming


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“The global pandemic which led to a total shutdown of the global economy in the year 2020 has compounded this debt-based economy that has been in place since 1971 with the world’s total debt stock reaching the sum of two hundred and eighty-one trillion United States Dollars ($281,000,000,000,000.00) as at 31st December 2020 according to Bloomberg News.

The sustainability of these debt levels globally is seriously in doubt.”

https://nairametrics.com/2021/03/27/resolving-the-global-debt-and-liquidity-crises-issues-and-possible-solutions/


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Will a collapse trigger global meltdown?

“In ways remarkably analogous to the unfolding global financial crisis of today, world credit had been built after 1919 on a pyramid of increasingly dubious debts, with the house of Morgan and Wall Street financial firms sitting at the peak of the pyramid.”

https://www.newagebd.net/article/133890/will-a-collapse-trigger-global-meltdown


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Credit Suisse and Nomura have warned of large losses after a fire sale of about $20bn of Chinese and US stocks, as their client Archegos Capital Management was forced into a huge unwinding of assets

Bankers in Tokyo familiar with the circumstances surrounding the heavy sell-off of Archegos assets described the event as a possible “Lehman moment” that would force multiple lenders to recognise that leverage extended to the fund had created excessive risk.

https://www.ft.com/content/073509cd-fe45-44d2-afac-cace611b6900


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

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