“The economy is running on a stimulus-fuelled caffeine high. What will happen when it wears off? [Caffeine is putting it mildly!]
“…One-time spending has rarely been the catalyst for long-term growth. Fiscal and monetary policy that now serve as irresistible tailwinds could soon turn into headwinds.”
“Biggest Banks Can’t Keep Up With U.S. Money Printing: Bank of America, Citigroup and other retail-facing banks are all experiencing declining loan growth as deposits surge…
“… the magnitude of the government response to the Covid-19 crisis is causing some difficulties at the largest U.S. financial institutions.”
“High street’s woes hit UK’s private landlords… the coronavirus crisis has emerged as a profound threat for …private commercial property investors, who range from local entrepreneurs and self-employed professionals… to wealthy millionaires on national newspaper rich lists.
“The pandemic has pushed many tenants to the brink and forced painful discussions about who will take the hit as incomes in retail plummet, leaving behind a swelling pile of rent arrears.”
https://www.ft.com/content/dc6b2802-6e63-41c1-bc6a-19ab4061b646
“New research reveals… more than 440 firms in banking and financial services have relocated part of their business, moved employees or set up new entities in the EU following Brexit.
“Banks have moved or plan to move more than £900bn in assets to the EU, equivalent to 10 per cent of the entire UK banking system. Insurance firms and asset managers have transferred more than £100bn.”
https://www.cityam.com/banks-flee-the-city-post-brexit-taking-more-than-900bn-in-assets-with-them/
“The euro zone economy will recover at a much weaker rate this quarter than expected only a month ago, according to a Reuters poll of economists who cited a slower vaccine rollout as the biggest risk over the next three months.”
“Germany warns of lasting economic damage as Covid cases spin out of control:
“Germany’s decentralised health system that seemed to work so well at the start of the pandemic is now a slow-moving disaster a year on.”
“…the European speculative-grade default rates are being pencilled in at 4.7% according to Moody’s and 5.3% according to S&P.
“However, Moody’s baseline forecast estimates a sharp decrease in default rates by the end of this year. We think this is too optimistic… we expect default rates to stay elevated for longer.”
https://think.ing.com/articles/default-rates-credit-higher-for-longer/
“‘Inequality virus’ threatens ‘catastrophe for all’ unless crisis can be overcome together… said UN Deputy Secretary-General, Amina Mohammed.
“Developing countries have faced “ballooning debt burdens” and constrained fiscal budget, and high borrowing costs, with a limited ability to respond to the pandemic, Ms. Mohammed explained.
““The diverging world that we are hurtling towards is a catastrophe for all of us”, she spelled out.”
https://news.un.org/en/story/2021/04/1089872
“Emerging markets fall behind their developed-world counterparts:
“While developed-world markets look forward to a recovery, emerging market stocks have tumbled as foreign investors pull out cash.”
https://moneyweek.com/investments/stockmarkets/emerging-markets/603102/emerging-markets-fall-behind
“Unwelcome Inflation Heats Up in Mexico, Brazil, and as Always in Argentina:
“Brazil’s central bank struck back with shock-and-awe rate hike. Mexico’s central bank faces tough spot after big hit to economy. Argentina’s inflation exceeds 42%.”
“Cuba’s economic woes may fuel America’s next migrant crisis:
“The pandemic hammered Cuba’s tourist industry, which suffered a 75% decline – a loss of roughly $2.5 billion… These external shocks hit an economy already weakened by the decline in cheap oil from crisis-stricken Venezuela… Since Cuba imports most of its food, the island nation has experienced a food crisis.”
https://theconversation.com/cubas-economic-woes-may-fuel-americas-next-migrant-crisis-158260
“‘It’s a day off’: wiretaps show Mediterranean migrants were left to die…
“The conversation, recorded by prosecutors in Sicily investigating sea rescue charities for alleged complicity in people-smuggling, lays bare the indifference of individuals on the Libyan side to the plight of migrants and to international law.”
“Hunger Deepens in West Africa, With 31 Million People at Risk…
“More than 31 million people in the region are expected to be food insecure and unable to feed themselves between June and August, a period when food is scarce ahead of the next harvest, the United Nations organization said in a statement Friday.”
“‘It is really bad’: Nigerians go hungry as food inflation soars…
““Not long after Nigeria’s statistics agency revealed that one in three people in the continent’s largest economy were unemployed, on Thursday it announced that food inflation has accelerated at the highest pace in 15 years, compounding the misery of many households.”
“U.N. agencies said Friday that tens of thousands of Nigerians are fleeing deadly attacks by armed groups and the continuing clashes between the rebels and national forces in the country’s troubled northeastern Borno state…
“The incidents mark the latest violence in the Lake Chad basin area which in recent years has uprooted some 3.3 million people…”
https://abcnews.go.com/US/wireStory/thousands-flee-attacks-nigeria-clashes-continue-77113591
“US warns pandemic could push some Middle East countries to collapse: By the end of 2021, the number of people in the MENA region living beneath the poverty line will reach 192 million, the World Bank’s estimates.
“”As a result, some states are likely to experience destabilizing conditions that may push them close to collapse,” the intelligence report said.”
“The price of iftar [Ramadan evening meal after fast] is soaring across much of the Arab world… food prices have steadily risen in recent months…
“…in the Arab world, where most countries are net importers of food, particularly staples such as grains, the effects are particularly severe.”
“Syria devalued the official price of its local currency on Thursday, two days after the central bank governor was sacked, state media reported.
“The decision came as the Syrian pound has continued to crash in recent months in the war-torn country, hitting record lows and throwing more Syrians into poverty.”
“With food and fuel, Hezbollah braces for the worst in Lebanon collapse…
“Lebanon’s Hezbollah has made preparations for an all-out collapse of the fracturing state, issuing ration cards for food, importing medicine and readying storage for fuel from its patron Iran, three sources familiar with the plans told Reuters.”
“A recovering world economy that depends upon the synchronized, smooth running of global supply chains is now being slammed by what has turned out to be synchronized disruptions…
“The pressures on supply chains are increasing and global disruptions are likely to only get worse as summer approaches and the economy booms. Disruptions have converged at the same time in three important pillars of the global economy – shipping, computer chips, and plastics.”
“Fans of bubble tea may soon find themselves unable to enjoy the beverage as the US reportedly faces what may be a months-long shortage of boba…
“…a backlog at US ports occurring as a result of the ongoing pandemic means that the ingredients used to make the popular drink… aren’t becoming available fast enough to keep up with the demand.”
“The spread of the arbitrage economy – Troubles rise as companies exploit the opaque gaps between regulations…
“The debacle at Archegos bears a remarkable resemblance to the near-collapse of the Long-Term Capital Management hedge fund in 1998, which foundered because of overleveraged positions in risky derivative instruments. Despite frenetic regulatory activity since then this experience raises the worrying possibility that we are in a vicious circle where financial crises breed rafts of new regulations which in turn breed more financial arbitrage which precipitate further, bigger crises.”
https://www.ft.com/content/3f4f36c4-afa1-4608-bab3-8598f03789e8
“Nasdaq Is Entering A Mighty Bubble: A moving 18-month slope of the NASDAQ provides overwhelming evidence that the index has ascended far above its normal path.
“If the NASDAQ pops, its bursting power is so strong that the aftermath can be comparable to that of the Great Depression.”
https://seekingalpha.com/article/4419329-nasdaq-entering-mighty-bubble
“Bloated Central Bank Balance Sheets: There are good reasons to believe that there will be no return to the pre-QE configuration of balance sheets.”
https://seekingalpha.com/article/4419338-bloated-central-bank-balance-sheets
“Global markets have got central banks over a barrel.
“Both bond and stock markets have become so dependent on ultra-loose monetary policy, so hyper-sensitive to any perceived possibility of a change in conditions, that there is little monetary authorities can now do to avert the dreaded taper tantrum if they threaten the status quo…
“The new normal is a world with lots of QE and rock-bottom interest rates. Anything else will cause ructions in stimulus-dependent markets.”
[This is not in any way “normal” and nor is it sustainable. This is hyper-financialisation, as the financial system keeps stretching and mutating in an ultimately doomed effort to offset growth constraints in the physical economy of goods and services. The elastic limit approaches.]
You can read the previous ‘Economic’ thread here. I’ll be back on Monday with a “Climate” thread.
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> “The economy is running on a stimulus-fuelled caffeine high. What will happen when it wears off?”
heart attack
My thoughts exactly, Jett. I often think of the global economy as a living super-organism and these medical/biological metaphors often work very well.