The pandemic-induced global slump is just part of a 20-year financial crisis… the global economy is in the middle of a long crisis – as it was when the first Jackson Hole symposium was held – and there’s not a lot Powell et al can do about it.
“Central banks have been chucking copious amounts of cheap money at the global economy for the past 12 years… the problems are deep-seated and structural [I would argue terminal in the absence of some new source of *cheap* energy]…
“The strategy of central banks is not new but is now played out…. the financial crash of 2008 and the pandemic-induced slump of 2020 are part of one long crisis stretching back two decades.”
US debt ceiling drama piles on yet more unwanted pressure.
“The US debt ceiling drama is back with its usual political farce. Unfortunately, it matters. ‘Extraordinary measures’ are keeping the show on the road for now. But any delay to a budget deal runs the risk of debt downgrades, Fed taper delays and even the possibility of a government shutdown.”
Thousands of Americans could become homeless as Supreme Court cancels Biden’s eviction moratorium.
“The US Supreme Court on Thursday allowed evictions to resume across the United States, blocking the Biden administration from enforcing a temporary ban that was put in place because of the Covid-19 pandemic, a move that threatens to render thousands homeless.”
Slowdown in UK recovery may be more than a supply chain issue…
“The message in the latest data was clear. The recovery is losing momentum. Card payments: flat. The number of seated diners: flat. Retail footfall: down slightly. Ship visits to the UK: down slightly. Daily flights: up a bit.”
German Ifo index signals economy’ s loss of momentum.
“Germany’s leading indicator joins the choir of recently released leading indicators pointing to a loss of momentum in the German economy. The Ifo index dropped for the second month in a row in August…”
Italy’s Biggest Airline Ends Its Operations From October 15 Due to Financial & Coronavirus Crisis…
“Alitalia is terminating its activity due to the lack of investment. In addition, the company was put under public administration in 2017, while the pandemic situation worsened the situation even more.”
West watches on as Bank of Korea raises interest rates… The Bank of Korea is raising interest rates in a shift away from pandemic era monetary policy as the country faces spiralling public debt.
“South Korea is the first developed economy to shift away from pandemic driven emergency economic support, raising speculation that a similar reversal could be on the cards in the UK and US.” [I doubt it, over and above the odd token increase of 0.25% for the sake of appearances.]
China Evergrande’s snowballing debt crisis… Under mounting pressure from financial regulators to shore up its finances, China Evergrande Group is poised to dump more of its sprawling empire.
“The clock is ticking for billionaire Hui Ka Yan and his company, which is laden with $300 billion in liabilities to banks, suppliers and homebuyers.”
Delta Variant’s Spread Clouds Outlook for Emerging-Market Debt. The spread of the highly contagious Delta variant of Covid-19 across Asia is weighing on emerging-market debt in the region.
“In recent months, investors have been demanding higher returns on bonds from Southeast Asian nations with relatively low vaccination rates that have reported sharp increases in Covid-19 cases.”
Three Years of Living Dangerously With Indonesia’s Radical Experiment…
“Despite pledges a year ago that a radical financial experiment was a one-off, Finance Minister Sri Mulyani Indrawati said Monday that the central bank will again directly finance state spending. Not just in 2021, but through the end of next year.”
Brazil Inflation Speeds Up With More Key Rate Hikes in Sight.
“Brazil’s consumer prices rose more than expected as the central bank readies its fifth straight interest rate hike in efforts to tame above-target inflation… Annual inflation sped up to 9.30%.”
South African Ruling Party Staff Strike as Cash Crunch Worsens…
“The party has run out of cash and its failure to pay its staff for months prompted some of them to go on strike on Thursday. Efforts to replenish its depleted coffers have fallen flat, with corporate donors reluctant to contribute…”
Skyrocketing food prices: What Nigeria must do…
“…the country has found itself in serious food uptight condition and this has been a great concern for everyone, especially the poor and vulnerable. It is also not a news that the country has been faced with worries of high electricity, fuel and transport prices.”
Infographic: Lebanon is about to run out of water.
“Lebanon’s water supply system is on the verge of collapse. In July, a report published by UNICEF warned that most water pumping would gradually cease across the country within four to six weeks as the country’s power grid falters.”
Afghanistan is ‘weeks to months’ from economic collapse, experts say…
“The country’s cash-based economy was struggling before the Taliban’s recent ascension, and the Islamic movement’s sudden takeover has left the country’s finances in limbo — with assets frozen, banks closed and crucial foreign aid stalled.”
Middle East Security Concerns Could Threaten The Global Economy.
“Since the beginning of 2021, attacks on ships passing through the Gulf routes have led to increased maritime concerns… These attacks are dangerous on multiple levels. International shipping is an essential aspect of the global supply chain for trading purposes.”
“The World Economy’s Supply Chain Problem Keeps Getting Worse.
”A supply chain crunch that was meant to be temporary now looks like lasting well into next year as the surging delta variant upends factory production in Asia and disrupts shipping, posing more shocks to the world economy.”
Is This the Last Charge of the Stimulus Brigade?
“The U.S. is closer to spending big on infrastructure. Beijing is pumping more credit into its economy. The IMF and the EU are doling out cash. What effect is all this money going to have?”
Central banks cannot really taper in this slowdown…
“The United States would go into a severe recession if it were not “doping ” the economy… The unsustainable fiscal situation of developed countries makes a serious normalization of policy impossible… The ECB is the only buyer of Italian and Spanish debt, according to the IIF (Institute of International Finance), and this disguises an imminent risk but does not eliminate it…
“Central banks are faced with the devil’s alternative created by their own policy. Either let inflation run and create a stagflation problem or scare the markets by reducing purchases. They will choose the first, without a doubt.”
You can read the previous ‘Economic’ thread here. I’ll be back over the weekend with a ‘Climate’ thread.
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