“Global economy sailing into a ‘perfect long storm’. The world’s finance ministers and central bankers are descending on Washington, D.C., next week, and the gathering will have the feel of an economic Last Supper.
“A recession in advanced economies is now all but certain, and the International Monetary Fund will officially downgrade its 2023 growth forecasts next week. Germany is likely to admit it’s already in recession, and inflation expectations remain elevated.
“Tharman Shanmugaratnam, Singapore’s central bank chair and head of the Group of Thirty — a global council of economic and financial leaders — is warning that we’re headed into a “perfect long storm.” For policymakers, he says, “there are no good options anymore.””
“Samsung’s earnings slump on rapid drop-off in chip demand…
“Samsung, the world’s top maker of memory chips, smartphones and televisions, is a bellwether for global consumer demand and its disappointing preliminary results add to a flurry of earnings downgrades and gloomy forecasts.”
“Epic decline in shipping rates continues…
“…cost to ship 40-ft container from Shanghai to LA has fallen by 76% from its peak, which is largest % decline in history of series.”
https://twitter.com/LizAnnSonders/status/1578340155567575041
“Global Fallout From Rate Moves Won’t Stop the Fed.
“The Federal Reserve, like many central banks, sets policy with an eye on the domestic economy. Its battle to control prices is causing pain abroad… Altogether, it is a worldwide push toward more expensive money unlike anything seen before in the 21st century, one that is likely to have serious ramifications.”
https://www.nytimes.com/2022/10/07/business/economy/federal-reserve-global-fallout.html
“The Fed Might Just Break the Global Economy…
“Nevertheless, for now, widespread inflation persists. And the Federal Reserve remains committed to raising interest rates, even as major Wall Street banks warn that further hikes just might break the financial system’s fragile “plumbing.””
“The risks from derivatives have morphed. Well-intentioned moves to safeguard the financial system have led to new vulnerabilities…
“Substantial moves in interest rates and currencies have affected investors using derivatives to hedge long-duration liabilities, as seen with UK pension funds. Such scenarios raise the prospect of counterparties being unable to find the necessary collateral and then defaulting. In turn, this may trigger asset sales, transmitting price changes across markets.”
https://www.ft.com/content/917f8395-8fdd-4e8b-b3ae-b6e1c7872f60
“Banks dial up risk-taking in OTC derivatives trades by using many of the same non-bank counterparties, a study says…
“A working paper on counterparty choice by major banks in the $12.4 trillion over-the-counter derivatives market offers evidence of systemic risk propagation in bank networks through non-bank counterparties in “opaque” markets… The study comes as questions of systemic risk have arisen recently amid speculation about the financial health of Credit Suisse AG.”
“Credit Suisse puts Zurich hotel up for sale in urgent liquidity dash.
“Credit Suisse, the investment bank whose shares plummeted to record lows this week over fears it could be on the brink of collapse, is selling the five-star Savoy hotel in the centre of Zurich for as much as 400m Swiss francs (£361m).”
“Say crash and people tend to think of The Great Depression and the Global Financial Crisis: severe economic contractions triggered by financial crises that caused enduring slumps.
“But a paper out this week from the Bank for International Settlements suggests, rather worryingly, that oil price shocks tend to have the greater scarring effects on long-term growth.
“Imagine the hit to growth were an oil shock and a financial crisis to hit not too far apart…” [the two are not really distinct events; there is a complex interplay between the financial and energy systems, of course].
https://www.ft.com/content/78c856b0-5bf1-43b6-ba05-e06898ebf2f4
“Clock ticking down on US debt time bomb…
“Washington’s runaway debt is causing intensifying headwinds at home, too. Case in point: widespread reports of liquidity problems with US bond trading. Strategist Krishna Guha at Evercore ISI says the “appreciable and troubling deterioration in Treasury market liquidity” tells a bigger story about where the global financial system finds itself as 2023 approaches.”
https://asiatimes.com/2022/10/clock-ticking-down-on-us-debt-time-bomb/
“Widespread shortages of Adderall and other versions of the drug used for treating attention-deficit hyperactivity disorder (ADHD) are deepening in the U.S., causing desperation in patients who rely on the medication to focus.
“The largest Adderall manufacturer in the U.S., Teva Pharmaceuticals Industries Ltd., said last month that a labor shortage from earlier in the year disrupted production…”
https://finance.yahoo.com/news/adderall-shortages-impacting-adhd-patients-202824605.html
“UK companies are collapsing at the fastest rate since the height of the global financial crisis as surging energy bills drive thousands of firms out of business.
“There were more than 5,600 insolvencies in England and Wales in the second quarter – the highest level since 2009, according to the Office for National Statistics.”
“UK power cut warning prompts fear for people using life-saving machines [renders the term, “cost of living” scarily literal].
“Rolling power cuts enforced this winter if gas supplies run extremely low could endanger thousands of people who use life-saving machines at home, health leaders have warned. They spoke out after National Grid warned on Thursday that households could experience a series of three-hour electricity outages this winter…”
“Shetlanders ‘worried they will not survive the winter’ as energy crisis grips islands.
“Many households have no access to mains gas and rely on electricity and oil to power and heat their homes. It means energy costs on the island are more expensive than on the mainland. Islander Mandy Johnson has decided to sleep in her living room to help keep warm.”
https://www.pressandjournal.co.uk/fp/news/highlands-islands/4883290/shetland-winter-enery-crisis/
“Why La Nina could make the energy crisis even worse in the coming weeks… how could this impact the UK?
“…“In these conditions, there is a chance of easterly winds leading to lower than usual temperatures. There is a higher than usual chance of having a cold outbreak at the beginning of winter.””
https://www.aol.co.uk/news/why-la-nina-could-energy-145725663.html
“EU leaders reaffirm support for Ukraine, squabble over gas price cap.
“European Union leaders on Friday agreed to give more financial and military aid to Ukraine, but a full day of talks in Prague’s ornate royal castle seemed to bring them no closer to deciding on whether or how to cap gas prices.”
https://www.reuters.com/business/energy/eu-leaders-turn-gas-price-caps-end-energy-crunch-2022-10-06/
“People in Poland are burning garbage, and Romania is capping firewood prices as desperation grows amid Europe’s energy crisis…
“Residents of a suburb outside Warsaw told Bloomberg that they can smell trash burning everyday now, while some towns are noticing less garbage is being picked up.” … Sources cited by the Washington Post told the paper that “firewood is the new gold.””
“German gas regulator: slash gas use or risk winter crisis.
“German households and small businesses last week used nearly 10% more gas than the four-year average for that week, Germany’s network regulator said on Thursday, warning Germany risked a winter crisis unless significant cuts were made.”
https://www.euronews.com/next/2022/10/07/ukraine-crisis-germany-gas
“Cyprus in renewed push to extract natural gas as shortages loom in EU.
“Cyprus expects natural gas from its seas to become commercially available by 2027, its energy minister said on Friday, adding that Europe’s energy crisis had put a renewed focus on how to expedite development of reserves in the east Mediterranean.”
“Japan’s foreign exchange reserves fall by record $54bn… China’s foreign currency holdings also dropped in September as the strength of the dollar rose…
“Japan’s foreign reserves dropped by a record $54bn to $1.24tn after authorities spent nearly $20bn last month to intervene in currency markets to stem the yen’s fall.”
https://www.ft.com/content/d1f06836-4c0b-45c7-bee4-be29c882b95a
“The dollar’s towering strength drives Korea to double-down in defense of its struggling currency.
“South Korea’s government will take steps to boost the supply of US dollars in local currency markets, as the won’s dismal performance this year drives uncertainty about the country’s economy.”
“Iran’s fierce protests are in their third week – with no sign of slowing down.
“Iran’s president has stated that the government will not accept chaos on the streets – an all too clear indication that the violent crackdown on protests will continue. However, Iran’s well-honed state apparatus for repressing dissidents has not been able to quell demonstrations or diminish the morale of protesters…”
https://www.theguardian.com/world/2022/oct/07/first-edition-iran-protests
“Iraq’s Oil Industry Threatened by Political Unrest.
“Clashes erupted on Tuesday in Iraq’s oil-rich Basra region following rocket attacks on the presidential palace, intensifying concerns that unrest in Baghdad could directly threaten the country’s oil industry… The clashes pit al-Sadr’s militias against his southern rivals in the Asaib Ahl al-Haq faction, which benefits strongly from oil revenues.”
https://oilprice.com/Energy/Energy-General/Iraqs-Oil-Industry-Threatened-By-Political-Unrest.html
“Kenya misses out on IMF food relief billions amid price surges…
“”…countries already engaged with the IMF through active borrowing programmes that are on track – like Kenya has, with its economic programme supported by the arrangements under the Extended Fund Facility and Extended Credit Facility – would not qualify to use the new facility,” the spokesperson said.”
“$1 Billion That Banks Sent to South Sudan for Food and Medicine Vanished, Probe Finds…
“The funds were meant to help local traders pay for imports at a time when they were struggling to do so because of a shortage of foreign exchange in the country and the weakness of South Sudan’s currency. Instead, the letters of credit were awarded to companies “that only existed on paper…”
“‘Gold dust’: Liberians queue for rice…
“Supply-chain disruptions and Russia’s war in Ukraine have caused food shortages and high prices across much of the world. But Liberia, a West African nation of five million people, has been hit particularly hard, with the government and UN blaming a delay in shipments.”
https://www.france24.com/en/live-news/20221006-gold-dust-liberians-queue-for-rice
“Around 82,000 homes and businesses were still without power in Puerto Rico on Thursday, over two weeks after Hurricane Fiona caused an island-wide outage for its 3.3 million people.
“Fiona plowed into Puerto Rico on Sept. 18, about five years after Hurricane Maria also knocked out all power on the Caribbean island.”
“Haiti: Fuel crisis prompts appeal for humanitarian corridor amid cholera outbreak…
“The rising insecurity in Haiti in recent months has affected the lives of ordinary citizens, who face movement restrictions, lootings, sexual violence, and other horrors. Due to the crisis at the terminal, people in the capital have resorted to buying fuel on the black market at exorbitant prices.”
https://news.un.org/en/story/2022/10/1129317
“IMF chief warns world heading towards age of greater instability.
“The world faces growing recession risks and a “fundamental shift” away from relative stability to an age of breakdown in international relations and more frequent natural disasters, the head of the International Monetary Fund has warned.”
“Joe Biden has warned the world could face “Armageddon” if Vladimir Putin uses a tactical nuclear weapon to try to win the war in Ukraine.
“The US president made his most outspoken remarks to date about the threat of nuclear war, at a Democratic fundraiser in New York, saying it was the closest the world had come to nuclear catastrophe for sixty years.”
You can read the previous “Economic” thread here. I’ll be back on Monday with a “Climate” thread.
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