“IMF forecasts ‘very painful’ outlook for global economy. The IMF has said there is a growing risk that the global economy will slide into recession next year as households and businesses in most countries face “stormy waters”…
“In an interview with the Financial Times, Pierre Olivier Gourinchas, the IMF’s chief economist, said, “We are not in a crisis yet, but things are really not looking good,” he said, adding that 2023 would be the “darkest hour” for the global economy…
“Although the sharp rises in interest rates around the world were weighing on growth, the IMF said they were necessary to ensure inflation came back under control and restored the global economy to a more stable footing.”
https://www.ft.com/content/30369662-554b-44b7-9f25-b87d5e13548d
“Megathreats by Nouriel Roubini — an avalanche of coming catastrophes…
“Roubini warns in Megathreats that the debt crisis of our lifetimes lies ahead. The entire world resembles the financial delinquent that is Argentina that has defaulted on its debt nine times since its independence in 1816. By the end of 2021, global debt, both public and private, exceeded 350 per cent of the planet’s gross domestic product.”
https://www.ft.com/content/3be78531-a7f9-4045-9ac8-88ca64210f59
“World set for first ‘significant destruction’ of wealth since 2008 financial crisis, says Allianz [really this is not the destruction of wealth but the mirage of financial pseudo-wealth evaporating].
“Global financial assets are set to fall by more than two per cent this year in the “first significant destruction” of wealth since the 2008 financial crisis, a new report by financial services giant Allianz SE said. In real terms, households could lose a tenth of their wealth…”
https://ca.finance.yahoo.com/news/world-set-first-significant-destruction-185730412.html
“‘The world should be worried’: Saudi Aramco — the world’s largest oil producer — just issued a dire warning over ‘extremely low’ capacity…
“Saudi Aramco CEO Amin Nasser… warns that oil prices could quickly spike — again. “When you erode that spare capacity the world should be worried. There will be no space for any hiccup — any interruption, any unforeseen events anywhere around the world.””
https://finance.yahoo.com/news/world-worried-saudi-aramco-world-160000039.html
“Biden vows ‘consequences’ for Saudi Arabia after oil output cuts…
“His remarks on Tuesday come a day after influential Democratic Senator Bob Menendez, the chairman of the Senate Foreign Relations Committee, said the US must immediately freeze all cooperation with Saudi Arabia, including arms sales.”
“Houston, We Have an Oil Problem… A decline in drilling across the Permian Basin suggests US production forecasts are way too high…
“The vast shale basin is the engine of America’s oil industry, pumping 4.6 million barrels a day… Other shale basins, such as the Bakken in North Dakota, haven’t yet returned to pre-pandemic levels of activity. And output from the country’s legacy — or non-shale — wells is below pre-Covid rates… That’s why the deceleration in Permian drilling is so concerning.”
“Yellen Worries Over Loss of ‘Adequate Liquidity’ in Treasuries…
“Treasury debt outstanding has climbed by about $7 trillion since the end of 2019. But big financial institutions haven’t been as willing to serve as market-makers, burdened by the so-called supplementary leverage ratio, or SLR, which requires that capital be put against such activity, as well as against reserve holdings.”
“U.S. corporate bond ETFs plunge in global debt market rout.
“”There appears to be a self-reinforcing trend at work, of higher and more volatile yields prompting liquidity to dry up, prompting yet more volatility. This dynamic also seems at work elsewhere,” Capital Economics said in a research note on Tuesday.”
“Strikes, possible blackouts and a plunging currency: Brits are being hit by a wave of bad news…
“The U.K. economy shrank by 0.3% in August, the Office for National Statistics estimated Wednesday, potentially beginning what economists expect will be a lengthy recession through the winter… Economists expect further volatility in the bond market, and peril for pension funds, in the coming weeks.”
“Columbia Threadneedle has suspended dealing on its CT UK Property Authorised Investment fund, in an attempt to shore up its liquidity.
“In a statement, Colombia Threadneedle said this decision was taken “due the amount of cash in the Fund reducing to a level where future redemption requests would not be able to be met until an orderly sale of assets has completed”… This comes the same week that Schroders and BlackRock, along with Threadneedle, also imposed redemption limits…”
“UK pension funds are dumping assets to meet margin calls as the BOE confirmed it will end emergency bond buying [Friday], and the reverberations are being felt everywhere from Sydney to Frankfurt and New York…
““The market simply doesn’t have the confidence, for now, that the LDI crisis won’t return and has increased concerns that other pockets of leverage may cause issues,” Janusz Nelson, head of WEI Grade Corporate Syndicate at Citigroup Inc. said.”
“The Bank of England has warned that some UK households may face a strain over debt repayments that is as great as before the 2008 financial crisis, if economic conditions continue to be difficult.
““It will be challenging for some households to manage the projected rises in the cost of essentials alongside higher interest rates,” the central bank’s Financial Policy Committee said in its quarterly Financial Policy Summary report released Wednesday.”
“Desperate parents reusing filthy nappies as they struggle through cost of living crisis.
“A baby left with pressure sores because their family had to ration nappies; a child sleeping in a drawer because their family didn’t have the money to buy a bed; and a parent forced to re-use dirty nappies because they couldn’t afford fresh ones. These are some of the desperate measures families in the UK are taking…”
“LNG carrier rates hit an all-time high on Tuesday, driven by growing prompt demand for gas in Europe as the continent tries to procure supply ahead of the winter.
“The freight rate to charter an LNG carrier in the Atlantic basin surged to $397,500 per day on Tuesday, according to Spark Commodities estimates cited by Bloomberg. The price to hire an LNG ship has now surged by 500% this year.”
“EU Ban On Russian Oil Could Spark Worst Energy Crisis In Decades.
“A European ban on most crude imports from Russia will come into effect in December. For EU leaders, the next task at hand has been finding new sources of crude oil ahead of what could be a very dark and cold winter… the world is moving into a much tighter oil market for the remainder of the year after OPEC+ cuts.”
“Leak detected in Druzhba pipeline carrying Russian oil to Germany.
“The leak is probably accidental rather than sabotage, Poland’s infrastructure official said, but the incident may stoke fears about the security of Europe’s energy supplies as it seeks to boycott Russian fossil fuels.”
“The trials and tribulations of European carmakers are unlikely to end anytime soon, as the industry prepares for the latest crisis: high energy costs.
“Europe’s auto manufacturing industry has barely picked itself up from a crippling semiconductor shortage during the pandemic… Now, a global auto industry forecaster is saying that the energy crisis could curtail new car production by the millions.”
https://finance.yahoo.com/news/energy-crisis-latest-threat-europe-163447058.html
“Germany and Italy will slip into recession next year, becoming the first advanced economies to contract in the wake of the Russia-Ukraine conflict [these forecasts still look crazily optimistic to me].
“The German economy is now expected to shrink by 0.3 percent in 2023… Italy, whose industries are also dependent on gas imports, will see its gross domestic product contract by 0.2 percent – also a sharp downgrade from 0.9 percent growth July.”
“Germans should stop whining and be prepared with sweaters and candles this winter in case of blackouts amid the energy crisis, according to politician Wolfgang Schäuble.
“In an interview on Tuesday with Bild-TV, the former finance minister and president of the German government said, “You don’t have to whine about it, you have to recognize that a lot of things can’t be taken for granted,” he told the news channel.”
“Fears French fuel crisis could spread amid plans to order strikers to work…
“The government is facing a deepening crisis after weeks of stoppages led by the leftwing CGT trade union, which is seeking large pay rises for workers at two oil firms, the French TotalEnergies and the US ExxonMobil. Strikers want better pay amid the cost-of-living crisis and a share of companies’ high profits.”
“Democrat Blasts Police for Blocking Anti-Price-Hike Protestors [Elbasan, Albania]…
“Vice Chair of the Democratic Party (DP), Luciano Boçi has criticized Tuesday the State Police for choosing to block citizens who gathered to protest in Elbasan city against the record fuel price hike… No one will forgive Edi Rama for putting his hand in their pocket, to take their sweat and children’s money”, stated Boçi.”
“Trading Drought Worsens in Japan’s Broken Bond Market.
“In a fresh sign of Japan’s dysfunctional bond market, the 10-year benchmark failed to trade for a third consecutive session Tuesday, the longest such streak since 1999. The Bank of Japan’s overwhelming presence in the JGB market where it’s the biggest buyer under its curve control policy has exacerbated liquidity issues and led to a deterioration in market functioning.”
“The yen has hit a new 24-year low against the US dollar, moving past the ¥145.90 level that prompted Japanese authorities to intervene last month to strengthen the currency for the first time since the late 1990s.
“The Japanese government spent $20bn to prop up the yen but analysts warned that such interventions would have little effect…”
https://www.ft.com/content/96ff4e7f-c035-400c-b8ac-82a72fd5d888
“Shanghai and other big Chinese cities, including Shenzhen, have ramped up testing for COVID-19 as infections rise, with some local authorities hastily closing schools, entertainment venues and tourist spots…
“As of Monday, 36 Chinese cities were under various degrees of lockdown or control, affecting around 196.9 million people, versus 179.7 million in the previous week, according to Nomura.”
“Ho Chi Minh City residents’ lives turned upside down by gasoline shortages.
“From Saturday, people in many of Vietnam’s southern provinces started struggling to buy fuel for their vehicles. As of Monday evening, Ho Chi Minh City alone had more than 100 closed petrol stations bearing “out of gas” signs, while others rationed their meager supplies.”
https://www.rfa.org/english/news/vietnam/hcmc-gas-shortages-10122022000859.html
“No hope for the future: Economic struggles add fuel to Iran’s protests…
““Expect anti-government protests to remain a feature of [Iran’s] political landscape and to increase in frequency, scale and violence as economic conditions worsen and social restrictions are tightened,” said Pat Thaker, Economist Intelligence Unit’s editorial director of Middle East and Africa.”
“Syrian pound drops to historic low as economy continues to deteriorate…
“The depreciation of the pound has caused imports to skyrocket in price and shortages of key goods, such as gas and foodstuffs. With the continued decline in the value of the pound, the cost of imports and overall cost of living is expected to increase…”
https://english.alaraby.co.uk/news/syrian-pound-drops-historic-low-economy-deteriorates
“Tunisians have been hit with soaring food prices and shortages of basic staples in recent weeks [fuel shortages, too] threatening to turn simmering discontent in the North African country — the cradle of the Arab Spring protests — into larger turmoil.
“Sugar, vegetable oil, rice and even bottled water periodically disappear from supermarkets and grocery stores. People stand in line for hours for these food essentials.”
“The Democratic Republic of Congo is in talks with oil companies over around $160 million in back payments in a bid to avoid nation-wide fuel shortages that hit the country in September, the government said on Monday.
“Long queues formed at gas stations in major cities earlier this year as stocks dwindled – a situation company and government sources have blamed on delayed payments to suppliers…”
“Nigeria Exploring Debt Restructuring, Finance Minister Says.
“Nigeria is considering restructuring its debt and extending the repayment period of its credit obligations, and appointed consultants to advise the government as it faces a rising debt-service burden, Finance Minister Zainab Ahmed said.”
“‘Time may be running out’: chronicle of a debt crisis foretold.
“Kristalina Georgieva, the managing director of the International Monetary Fund knows it. David Malpass, the World Bank president knows it too. An increasing number of countries are having problems paying their debts, and the crunch point is fast arriving.”
You can read the previous “Economic” thread here. I’ll be back tomorrow with a “Climate” thread.
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