“Pessimism mounts over a global economy facing multiple shocks.
“In one of the bleakest meetings of the IMF and World Bank since the financial crisis, Sri Mulyani Indrawati, Indonesia’s finance minister and chair of the Group of 20 leading economies, summed up the mood.
““The global economic situation has become more and more challenging,” she said in her closing remarks to the gathering of finance ministers and central bank governors in Washington, DC on Thursday. “The world is in a dangerous situation.”
“Kristalina Georgieva, managing director of the IMF, said the world was witnessing a transition from predictability, where interest rates and inflation were low, to instability.
““Shock upon shock upon shock,” she said, characterising the situation facing participants. “We have to really work on changing our mindset to be much more precautionary and be prepared for much more uncertainty.””
https://www.ft.com/content/ab52e693-ec4a-43d9-ab88-4538a46c0778
“Things Are Breaking In Global Financial Markets.
“The rising dollar is a sign of tightening financial conditions and increased stress in the global financial system. Investors have been feeling the stress as the drawdown in market cap of U.S. equity and bond markets has declined by a staggering $57.8 trillion in less than one year… Global government bonds are having their worst year of performance since the 1940s.”
https://seekingalpha.com/article/4546294-things-breaking-global-financial-markets
““Post-bubble contraction” as coined by Bob Hoye, may finally be at hand…
“For decades, the sustaining constant has been periodic deflationary/disinflationary episodes routinely met by a dovish Fed. Today, the Fed is forced by its own excess to try to recapture something that has gotten out of its bottle. But the spike above the green moving averages look like a broken lid, and the Genie is not going to willingly go back in.”
https://seekingalpha.com/article/4546637-post-bubble-contraction
“Deflation Will Become the Problem When “Something Breaks”… [FWIW, this is how I see it.]
“…high inflationary periods also correspond with higher interest rates. In highly indebted economies, as in the U.S. today, such creates faster demand destruction as prices and debt servicing costs rise, thereby consuming more of available disposable income… Not surprisingly, each period of high inflation is followed by very low or negative inflationary (deflation) periods.”
https://realinvestmentadvice.com/deflation-will-become-the-problem/
“The US housing market’s big chill. As soaring mortgage rates push home ownership beyond reach for many, demand is cooling and prices are falling…
“Mortgage rates have risen quickly this year as the Federal Reserve halted its pandemic-era programme of purchasing mortgage-backed securities and also raised interest rates to counter inflation.”
https://www.ft.com/content/b9df3102-a7d2-483d-8216-f507c0460d3d
“A complete US ban on Russian aluminium threatens to upend a global market already reeling from multiple disruptions, throwing a spotlight on how China could fill any supply gap.
“The Biden administration is considering options including sanctions on Russia’s top producer of the metal as the White House looks to punish Moscow for its military escalations in Ukraine, according to people familiar with the deliberations.”
https://www.theedgemarkets.com/article/aluminium-heads-more-supply-chaos-biden-weighs-russia-ban
“US Vulnerable To Future Copper Supply Squeeze – Analysis.
“… ongoing geopolitical turmoil and recent trade wars highlight the need to mitigate this shortfall’s repercussions on the US economy in terms of domestic consumption, financial volatility, and leverage for geopolitical blackmail.”
https://www.eurasiareview.com/14102022-us-vulnerable-to-future-copper-supply-squeeze-analysis/
“The world’s diesel market is once again flashing signs of chaos, undermining the global economy with a fresh bout of inflationary pressure.
“Powering trucks, trains and ships that drive industry, the fuel is commanding huge buy-it-now premiums in Europe… The US has the lowest seasonal inventories in data that began in 1982 going into winter.”
“Traders are diverting Europe-bound tankers carrying diesel to the U.S. East Coast as the two regions battle for supplies amid an acute shortage and soaring prices…
“Such diversions are rare as Europe, where refineries do not produce enough diesel to meet domestic demand, typically imports diesel from the United States as well as Asia and the Middle East.”
https://uk.finance.yahoo.com/news/traders-divert-europe-bound-diesel-114234232.html
“Gap between average petrol and diesel tops 20p for the first time [UK]…
“RAC Fuel Watch data has shown that as of Wednesday (October 12), drivers were paying an average of 163.13p for a litre of unleaded, whereas diesel had climbed to 183.94p a litre – a difference of 20.35p a litre.”
“U.K. Markets Still Troubled Despite Finance Minister’s Ouster.
“Although Prime Minister Liz Truss of Britain on Friday fired the country’s top economic official in an effort to end the market turmoil that has raged for weeks, the move failed to fully soothe investors: The British pound fell, and recent gains made by government bonds were reversed.”
https://www.nytimes.com/2022/10/14/business/uk-markets-kwarteng-truss.html
“France fuel crisis: Nationwide strike planned for Tuesday.
“France’s CGT union, at the core of a weeks-long strike at oil major TotalEnergies , walked away from wage talks on Thursday night, dashing hopes for an end to a standoff that has disrupted everyday life as petrol stations run dry. Union branches in other sectors including in the railway and automotive sectors announced they would take part in a wider strike planned for next Tuesday.”
https://www.france24.com/en/video/20221014-france-fuel-crisis-nationwide-strike-planned-for-tuesday
“Europe’s energy crisis: Wood industry booms before winter of discontent…
“In July, the EU also banned the import of Russian wood and pellets, and campaigners are warning that spiking prices will be felt the most by the poorest, especially those in Central and Eastern Europe where low-income households tend to be more reliant on firewood than gas.”
“Eurozone posts record high trade deficit in August.
“Eurozone trade balance saw a record high deficit of €50.9 billion ($49.6 billion) in August due to soaring costs of imported energy, the EU’s statistical office said on Friday. The trade gap widened from a €33.9 billion in July, while it worsened from a trade surplus of €2.8 billion in August 2021, Eurostat data showed.”
https://www.aa.com.tr/en/economy/eurozone-posts-record-high-trade-deficit-in-august/2711665
“Japan Voices Concern on Currency Swings After 32-Year Yen Low.
“Japan is “deeply concerned” about the rapidly increasing volatility in the foreign-exchange market, the latest in a string of recent warnings over the yen’s decline… A finance ministry official declined to comment on whether the country had stepped into markets again.”
“World’s top chip equipment suppliers halt business with China.
“Leading chip equipment suppliers have suspended sales and services to semiconductor manufacturers in China, as new US export controls disrupt the Chinese tech industry and global companies’ operations… The new controls are hitting the industry in a downturn.”
https://www.ft.com/content/51f9ec46-ec9e-43a1-ba64-45e0e6e6da71
“US sanctions on Chinese semiconductors ‘decapitate’ industry, experts say.
“…rules announced by the US Department of Commerce last week restricting “US persons” from involvement in manufacturing chips in China have led to mass resignations of American executives from Chinese firms. This had the effect of “paralyzing Chinese manufacturing overnight”, adding that the industry was in “complete collapse” with “no chance of survival”.”
“Cifi defaults on bond, triggering sell-off of developers, fears Chinese property debt crisis is spreading.
“Chinese property developer Cifi Holdings has failed to make a bond payment, marking its first offshore default as the debt crisis gripping the property sector spread to companies previously deemed financially sound.”
“Anti-CCP protest and lockdown fears fuel China tensions before congress.
“A rare protest against the Communist party in Beijing and fears over renewed Covid restrictions across Shanghai are stoking political tensions just days before President Xi Jinping is expected to secure a third term in power in a key meeting on Sunday.”
“Syria winter is a “nightmare” although oil tanks are full…
“Citizens are looking for alternative solutions for heating during the winter, such as olive waste, firewood, waste, and plastic materials in some cases, especially with the government’s subsidized diesel allocations being barely enough for one family for one month (50 liters), in addition to the high prices on the black market.”
“Lebanon’s currency crisis: New exchange rate policy to cause massive hardship…
“Over the past three years, Lebanon’s local currency has lost more than 95% of its value; the inflation rate has exceeded 200%, and the United Nations Economic and Social Commission for Western Asia (UNESCWA) estimates that multidimensional poverty rate in Lebanon had nearly doubled from 42% in 2019 to 82% in 2021.”
“Bread Joins Fuel as Flashpoint in Tunisia’s Economic Crisis.
“Tunisian bakers called a one-day strike amid growing discontent in the cash-strapped North African country that’s trying to secure an International Monetary Fund deal and saw major fuel shortages this month. The bakers’ guild’s call for the protest comes on the heels of an unprecedented fuel shortage earlier this month…”
“Morocco’s Fuel Prices to Experience New Increases Amid Global Crisis.
“…citizens across Morocco have been taking to social networks to protest price increases of commodities, including fuel. Some citizens continue to share posts under hashtags calling for fuel price decreases. A viral online campaign also demands the resignation of Head of Government Aziz Akhannouch.”
“Senegal on the verge of fuel crisis as gov’t owes 375B CFA.
“L’Observateur, a daily Senegalese independent newspaper reports the “red alert for oil tankers” due to the State’s debt of 375 billion CFA francs, risking creating a “sector shutdown” and therefore a “shortage” of hydrocarbons.”
“Global inflation causing ‘horrifying’ food insecurity, says IMF Africa head.
“Africa’s central banks are walking a tightrope trying to curb inflation that is mostly out of their control and causing “horrifying” food insecurity, the International Monetary Fund’s Africa head warned… Ethiopia, Somalia and parts of Kenya are also on track for a fifth failed rainy season, with famine looming in Somalia.”
“20 Nations at High Risk from Global Warming Might Halt Debt Payments…
“Mohamad Nasheed, the former president of the Maldives, said poor nations were locked in a Sisyphean trap: they must borrow money to ward off rising seas and storms — only to see disasters made worse by climate change destroy the improvements they make. But the debt remains, and often countries are left to borrow once again.”
https://www.nytimes.com/2022/10/14/climate/climate-disasters-poor-nations-iimf.html
“Emerging markets face risk of ‘flight to safety’, IMF official warns.
““It could be the case that what we saw in the UK . . . could become a more generalised vulnerability so that markets become more disorderly,” Ilan Goldfajn said in an interview during this week’s IMF meetings in Washington. “In this world something very important will happen for emerging markets . . . the flight to safety.””
https://www.ft.com/content/2e6fc69d-bec0-4eab-9173-7ba8a37e7d3e
“How Nuclear Conflict Could Halt Global Air Traffic…
“Russia’s cancellation of overflight rights for Western airlines has added several hours to the already long flying time between Europe and the Far East. Other flights are likely to join Virgin Atlantic’s London-Hong Kong route in biting the dust. But the suddenly real prospect of a Russian nuclear attack on Ukraine is adding a new and far more devastating risk: a complete standstill in global air travel.”
https://foreignpolicy.com/2022/10/14/russia-ukraine-nuclear-weapons-halt-global-air-traffic/
You can read the previous “Economic” thread here. I’ll be back on Monday with a “Climate” thread.
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