“Hard choices on global growth, fiscal austerity needed now to avoid a new debt crisis… The 40-year bull market for global debt has collapsed…
“There is no magic formula to undo the long-lasting damage from the 2008 crash, the 2010 European debt crisis and the pandemic, and there is no fairy-tale cure from suboptimal growth in the world economy during the past 14 years. Global policymakers have been asleep at the wheel for too long…
“But delaying fiscal correction too long exposes the world to a potential doom loop of rising bond yields, a spiral into recession and rising risks of a major debt default. The world is between a rock and a hard place, and it won’t take much to spark another extreme credit event like the 2008 global financial crisis.
“If the major nations persist with tighter money to combat inflation and double up the pain with a shot of fiscal austerity, global growth prospects will be relegated to less than 2 per cent in the next two years. Policymakers have tough choices to make and time is running out.”
“The era of negative-yielding global bonds looks tantalizingly close to an end with Japan’s two-year yield on the cusp of breaking above zero for the first time since 2015…
“The Bank of Japan is the last holdout among developed central banks sticking to rock-bottom interest rates to boost the economy and its short-term policy rate remains at minus 0.1%.”
“Decade of central bank largesse haunts taxpayers as losses loom.
“For more than a decade since the global financial crisis, central bankers pumped trillions of dollars of cheap money into the financial system to keep the economy afloat. Now that largesse is coming back to haunt them – and taxpayers.”
“A political backlash against monetary policy is looming.
“…unless we have a lucky escape from a sharp downturn this winter, a political backlash is surely coming… The alternative to openly debating these issues in a democratic space is to let that backlash fester until it breaks out in the more radical and dangerous form of a populist assault on institutions. Central banks’ credibility would not be worth much then.”
https://www.ft.com/content/6f70bbcd-72b7-4518-be6b-401adba7cc34
“Danger of defaults looms larger for private credit funds. Whether known as private debt, non-bank lending, alternative lending, shadow lending, or private credit, the investment class has witnessed eye-popping growth in the space of two decades.
“After a long-running period of success, however, concerns are mounting that the twin threats of rising inflation and a global recession pose problems for an asset class that… has yet to be properly tested.”
https://www.ft.com/content/934a6f36-4496-42d2-9132-66f688e71048
“When finance and oil collide; Central banks are being pulled in opposing directions by energy inflation and market instability…
“For all the turmoil after 2008… The international financial system and oil markets were largely parallel worlds: profoundly connected in the deep plumbing of the global economy but separate on the surface. For the last few years, however, they have been colliding. As a result, the Fed has been pulled in two opposing directions, between responding to oil-generated inflation on the one hand, and needing to calm financial markets on the other.”
https://www.newstatesman.com/ideas/2022/10/finance-oil-collide-2008-financial-crisis
“Big Oil’s Profits Just Keep Rolling in as World Economy Sputters…
“Big Oil’s run of record profit will suffer only a minor dent for the third quarter, even as the global economy shows signs of cracking under the pressure of rising inflation and interest rates… companies are showing restraint, preferring to pay down debt rather than spend their cash on new supplies.”
“Oil investors on defensive as recession forces intensify.
“Portfolio investors abruptly reversed course last week as the optimism caused by OPEC+ production cuts at the start of October crumpled to be replaced by pessimism stemming from the worsening economic outlook… Investors are bracing for a severe downturn in the global business cycle…”
“Flash US PMI falls sharply into contraction territory in October as optimism and demand slumps.
“The October S&P Global flash PMI surveys present a picture of the economy at increased risk of contracting in the fourth quarter at the same time that inflationary pressures remain stubbornly high. Forward-looking indicators have also deteriorated.”
https://ihsmarkit.com/research-analysis/flash-us-pmi-falls-sharply-in-to-contraction-territory.html
“Would a championship win for the Philadelphia Phillies be a good thing for the nation’s economy?
“The only times the team has won has been in the midst of economic chaos: the financial crisis of 2008 and the recession in the early 1980s. Prior to that, the Athletics, a former Philadelphia baseball team, won during the stock-market crash of 1929 and the Great Depression of 1930.”
“Inflation: Why Canada grocers are accused of ‘greedflation’.
“…large corporations – including grocers – are reporting record earnings. Loblaw’s first-quarter profit this year was up nearly 40% from that of last year, and its net earnings after adjustments were up 17%. In Canada, where distrust in grocery magnates runs deep from a recent bread price-fixing scandal, this dilemma has turned political.”
https://www.bbc.co.uk/news/world-us-canada-63323636
“Surging inflation triggers biggest wave of profit warnings since financial crisis [UK]…
“New figures from EY-Parthenon show there were 86 profit warnings at UK-listed companies in the three months to the end of September, up more than two thirds from last summer and the highest level for the period since 2008. The data suggests that 28 listed companies are in the “danger zone”…”
“Flash UK PMI data signal increasing economic stress as downturn intensifies…
“GDP therefore looks certain to fall in the fourth quarter after a likely third quarter contraction, meaning the UK is in recession. Business confidence has meanwhile collapsed, sliding to a level rarely seen before in 25 years of survey history, meaning companies are becoming increasingly nervous about the outlook. As night follows day, investment and employment will suffer in the months ahead…”
“University lecturers, librarians and admin staff across the UK will strike over pay and pensions, the University and College Union (UCU) has announced.
“A total of 70,000 UCU members at 150 universities were asked to vote in two separate ballots – one on pay and working conditions, and another on pensions. Strike dates are yet to be decided.”
https://www.bbc.co.uk/news/education-63351675
“Fears of a severe recession deepen as European business activity slows on surging energy costs.
“European business activity took another hit in the month of October, reporting the steepest output loss since April 2013 excluding pandemic lockdowns. Firms have been under pressure due to higher inflation, particularly coming from energy costs and wage pressures.”
https://www.cnbc.com/2022/10/24/euro-zone-pmis-business-activity-slows-on-surging-energy-costs.html
“ECB Heads Back to 2008 Territory with Hike Planned This Week.
“The European Central Bank is set to enter territory last visited in the run-up to the global financial crisis as it raises interest rates during what looks likely to be a recession. It was July of 2008, just as the euro area began four quarters of contraction, when the Governing Council raised borrowing costs for the first time in more than a year…”
“France’s Nuclear Reactors Malfunction as Energy Crisis Bites.
“The linchpin of the country’s energy security faces maintenance and pipe-corrosion problems plus labor unrest… . Fixing the corrosion is taking longer than expected at several reactors… Labor unrest is another obstacle. Strikes at 18 reactors owned by EDF SA have delayed their restart by several weeks…”
https://www.wsj.com/articles/frances-nuclear-reactors-malfunction-as-energy-crisis-bites-11666517581
“3,000 protesters take to streets in central Madrid calling for solution to soaring inflation.
“The center of Madrid on Saturday was filled with noise, whistles, chants and union flags as some 3,000 people took to the street calling for increased wages and pensions amid the soaring inflation… Food, fuel, rent and home heating prices have all spiraled upwards…”
“Thousands protest energy costs in German cities…
“Protesters gathered in six German cities on Saturday under a motto roughly translating as “together through the crisis — ensure social security and end fossil fuel dependence,” demanding more social justice and sustainability as inflation and rising gas prices start to bite in Germany.”
https://www.dw.com/en/germany-thousands-protest-high-energy-costs-in-6-cities/a-63526936
“Thousands protest against PM Orban’s government, “runaway inflation”…
“Walking across a bridge over the Danube, protesters held up banners like “Orban get lost” and “No teachers, no future,” a few hours after nationalist Prime Minister Viktor Orban pledged to preserve economic stability and maintain a cap on household energy bills even as the EU slides into an “economic crisis”.”
https://uk.news.yahoo.com/hungarys-orban-pledges-preserve-economic-103048497.html
“Thousands in new Moldova anti-government protest.
“Several thousand protesters denouncing Moldova’s pro-Western leaders marched through ex-Soviet state’s capital for the sixth consecutive Sunday and set up a new tent camp days after police cleared a similar encampment.”
https://www.reuters.com/world/europe/thousands-new-moldova-anti-government-protest-2022-10-23/
“China’s zero-Covid strategy risks derailing a global economy already battered by inflation and an energy price crunch unleashed by the war in Ukraine.
“Concerns intensified this week after China’s GDP fell well short of official targets, suggesting the measures are slamming the brakes on growth. GDP grew by just 3.9 per cent in the third quarter of the year, figures revealed yesterday – well below the target of 5.5 per cent.”
“Xi Jinping’s party purge prompts fears of greater Taiwan invasion risk.
“Xi Jinping’s purging of political rivals and elevation of loyalists to the top ranks of the Chinese Communist party has raised fears that his now unfettered and unquestionable power could increase the risk of an attack on Taiwan.”
https://www.theguardian.com/world/2022/oct/25/xi-jinping-party-purge-china-taiwan-invasion-risk
“China chip imports down 12.4% as tech trade war with US intensifies… That’s 6.7 billion fewer chips than was delivered in September 2021…
“The chip wars appear to be biting in China, as the country’s semiconductor imports dropped 12.4 percent in the month of September, according to official customs data published by the country.”
https://www.theregister.com/2022/10/24/china_chip_imports_down_124/
“The Justice Department has charged 13 people who tried to “unlawfully exert influence in the United States” for the People’s Republic of China, U.S. officials allege.
“Attorney General Merrick Garland rolled out three different cases alleging separate schemes at a news conference Monday.”
“U.S.-Saudi Relations Buckle, Driven by Animosity Between Biden and Mohammed bin Salman.
“An unwritten pact binding the U.S. and Saudi Arabia has survived 15 presidents and seven kings through an Arab oil embargo, two Persian Gulf wars and the Sept. 11 terrorist attacks. Now, it is fracturing under two leaders who don’t like or trust each other.”
https://www.wsj.com/articles/u-s-saudi-relations-biden-mbs-animosity-11666623661
“Lebanon deputy PM says state cannot “save all depositors” who lost funds in crisis.
“Lebanon’s deputy prime minister Saade Chami said Monday that the government’s plan to revive an economy crushed by a three-year financial crisis would not be able to pay back all depositors in full.”
“Moroccans Protest Against Cost of Living Crisis…
“The rally, outside parliament and witnessed by AFP journalists, came after several protests already this week in Rabat and other Moroccan cities. It was organised by the country’s main trade union, the UNTM, which is close to the Justice and Development Party (PJD).”
https://www.barrons.com/articles/moroccans-protest-against-cost-of-living-crisis-01666550707
“Political unrest causing supply chain problems – SAP survey…
“Business leaders told SAP that current supply chain issues primarily stem from global political unrest (58%), lack of raw materials (44%) and rising fuel and energy costs (40%). Only 31% cited inflation as a major contributor.”
“Greening global economy brings dependence on critical minerals.
“Global demand for these critical metals may quadruple by 2040 if the world is to meet its pledges under the Paris climate pact, according to estimates by the International Energy Agency (IEA). French researcher Olivier Vidal has calculated that more of the metals will need to be manufactured by 2050 than humanity has produced throughout history.”
You can read the previous “Economic” thread here. I’ll be back tomorrow with a “Climate” thread.
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