“The world economy faces a huge stress test in 2023… With inflation on the rise and the era of ultra-low interest rates over, there could well be a systemic crisis.
“The fact that the world did not experience a systemic financial crisis in 2022 is a minor miracle, given the rise in inflation and interest rates, not to mention a massive increase in geopolitical risk.
“But with public and private debt having risen to record levels during the now-bygone era of ultra-low interest rates, and recession risks high, the global financial system faces a huge stress test. A crisis in an advanced economy – for example, Japan or Italy – would be difficult to contain.”
“Global regulators to step up scrutiny of risks outside banking system.
“Global regulators are set to sharpen their scrutiny of hedge funds, clearing houses and pension assets this year after a run of crises has shifted watchdogs’ focus towards risks outside the banking system… Regulation of NBFIs, which now account for almost half of global financial assets, is unfamiliar territory for policymakers in more ways than one.”
https://www.ft.com/content/1a75dee8-ffe1-402b-a890-5c9e84798d85
“Oil falls again as concerns grow over global economy, China COVID cases…
““Worries about the state of the global economy are front and centre of traders’ minds and will remain so for the foreseeable future,” PVM Oil analyst Stephen Brennock said.”
“Demand slump sees 2m “ghost ship” sailings out of Asia.
“The high number of blanked sailings from Asia to North Europe is leading to some carriers operating “ghost ship” loops on the tradelane… The immediate outlook for the tradelane is “grim”, according to a UK-based carrier contact, who told The Loadstar recently he could not recall such a slump in demand in his many years in the liner industry.”
https://theloadstar.com/demand-slump-sees-2m-ghost-ship-sailings-out-of-asia/
“Amid a turbulent few years for the global economy, one researcher says another big change is on the horizon. Robert Davies, a Utah State University physicist, predicts that economic growth will end, and it will end soon.
“The reasoning is simple, he says: The global economy has gotten too big, and — according to the laws of thermodynamics and exponential growth — that kind of growth isn’t sustainable in the long run.”
https://891khol.org/global-economic-growth-end-robert-davies-jackson-center-for-the-arts/
“December S&P Global U.S. Manufacturing PMI: Deteriorating Faster.
“The December S&P Global US Manufacturing PMI came in at 46.2, down 1.5 from the final November figure and in contraction territory for the second consecutive month. S&P Global US Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.”
“Fed wants ‘more evidence’ of easing inflation and backs fresh rate rises…
“Minutes from the December gathering, when the US central bank raised its benchmark rate by half a percentage point, showed the Fed intends to continue squeezing the economy to try to tackle price pressures, which they warned could “prove to be more persistent than anticipated”.”
https://www.ft.com/content/f2a12a8a-fa88-4b02-abe0-647664dfe038
“Mortgage demand plunges 13.2% to end 2022, as interest rates head higher again.
“After a brief reprieve in the first half of December, mortgage interest rates shot up again to end the year, weighing on mortgage demand. Mortgage application volume was down 13.2% at the end of last week from two weeks earlier…”
https://www.cnbc.com/2023/01/04/mortgage-demand-plunges-interest-rates-rise.html
“Pharmacists in UK and US report shortage of cold and flu medicines…
“Sufferers are buying the medicines to treat the symptoms of Covid-19, flu, and other conditions, including Strep-A and RSV, which have seen a resurgence after two winters of lockdowns. The supply problems come on top of a global shortage of antibiotics…”
https://www.ft.com/content/7f3ff5c0-a09e-40ce-91bd-721215bd0c70
“Record 13.3% UK food inflation raises fears of ‘another difficult year’.
“The figures came as concerns grew about the strength of the British economy, with the headline inflation rate at its highest level since the early 1980s, driven by soaring gas and electricity bills. Manufacturers suffered a further downturn in activity in December, with production, new orders and employment all in decline.”
“Europe’s energy crisis is now hurting France’s national treasure, the baguette…
“France’s iconic baguette has been under an increasing threat as bakers struggle with sharp hikes in the price of butter, flour and sugar, but with astronomical electricity bills looming this year some have been warning their ovens will remain unlit.”
“Bordeaux winegrowers demand money to uproot vines… As French winemakers struggle with declining exports and increased red tape…
“To demonstrate the urgency of the situation, the industry staged a protest in the city centre in December, with several hundred attending. It was the first protest by winemakers since 2004, when the global economic crisis after the burst dot-com bubble had a knock-on effect on business.”
“‘Yellow vest’ leaders call for resurgence to protest French pension reform,
“Four years after the start of the start of one of France’s most powerful protest movements, the ‘yellow vests’ (Gilet Jaunes) have announced plans to mobilise on Saturday, to protest rising inflation and the government’s plans to push forward pension reform.”
“How France’s prized nuclear sector stalled in Europe’s hour of need.
“…rather than enjoying the benefits of its vaunted nuclear industry, France found itself importing electricity from Germany in 2022. By November, a record 26 of France’s 56 nuclear reactors were shut for repairs… Meanwhile the French government is fully nationalising EDF, the state-controlled energy company running the power stations, to stop it going bankrupt.”
“European Debt Defaults Seen Surging in Echo of Covid Turmoil…
“The increase in defaults is expected as companies in Europe struggle with challenges including an energy crisis, soaring materials costs and cash-strapped customers. At the same time, refinancing existing debt has become increasingly expensive after central banks globally hiked rates to tackle soaring inflation last year.”
“Rising interest rates threaten to test the eurozone to destruction…
“With monetary conditions tightening precipitously, the euro is about to face its second great test…. Whatever its pretences, the European economy is still essentially just a collection of individual sovereign economies with little that connects them beyond free trade and a shared currency. Legal, insolvency, entitlement and tax systems remain wildly varied, while a properly functioning banking union is still just a distant aspiration.”
“BOJ Boosts Bond Buying for Fourth Day to Cap Rise in Yields.
“The Bank of Japan’s decision to double its 10-year yield ceiling was meant to improve market functioning. So far it’s triggered even heavier intervention from the central bank, threatening to reduce liquidity further in the local bond market.”
“Japan’s nuclear restart hit by engineer and manufacturing capacity shortages.
“Japan’s ambitions to reboot its nuclear industry risk being set back by a shortage of engineers and manufacturing capacity that has atrophied in the decade following the Fukushima nuclear disaster… the industry’s nuclear supply chain is under strain, warned industry executives and experts.”
https://www.ft.com/content/e179ece0-6e0b-4ce7-98b5-30ae01d41501
“Beijing warns of need to minimise China’s debt risks as it shores up economy…
“The world’s second-largest economy is also facing slower export growth and a property market downturn, while dwindling local government revenue has raised concerns about the recovery of regional economies and mounting debt risks.”
“Chinese Builder Defaults on Bonds Despite State Help for Sector.
“A Chinese developer has defaulted on two dollar bonds and is halting payments on offshore notes, the latest delinquencies despite a plethora of recent government steps to ease the sector’s liquidity crunch. Times China Holdings Ltd. didn’t pay coupons on two dollar notes…”
“Peru roadblocks resume as president urges ‘peace, calm, unity’.
“Anti-government demonstrations and roadblocks have resumed in Peru after a two-week pause as the South American nation continues to reel from last month’s impeachment, arrest and detention of former President Pedro Castillo.”
https://www.aljazeera.com/news/2023/1/4/peru-roadblocks-resume-as-president-urges-peace-calm-unity
“Fireworks fly as protesters clash with police [Bolivia]…
“The clashes come as the country faces divisions and unrest following the government’s decision to delay the country’s census until 2024. The province had been expecting greater funding and congressional representation due to a surge in its population.”
“Kerala [India] in deep fiscal crisis; to write to centre seeking more borrowing.
“Thiruvananthapuram: Faced with an “unprecedented financial crisis”, the Kerala Government is all set to write to the Centre, requesting the Union Government to exclude debts incurred by state-run autonomous bodies like Kerala Infrastructure Investment Fund Board (KIIFB) from the state’s annual borrowing limit so as to facilitate more borrowings.”
“Wheat shortage, financial crisis; Balochistan [Pakistan] seeks centre’s help.
“Balochistan Chief Minister Mir Abdul Quddus Bizenjo here on Wednesday demanded the federation to immediately play its role to address wheat shortage and financial crisis in order to provide facilities to the people of the province.”
“Pakistan to shut markets and restaurants early to save power amid economic crisis.
“Pakistan’s economic woes show no signs of letting up in 2023. The South Asian nation announced a new energy conservation plan Tuesday as its fragile economy continues to struggle with multiple challenges. The government has ordered all markets to close by 8.30 pm and restaurants by 10 pm, according to a tweet by its ruling party.”
“EXPLAINER: Why has Syria’s economic crisis hit a new low?
“Syria’s economy has hit its lowest point since the start of its civil war nearly 12 years ago, with spiraling inflation, a currency plunge and severe fuel shortages in both government-run and rebel-held areas. Life in Damascus has come to a near standstill.”
https://abcnews.go.com/International/wireStory/explainer-syrias-economic-crisis-hit-new-low-96214509
“The Egyptians are under the weight of high prices, rationing, and the scarcity of the dollar.
“From restrictions on withdrawals from personal accounts outside Egypt, to rationing the amount of rice an individual can buy, to advertising campaigns about the health benefits of eating chicken legs, Egyptians are suffering greatly from the economic crisis their country is going through while it is burdened with debt.”
“Tunisia central bank warns of consequences if inflation rockets.
“Tunisia’s central bank governor warned on Wednesday inflation could spiral out of control if it did not raise interest rates… Economy Minister Samir Saeed said on Tuesday the hike would have negative repercussions for small and medium companies as the government contends with Tunisia’s worst economic crisis.”
“World’s Largest Manmade Dam Has Less Than 1% of Usable Water.
“Water levels at the Kariba reservoir plunged to a record low of less than 1%, curtailing power supply to Zambia and Zimbabwe and shuttering the tourism and fishing industries… Zambia began power rationing on Tuesday because of the critical low levels. Zimbabweans have been subjected to 19 hours of power outages a day…”
You can read the previous “Economic” thread here. I’ll be back tomorrow with a “Climate” thread.
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Another day of dismal news. I’m beginning to suspect a global race to the bottom. Remains to be seen which will hit first, climate disasters or economic/financial collapses.
And rather a dismal day up here in the Hebrides, Rain. 2023 looking unpromising at this juncture.