“It Just Had an Energy Crisis, Now Europe Faces a Food Shock…
“The continued surge in food prices has caught central bankers off guard and pressured governments that are still reeling from the cost of last year’s emergency support to come to the rescue. And it is pressuring household budgets that are also under strain from rising borrowing costs.”
https://www.wsj.com/articles/it-just-had-an-energy-crisis-now-europe-faces-a-food-shock-7a7f88d2
“The central banks are frightened, so they are slowing the economy… They have been very wrong in underplaying the danger of inflation…
“Just this week the head of the German Bundesbank, Joachim Nagel, said that the European Central Bank would have to increase its rates “several” more times to control inflation.”
https://inews.co.uk/opinion/the-central-banks-are-frightened-so-they-are-slowing-the-economy-2362787
““The debt problem is shifting to core Europe”…
“France and Germany are still spending money by the bushel full. The debt problem is shifting to core Europe, and on top of that, growth here is weaker than on the periphery. That can’t keep going the way it is, and politicians have finally got to tell people so.”
“EU rules unable to shield shadow banks from market shocks, warns ECB.
“The European Central Bank has warned that rising risks at so-called shadow banks have left EU regulation “ever more insufficient” to prevent further financial market shocks from triggering a wider liquidity crisis.”
https://www.ft.com/content/2027becc-234f-444b-9639-25089f777cc8
“Switzerland speeds up work on liquidity backstop after Credit Suisse crash.
“The Swiss government on Thursday moved to speed up work on extending a public liquidity backstop Credit Suisse received access to in March under emergency rules to other systemically important banks and make it a permanent part of regulatory framework.”
“Germany falls into recession as inflation hits economy…
““Under the weight of immense inflation, the German consumer has fallen to his knees, dragging the entire economy down with him,” said Andreas Scheuerle, an analyst at DekaBank. Germany’s inflation rate stood at 7.2% in April, above the euro area’s average but below the UK’s 8.7%.”
https://www.bbc.co.uk/news/business-65707206
“UK borrowing costs surged to levels last reached under Liz Truss’s ill-fated premiership after traders were spooked by unexpectedly strong inflation.
“The consumer prices index (CPI) dropped to 8.7pc last month from 10.1pc in March, but the Bank of England had expected a bigger fall to 8.4pc.”
https://www.telegraph.co.uk/business/2023/05/24/ftse-100-markets-live-news-cpi-inflation/
“Lack of risk taking in the City threatening the economy, warns Bailey…
“The Governor of the Bank of England said on Wednesday that regulatory reforms were needed to encourage greater risk taking by finance companies to turbocharge the Square Mile… The comments are likely to raise eyebrows, as Mr Bailey has been one of the main architects of the UK’s post-financial crisis regulatory regime, having led all of Britain’s top City regulators.”
“The value of the Swedish krona has dropped steadily against the euro since summer 2021, hitting its weakest value since the beginning of 2009 on Wednesday.
“A euro now costs 11:49 kronor, up from around 10 kronor in summer 2021. This means the krona has lost around 15 percent of its value against the euro in just under two years.”
https://www.thelocal.se/20230524/swedish-krona-at-weakest-point-against-euro-since-financial-crisis
“When will interest rates in Norway start to come down?
“A combination of a weak krone and high inflation means that consumers in Norway may have to wait until 2025 before interest rates on loans and mortgages come down… A weak krone contributes to inflation by making the cost of important goods more expensive.”
https://www.thelocal.no/20230524/when-will-interest-rates-in-norway-start-to-come-down
“Iceland Surprises With Biggest Rate Hike Since Financial Crisis…
“The Monetary Policy Committee in Reykjavik hiked the 7-day term deposit rate by 125 basis points, exceeding the forecasts by the largest banks and other market participants. That’s its biggest increase since the global financial crisis in 2008. The rate is now at 8.75%.”
“Canada’s household debt is now highest in the G7.
“The amount owed by Canadian households is also higher than the country’s entire GDP. The Canada Mortgage and Housing Corporation said high home prices are to blame for the ballooning debt.”
https://www.bbc.co.uk/news/world-us-canada-65688460
“Australia might not be in a recession but households are about to feel as though they are…
“We are now buying about 5% less food than expected before the pandemic. It’s just costing more. This trend, sadly, is not limited to food. During the pandemic we spent like crazy on household goods. But now, not only are we reducing the volume of items we are buying, but also the dollar amount.”
“US credit squeeze triggers rise in corporate bankruptcies.
“More large US companies are taking shelter in bankruptcy court, a sign of a tightening credit squeeze as interest rates rise and financial markets become less hospitable to borrowers. Eight companies with more than $500mn in liabilities have filed for Chapter 11 bankruptcy this month, including five in a single 24-hour stretch last week.”
https://www.ft.com/content/7f45d897-5312-40bd-abff-039ef31c9e50
“Charcoal cooking, week-long queues for gasoline: Fuel shortages slam Cuba’s countryside.
“Cuba’s most recent fuel shortage has crippled an already fragile economy, but it is hitting rural villages particularly hard, with residents resorting to coal fires to cook their food, scrambling to find transport to take them to work and spending days — and nights — at the gas station waiting to fuel up.”
https://www.independent.co.uk/news/ap-cuba-havana-chevrolet-covid-b2345286.html
“South Africa lifts interest rates to 14-year high to fight inflation.
“South Africa’s central bank raised its main interest rate on Thursday to a 14-year high, a move Governor Lesetja Kganyago described as “bitter medicine” needed to tame inflation. The bank lifted rates by 50 basis points to 8.25% as it raised its inflation forecasts…”
“Sudan’s warring sides have accused each other of being behind breaches of the latest ceasefire that was negotiated by the US and Saudi Arabia, now in its third day.
“Clashes between the rival factions broke out again on Thursday in Khartoum and neighbouring Omdurman, witnesses said, as well as the strategic city of El Obeid to the southwest.”
“Lebanon to introduce higher denomination banknotes as inflation soars…
“The Central Bank is reportedly considering creating 500,000 and 1 million lira banknotes, equivalent to about $5 and $10, respectively at current parallel market rates. Lebanon’s currency has lost over 98 percent of its value since the beginning of its financial crisis in the Autumn 2019.”
https://www.newarab.com/news/lebanon-introduce-larger-banknotes-inflation-soars
“In the southern port city of Aden, Yemen, a scorching heat wave and prolonged electricity outages have plunged its citizens into a struggle for survival.
“With temperatures soaring above a blistering 43 degrees Celsius, and power cuts extending to 4-5 hours, many families seek respite from the stifling heat by retreating to the beaches during the hottest time of the day.”
https://english.news.cn/20230526/926d775ccc7c4ce6a3aa3050b88f1b0f/c.html
“India’s Workers Are Trapped In a Vicious Cycle Of Coal and Heat…
““It’s hard to survive without electricity during the summer,” he said, giant trucks rumbling past in clouds of black dust. “Our production target is raised every year. Every year we’re producing more coal.””
“Bangladesh is struggling to pay for imported fuel because of a dollar shortage, letters from the state petroleum firm show, with it warning of an “alarming decrease” in fuel reserves.
“It owes more than $300 million to six overseas companies, some of which have either sent fewer cargoes than scheduled or threatened to halt supplies…”
“Vietnam seeks more electricity supply from China, Laos to ease summer power shortage.
“State utility Vietnam Electricity Group (EVN) will ramp up its electricity imports from the neighboring countries of China and Laos in a bid to ease imminent power shortages over the summer months, Vietnam News Agency reported on Wednesday.”
https://english.news.cn/asiapacific/20230524/493c4de78ad7439a85af0ca258f8addf/c.html
“Banking Turmoil Isn’t Over, Says Commercial Bank of Kuwait CEO.
“The current turmoil in the banking industry, which has seen the collapse of four US lenders and the takeover of Credit Suisse Group AG, isn’t over and growth is a concern, according to the chief executive officer of Kuwait’s fourth-largest lender.”
“The global economies are “not more prepared than before” for new viruses that may cause pandemics, an expert said on Tuesday.
“Unveiling a report by the WHO Council on the Economics of Health for All, Mariana Mazzucato, the council’s chair, said that even though people are saying COVID-19 is over, “of course, it’s not over because of the interlinked crises,” such as financial, health, and climate.”
You can read the previous “Economic” thread here. I’ll be back tomorrow with a “Climate” thread.
If you found value in this content, please help me continue this work by becoming a patron of my work via Patreon. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.
Is there a silver lining for some while the world is in turmoil
Are Governments not quietly taking extra tax because of inflation while businesses, workers and their families struggle?
Is inflation not also devaluing older debt.
Bobby, both of those things can be true. However, overall, certainly for nations like the UK and Germany, higher prices, the subsidies needed to offset them, negligible growth and higher borrowing costs are a net negative for finances:
“Scholz’s Vice Chancellor and Economy Minister Robert Habeck, from the Greens, warned earlier this week that Germany faces potential budget cuts of up to €22 billion next year. “It’s the first time in many years that the federal budget is getting smaller, and … of course, the whole system is not attuned to that,” Habeck said.”
https://www.politico.eu/article/germany-in-recession-berlin-braces-for-budget-cut-battle/
My Dear Bobby, our predicament has nothing to do with ‘greedy governments’ but everything to do decreasing amounts of ‘net energy’ available to the average consumer.
As Panopticon well knows, he is a long time visiter to Gail the Actuary’s blog called OurFiniteWorld where these matters are discussed in depth.
All the stories you see linked here on this admirable site are symtoms merely of a greater malaise: that of depletion.
We all wonder, those who pay attention, how the ball of string will unravel. Well, my guess has always been that the world will be driven mad first before any real understanding is had.
I am indeed an admirer of Gail’s work.