“Overlapping crises could fracture the global financial system. Like the Titanic, we have an apparatus that is declared unsinkable, but is far from being so…
“International leadership seems to think that if two or more crises flare up simultaneously, the system will still float. This assumption is patently wrong. The interplay of the climate crisis with financial fragility alone threatens potentially insurmountable dangers unless immediate action is taken.
“Global debt has hit unprecedented levels, weighing down a system still shaken by the pandemic. A shadow banking system of “non-bank financial intermediaries” emerged following the financial crisis of 2008, and now dominates about half of global financing. The unregulated financing attributable to NBFIs is about $240tn…
“…a worse-than-predicted climate crisis could bring the global financial system to its knees [pictures from Greece’s floods this week].
“The 16 climatic tipping points, identified by a group of researchers in an article in Science, are triggers for a possible collapse in highly leveraged global financial markets. The markets, including regulators and central banks, have failed to integrate the physical, transition and liability risks from climate change into the observable market data.
“Take one example: imagine if five of the largest property and casualty insurance companies and the three largest reinsurers failed following previously unlikely ice sheet melt and permafrost collapse, which would lead to flooding. The insurance companies would face unprecedented claims and a decimated investment portfolio, wiping out their capital bases.
“Furthermore, the effects of climate change on food shortages and supply chain collapses would render the system even more fragile.
Price levels would rocket due to a massive injection of liquidity in the global financial system, as a result of defensive actions such as central bank bailouts. Banks would be knocking on central bank doors to fend off the impact of insurance company defaults.”
https://www.ft.com/content/71bd6ac7-43c9-45e2-ab85-020dded0d8b3
“Saudi Cuts Send World Diesel Prices Soaring.
“One corner of the global energy market is getting especially squeezed by Saudi Arabia and Russia’s oil-production cuts: diesel. Diesel prices have climbed more than 40% in the U.S. and Europe since May, when surprise output cuts by Saudi Arabia and some other members of the OPEC+ oil cartel took effect…”
“‘There’s No Plan B’: Oil Chiefs Sound Alarm on Refining Woes.
“An increasingly stretched global refining system means fuel-price volatility is set to become more common, according to top oil executives. A lack of spare crude-processing capacity due to under-investment, and shutdowns happening more frequently.”
“The US is now paying ~$2 billion PER DAY in interest expense on federal debt.
“This has doubled since the pre-pandemic levels of ~$1 billion per day. Since 2020, the US has added a historic $9.1 TRILLION to the national debt. Meanwhile, 31% of outstanding debt is going to mature within the next year. Refinancing this debt will come with much higher interest rates.”
https://twitter.com/KobeissiLetter/status/1699588357695652298
“[US] Bank Deposits Fell for Fifth Straight Quarter in Q2.
“Deposits at Federal Deposit Insurance Corp. (FDIC)-insured banks were down for the fifth straight quarter in the period ended June 30, while net income fell by double digits, the FDIC’s latest Quarterly Banking Profile showed.”
https://www.investopedia.com/us-banks-net-income-fell-by-double-digits-in-the-second-quarter-7966744
“Real-Estate Doom Loop Threatens America’s Banks…
“Banks’ exposure is even bigger than commonly reported. The banks are in danger of setting off a doom-loop scenario where losses on the loans trigger banks to cut lending, which leads to further drops in property prices and yet more losses.”
https://www.wsj.com/real-estate/commercial-real-estate-regional-banks-9f8f591d
“[US] Mortgage Applications at Lowest Level in 28 Years.
“Despite the drop in 30-year fixed mortgage rates last week, weekly mortgage applications decreased by 2.9% to the lowest level since December 1996. That’s according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Sept. 1.”
https://www.investopedia.com/mortgage-applications-at-lowest-level-in-28-years-7966026
“Pressure on US consumers from higher interest rates is the most since the financial crisis, economist says…
“The chart below from Steven Blitz, chief U.S. economist at TS Lombard, shows the central bank’s tightening has pushed borrowing costs relative to incomes to their most since the global financial crisis — a height that has caused households problems in previous cycles.”
“U.S. Stagflation Risks Rise As Service Sector Falters Alongside Manufacturing Downturn.
“Growth of business activity in the US came close to stalling in August, according to the final reading of S&P Global’s US PMI. Looking at the broad split of the data, manufacturing output slipped back into decline after a brief resumption of growth in July.”
“Texas paid bitcoin miner more than $31 million to cut energy usage during heat wave…
“Riot said on Wednesday that the state’s power grid operator paid the company $31.7 million in energy credits in August — or roughly $22 million more than the value of the bitcoin it mined that month — to cut its energy consumption… The strain on the grid persists. On Wednesday, Texas officials declared an emergency as sky-high temperatures again threatened to trigger rolling blackouts across the state.”
https://www.cbsnews.com/news/bitcoin-mining-cryptocurrency-riot-texas-power-grid/
“‘Biggest clean energy disaster in years’: UK auction secures no offshore windfarms…
“Britain’s offshore wind industry suffered a blow after ministers failed to heed warnings from some of the world’s biggest renewable energy developers that the annual auction was set too low to reflect their soaring costs. No energy companies submitted bids…”
“Swedish utility Vattenfall AB is in early-stage talks to sell one of the UK’s largest offshore projects, which it halted in July because of soaring costs.
“The company is negotiating with possible buyers of its Norfolk Boreas site, according to people familiar with the matter. Conversations are at an early stage…”
“UK ‘completely uncompetitive’ for oil and gas investment, says EnQuest CEO.
“Speaking at Offshore Europe, the head of the North Sea operator set out challenges for the sector – predominantly the windfall tax, which saw EnQuest drop to a $21m loss this week, reversing last year’s $200m profits… “We clearly now are completely uncompetitive in the upstream oil and gas business,” said the EnQuest CEO of the UK regime.”
https://www.energyvoice.com/events/offshore-europe/530206/enquest-uk-investment-oil-gas/
“Build hydrogen ‘caves’ or risk blackouts, Britain warned.
“Britain must set up a vast network of hydrogen-filled caves to guard against the risk of blackouts under the net zero shift, according to the country’s premier science body. The Royal Society has said 900 caverns filled with hydrogen will be needed to ensure the UK can keep the nation’s lights on…”
https://www.telegraph.co.uk/business/2023/09/08/build-hydrogen-caves-or-risk-blackouts-britain-warned/
“Ireland’s dairy farmers in crisis over EU nitrogen cap.
“Irish dairy farmers face the prospect of having to reduce their herds in the next four months after the government said there was no chance of overturning an EU decision to apply tougher limits on nitrogen. Farmers say 3,000 dairy producers will be affected, which could cost Ireland’s rural economy nearly €240mn…”
https://www.ft.com/content/0286e4b4-b55f-485d-b9e2-a1af9f1a051b
“Eurozone faces recession as growth falters.
“Andrew Kenningham, chief Europe economist at Capital Economics, said: “With business surveys having turned down sharply in July and August, construction and industry struggling and the labour market easing, we suspect that the economy will slip into recession in the second half of the year.””
https://www.thetimes.co.uk/article/eurozone-faces-recession-as-growth-falters-0grjp9fkb
“European private loan market falters as corporate credit stress mounts.
“Direct lending, a key but expensive source of credit for riskier European firms that banks often shy away from, is running out of steam, a fresh sign that aggressive interest rate rises may be starting to cause funding stress and exacerbate economic pain. Fundraising and deal-making have dropped sharply…”
“Feeble German Economy Faces Fresh Contraction as Factories Falter.
“Germany’s embattled economy, once Europe’s main engine of growth, looks set for a fresh contraction as its all-important manufacturing sector continues to weaken. After stagnating since the end of last year, Germany’s output is likely to contract this quarter as its factories face higher energy costs…”
“Russian farm minister says fuel shortages threaten harvest and sowing…
“”We already have problems with the availability (of fuel). We will now stop harvesting, and we will not sow winter crops. It will be a disaster,” he was quoted as telling the joint session of parliament’s monitoring and agriculture committees. “Maybe it’s time to temporarily stop exports of oil products until we stabilise the situation on the domestic market.””
“China asks fertilizer makers to halt urea exports on price surge
“China has asked some fertilizer producers to suspend urea exports after domestic prices jumped, a move that’s likely to restrict supplies and boost costs for farmers in key buyers such as India. Some major Chinese fertilizer producers have halted signing new export deals from early this month following a government mandate…”
“China’s renminbi hits 16-year low after exports tumble in August.
“China’s currency has fallen to its lowest point against the dollar since 2007 after exports shrank for a fourth straight month in August, showing how the manufacturing sector in the world’s second-largest economy is struggling to regain momentum… China’s exports dropped 8.8 per cent in August compared with a year ago.”
https://www.ft.com/content/91b7b634-9f63-4f5b-9cd4-3b838b9b51e7
“Indonesia has nearly halved output at a major coal-fired power plant near the capital Jakarta after the city faced major pollution spikes in recent weeks, its operator told AFP Wednesday…
“The megalopolis of about 30 million people topped global pollution rankings several times last month, according to Swiss-based air quality monitor IQAir, as a toxic smog crisis threatened to overshadow the ASEAN meetings.”
https://phys.org/news/2023-09-indonesia-halves-output-coal-power.html
“Colombia mulls future of massive coal mine as water dries up.
“Gigantic black craters scar the earth in La Guajira, northern Colombia, after four decades of coal extraction that has sucked up large quantities of water in an already-arid region hit by a wave of extreme droughts.”
“South Africa to Face Pressure From Trade Partners to Ditch Coal.
“South Africa must accelerate its transition to renewable energy to avoid export penalties being threatened by key trading partners, a government official said on Wednesday… The European Union plans a levy on certain carbon-intensive imports…”
“Crime in South Africa. Security compromised during blackouts.
“Eskom’s indefinite implementation of Stage 6 blackouts has created a haven for criminals. Joburg residents say their security has been compromised and break-ins, hijackings, and smash and grabs have all increased. Continued darkness has also made it difficult for private security services to operate effectively.
https://www.enca.com/news/crime-sa-security-compromised-during-blackouts
“Tunisia’s president tightens grip on power by jailing rivals while economy falters.
“Democracy in Tunisia is under pressure. The North African country was long considered a trailblazer for democracy in the Arab world, but now its president has launched an authoritarian crackdown that has jailed political rivals, wrecked the economy and caused people to flee.”
“‘We are starving to death:’ Residents of Nagorno-Karabakh fear for future under blockade.
“…as shortages of food, fuel and medicines caused by the months-long blockade take an increasing toll on the region’s population, officials there have reported the first death from malnutrition on August 15, according to Gegham Stepanyan, the ombudsman of Artsakh, who CNN reached by phone.”
“Pakistan shuts Afghanistan crossing as deadly clashes raise tensions.
“Pakistan closed a key northwestern border crossing with Afghanistan after border guards from the two sides exchanged fire Wednesday, while elsewhere near the border in northern Pakistan clashes killed four Pakistani soldiers and 12 militants, authorities said.”
“Pakistan army vows to assist government in foreign investments, curbing ‘illegal activities’ harming economy.
“Pakistan Army’s top leadership on Thursday vowed to assist the government in foreign investments and its crackdown against “illegal activities” hampering economic growth and stability, a statement from the army’s media wing said.”
https://www.arabnews.com/node/2369401/pakistan
“How central banks are already deploying artificial intelligence…
“While these use cases are promising and may improve central bank operating models, they harbour issues about the quality and protection of data, the assumptions guiding AI systems and the possible convergence of AI systems. All of this may pose a threat to financial markets, as organisations like the Securities and Exchange Commission have argued.”
https://www.omfif.org/2023/09/how-central-banks-are-already-deploying-artificial-intelligence/
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.
Hello Pan
Very interesting updates!
1. In France, we are thus shifting from the last very late heatwave that will last until next week to autumn em dam are once again the focus of ‘energy prices’. Prices at the pump are rising to record highs and diesel in particular is accelerating to an unprecedented price of 2 euros for France. This is a big problem for a ‘diesel country’.
Besides the rise in oil prices and production constraints. It is mainly the prices of ‘refining’ that are driving up prices. If you read the Russian report in combination with OPEC’s production restrictions, you may well wonder whether this is a result of ‘wanting’ or ‘not being able’ :)In any case, it will cause a lot of unrest in France in the coming months, especially as the government now categorically refuses to come to the aid of the ‘motorist’.
The cost of this last year was 8 billion, which is no longer bearable given France’s enourmous budget deficit of more than 3000 billion and rising interest charges.
It will undoubtedly be a tumultuous autumn because for once a population does not
time does not accept that the inflationary spiral cannot be broken.
2. This downfall of the windmill industry is of course a predictable chronicle of ongoing events. Any ‘kid’ can calculate that if you raise ‘intermittent utilities above a certain level, let’s say something like 10% the power production from solar and wind turns into an unmitigated power disaster for everyone. In the Netherlands, far too many solar panels have been installed that can never! be economically integrated into the grid, and this while the ‘population’ was promised golden mountains with all kinds of balancing schemes that now have to be hastily reversed. Eeensw look hjoe it goes there with the plans for new giant wind farms in the North Sea. I wouldn’t put my money in 🙂
https://www.europe1.fr/economie/prix-du-petrole-brut-pas-daide-de-letat-comment-expliquer-laddition-salee-a-la-pompe-4202008
Oh yes Pan
Talking about upgrading and refining. Venezuela ‘s production has collapsed because they are unable to convert their “tar” sands into “something” we can transport and further process. Well that probably requires prices we can’t afford at the pump. And so it will probably stay in the ground. Interesting world that very expensive refining that, like nuclear power plants, must have a very long career to become and remain profitable.
https://oilprice.com/Energy/Energy-General/Venezuelas-Oil-Exports-Plunge-By-38-From-Three-Year-High.html
A day of reckoning is coming to America every thing will catch up with us the bill is coming due and the bills cannot be paid back. Its gonna be a scary place as things break down more and more stuff disappears. My own hoa will get the middle finger as the infrastructure collapses and the grass cannot grow!
https://www.miamiherald.com/news/state/florida/article278835624.html
Salt water and hurricanes don’t mix yeah it’s interesting how they are trying to address this problem. Right!
EVs haven’t really taken off here in Oz, no major incentives either – though in my local city (mountains, nowhere near salt water!) and generally above the national average incomes – there are quite a few around, and all the big stores have EV charge station carparking bays. Which annoys me, they place them all next to the handicapped parking bays, closest to the store entrances. Obviously, still plenty of money around in my neck of the woods!
As for Australia’s economy, we are now in a “per capita” recession, which is just another way of saying our poor are poorer and growing in number, I suspect the rich are holding their own or getting richer and still spending a lot.
https://www.theguardian.com/business/grogonomics/2023/sep/07/australias-economy-has-got-smaller-on-a-per-capita-basis-like-it-did-in-the-gfc-and-1990s-recession-so-you-know-not-good
https://finance.yahoo.com/news/home-insurers-cut-natural-disasters-150846840.html
“When people lose everything & have nothing left to lose, they lose it.”
Advice to the entitled,elite rich; Give away or hide all the wealth you’ve been flaunting,drive a vehicle with 3 different colored fenders,buy oversized clothes from the homeless & don’t bathe often & maybe you won’t have to experience the consequences of your greed from the angry poor.
Favorite sayings: “Be careful of who you or other piss off.”
“There is no right or wrong,only do or don’t.”