“The world is at a “tipping point” on debt that threatens to spark a global reckoning after years of government borrowing binges, the boss of HSBC has warned.
“Speaking at the Future Investment Initiative Institute’s summit in Saudi Arabia, known as Davos in the Desert, Noel Quinn said the current rate of borrowing was unsustainable.
“He said: “I’m concerned about a tipping point on fiscal deficits. When it comes, it will come fast and I think there are a number of economies in the world where there could be a tipping point and it will hit hard.””
“Jamie Dimon rips central banks for being ‘100% dead wrong’ on economic forecasts…
““I want to point out the central banks 18 months ago were 100% dead wrong,” he added. “I would be quite cautious about what might happen next year.” The comments reference back to the Fed outlook in early 2022 and for much of the previous year, when central bank officials insisted that the inflation surge would be “transitory.””
“Why ‘higher for longer’ might start ‘breaking things’… Central bankers raise rates until economies slow down: but they can’t control the impact of rising yields…
“Thanks to very long time lags, only around half of the impact of central bank tightening has been felt in the economy so far.”
“New Age for Treasuries Means 6% Yield Isn’t ‘Out of the Picture’…
“On Monday, the 10-year Treasury yield climbed over 5%, a 16-year high. It’s a level few would have predicted during the long run of rock bottom interest rates that followed the Great Financial Crisis… And the federal budget deficit is surging, testing the market’s ability to absorb a seemingly endless supply of new US government bonds.”
[Car Dealership Guy].“Many people have asked me to why I haven’t commented on the concerning auto loan data that just came out
“In case you haven’t heard… The percentage of subprime auto borrowers 60+ days past due on loans hit a record 6.1% in September… But my concerns go way beyond the car market. I’m concerned about people that are struggling to keep up with their bills… I’m concerned about our economy… Most of all, i’m concerned about the future of our country.”
“Big Banks Bailed Out During Financial Crisis Now Running Ads Against Effort to Prevent the Next One [US]…
“…many of the same bailed out banks have launched a 7-figure ad campaign against common-sense proposed federal rules to help prevent another financial crisis. The industry opposes new limits to risky behavior beyond their means by increasing minimum capital requirements.”
“Cap on bankers’ bonuses to be abolished next week [UK].
“The move has been called “an obscene decision” by the TUC but is being done, regulators said, so companies can have lower fixed salary payments and better respond to the financial environment and claw back money more easily in the case of misconduct.”
“UK borrowing costs hit fresh 25-year high as interest rates set to remain high.
“The 30-year UK gilt yield surged to 5.209%, its highest since the summer of 1998. Borrowing costs have risen over the past two weeks amid signs that inflation is proving to be stickier than previously expected, prompting investors to demand higher returns for their money.”
“UK Economy on the Brink: PMI Data Signals Persistent Contraction…
“October witnessed the manufacturing sector recording a three-month high at 45.3, yet it was the sector’s eighth consecutive month of decline, the longest since the 2008/09 recession. Firms noted customer destocking and a dearth of new orders as factors affecting production.”
“Eurozone business activity sees sudden fall in October, goes from ‘bad to worse’.
“The PMI score for October dropped to 46.5, below the September figure of 47.2, resulting in job losses. The PMI score has now dropped for five successive months, and was declining at the fastest pace since November 2020.”
“‘Pervasive and relentless’ racism on the rise in Europe, survey finds…
“In every walk of life, from schools to the job market, housing and health, a survey by the EU’s rights agency of people of African descent found high levels of discrimination, with some of the worst results recorded in Austria and Germany, where far-right parties have been on the rise.”
“Threat of higher fuel prices resurrects Yellow Vest fears.
“A recent analysis suggests that the EU’s carbon market for road transport and buildings (known as ETS 2) may see prices rise far above the €45 promised by the European Commission, provoking fears that protests against fuel price hikes will follow.”
“The region at the heart of Germany’s economic stagnation. Facing higher energy costs and the transition to electric vehicles, once prosperous industrial districts are struggling to adapt…
“A recent survey by the think-tank IW Consult identified Donnersbergkreis, named after the eponymous mountain that dominates the surrounding landscape, as one of the most challenged regions in Germany.”
“Soft flash PMIs add to rising concerns over Japan’s recovery. The October flash composite PMI fell below neutral for the first time since December 2022 in Japan, which was all the more concerning given the cooling of service activity caused most of the decline.”
“How Far Is China’s Slowdown Spreading? Ask a Dairy Farmer 6,000 Miles Away. Weak demand among Chinese consumers for milk is rippling out to the rolling hills of New Zealand…
“The weak demand from China is driving dairy prices lower. They are now down nearly 40% compared with March last year. A few weeks ago, they were down nearly 50%. “That’s a big hit,” said Jim van der Poel, chairman of DairyNZ…”
“Vietnam power crunch fears darken business outlook.
“Vietnam’s government is rushing to stabilize power supplies after a wave of blackouts over the summer disrupted the lives of millions of residents and darkened the outlook for business in one of Asia’s fastest-growing economies.”
“Massa-Milei Runoff in Argentina Is Worst-Case Scenario for Bonds.
“Wall Street is bracing for more losses on Argentina’s sovereign bonds after Sunday’s presidential ballot sent the contest to a second round between Economy Minister Sergio Massa and libertarian outsider Javier Milei — the scenario that investors had feared most.”
“Nicaragua is ‘weaponizing’ US-bound migrants as Haitians pour in on charter flights, observers say.
“More than 260 charter flights believed to be carrying migrants from Haiti have touched down in Nicaragua in recent months, according to flight data and experts in the region, adding to a historic crush of migration by people hoping to reach the U.S.”
“In Cuba, raising fish in plant-filtered ponds to tackle food shortage.
“Over the last two years, Cuban entrepreneurs Jose Martinez and Joel Lopez have used an innovative technique to raise 24 tons of tilapia — a critical source of food for an island nation surrounded by water but not enough fish.”
“Anger boils in Morocco’s earthquake zone as protesters demand promised emergency aid.
“Hundreds of protesters on Tuesday took to the streets of a city near the epicenter of a devastating earthquake that hit Morocco last month to express anger and frustration after weeks of waiting for emergency assistance.”
“Avoiding a “second emergency” in Libya: A race against time as the rainy season looms…
“More than 43,000 people have been displaced [by the floods], left with literally nothing. They are badly in need of food, clean water, shelter, healthcare, and financial support. Prices for basics such as bread, cooking oil, and vegetables have shot up. The fishing industry has come to a standstill…”
“Escalation In Israel-Hamas Conflict May Doom Oil Markets.
“Geopolitical risk for oil and gas markets is nearing levels that we have rarely seen during the last 50 years. Parallels can be drawn between the 1973 oil crisis and today, but there are a number of new complicating factors in 2023.”
“Israel’s military push for Gaza invasion in apparent rift with Netanyahu.
“The Israeli prime minister is believed to be delaying the operation, fearing a second front with Hezbollah in the country’s north. On Monday, several Israeli media outlets reported that the Israel Defense Forces (IDF) are anxious to start the invasion as troops wait on the border following the biggest mobilisation drive for 50 years.”
“More than 19,000 displaced in Lebanon as Israel border clashes escalate: UN…
“The International Organization for Migration (IOM) said 19,646 people had been displaced inside Lebanon since it began tracking movements on October 8, the day after an assault on Israel by Hamas fighters and an Israeli offensive on the besieged Gaza Strip.”
“Secret US war in Lebanon is tinder for escalation of Israel-Gaza conflict…
“The U.S. has, over decades, poured billions of dollars in security assistance into Lebanon and conducted counterterrorism efforts against Hezbollah, an Iran-backed Shia group with political and military wings. Lebanon’s dominant political and military force, Hezbollah has long been designated a terrorist organization by the U.S.”
“Blinken warns US will defend itself ‘swiftly and decisively’ against attacks by Iran or proxies…
“The top US diplomat’s pointed public missive comes in the wake of an uptick in attacks by Iranian-backed proxies against US interests in the Middle East. US and coalition forces in Iraq and Syria have been attacked at least 13 times since October 17, according to the Defense Department.”
“Iran and Russia denounce West over Caucasus tensions…
“The talks are seen as Moscow’s attempt to reduce growing Western influence in the Caucasus — a region it has long considered as its backyard. According to Moscow’s original plan, the “3+3 format” was meant to also include Georgia. But Tbilisi, which aspires to join the EU and NATO, has rejected the proposal.”
[Japan administers them; China & Taiwan both claim ownership]…“It has been nearly 15 years since the Chinese started moving in on Japan’s Senkaku Islands
“What is the likelihood that this somewhat manageable Chinese gray zone activity escalates into something worse? The likelihood is high. And it is up to the Chinese. The escalation move might be either “flooding the zone” tactics or actual shooting. Although the former could of course lead to the latter.”
“Global banking giants are investing in companies which produce traditional Chinese medicines containing leopard and pangolin parts, a report has found.
“Both species are classed as threatened. The Environmental Investigation Authority identified 62 banks and financial institutions which are investing in three pharmaceutical groups making nine products which they say contain leopard or pangolin.”
You can read the previous “Economic” thread here. I’ll be back tomorrow with a “Climate” thread.
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