“Financial crises start under blue skies, as investors in emerging markets know too well. They lead rather than follow business recessions. Ultimately, they are caused by a sharp tightening of liquidity conditions and collapsing investors’ risk appetite.
“Arguably, the most important price to watch in financial markets for an early-warning sign is the price of the dominant economy’s debt. This is best measured from the US interest rate term structure, which is popularly summarised by the slope of the yield curve between the yields on 10-year US Treasuries and the Federal Reserve’s short-term policy rates…
“…it is popularly argued that, by reducing the effective supply of “safe” assets, the QE policies of central banks have distorted the term structure by narrowing term premia.
“However, this leaves aside the more important fact that to purchase these bonds, central banks must simultaneously inject liquidity into financial markets. This, by definition, reduces systemic risks, loosens leverage constraints and, by encouraging more risk-seeking activity, reduces the need for “safe” assets.
“The bottom line is that far from lowering yields and term premia, these QE policies actually raise them. In other words, the stark collapse back from their decade highs in worldwide bond term premia at these longer-dated maturities is not a distortion caused by overly-generous QE, but may instead reflect an unambiguous and growing demand for safety by the key investors.
“Thus, the 10-year/5-year yield spread, in particular, has been fast-narrowing in the US, UK and Europe. It is this second, “flatter” and longer-dated yield curve that we should take very seriously as a warning sign of falling liquidity, heightened systemic risk and the threat of an upcoming financial crisis. And, it is now flashing red for both emerging and developed market investors.”
“The US is now behaving in ways that could all too easily lead to a breakdown of the whole trading system and a drastic, disruptive reduction in world trade. Yet, Trump appears to believe that the whole world will bow down to US economic power and his deal-making prowess.”
“Even before a round of U.S. tariffs levied on China comes into force Friday, there are signs that global trade is already cooling. Business surveys published this week show that global export growth, strong in 2017, has slowed to a relative crawl—helping to drive sharp stock-market falls in big exporting nations like South Korea and Japan.”
“Tit-for-tat sanctions between the major economic powers put the global trading system at “potentially large risk”, the WTO said in its most damning assessment yet of the tariff war sparked by Donald Trump’s levies on imports of steel and aluminium.”
“German Chancellor Angela Merkel raised the specter of the global financial crisis as she warned of potential fallout from a trade war with the U.S., saying tariffs on European cars would be “much more serious” than levies on steel and aluminum.”
“World trade has decelerated sharply. This ill omen portends severe risks in the months to come. The greatest risks are in the eurozone – where Italy is the fault line along which the most acute vulnerabilities lie… Already, Italian GDP growth is slowing and forecasts for the 2018 have are down to just above a 1 percent annual growth rate. Even these forecasts may prove too optimistic.”
“Donald Trump considered invading Venezuela, a senior US administration official has said. In a meeting last August to discuss sanctions on Venezuela in the Oval Office, Mr Trump asked why he could not just invade the country.
“Months later, Mr Trump was briefed not to mention the topic at a private dinner with leaders from four Latin American allies, but the first thing the president said was “my staff told me not to say this” – stunning his advisers at the time.”
“The government in Iran has gagged bitcoin exchanges across the country, claim bitcoin users and alternate coin community of the Islamic state. The government has been censoring its citizens from engaging in crypto-economy, to apparently counter the fresh round of economic sanctions that the US government is looking to impose later in August this year.”
“In the wider sense, the post election period Turkish economy remains on the edge as the administration has yet to name the economy management team. The current account deficit at 6.4 percent of GDP and Turkey’s huge external financing requirement at 237 billion dollars for the next 12 months is the Achilles Heel. The combination of an economic contraction in the third quarter and recession afterwards with double digit high inflation translates into stagflation; a phase in the Turkish economy good enough to shy investors further away given the global financial conditions…”
“From the normally mild summer climes of Ireland, Scotland and Canada to the scorching Middle East, numerous locations in the Northern Hemisphere have witnessed their hottest weather ever recorded over the past week.
“Large areas of heat pressure or heat domes scattered around the hemisphere led to the sweltering temperatures.
“Let’s take a tour around the world of the recent hot-weather milestones…”
“Large swaths of the United States are expecting scorching temperatures and humidity that are expected to last until after the Fourth of July celebrations, when America celebrates its independence as a nation.”
“Quarter-sized hail driven by strong wind gusts decimated some farm fields, stripping corn stalks, flattening beans and overturning center pivots. Just two days later, a supercell thunderstorm tracked from northeastern Wyoming through northern South Dakota, laying down multiple swaths of damaging hail.”
“A warming climate is putting tens of thousands of residents living in Huaraz, Peru, in peril from possible outburst flooding. Researchers say a massive chunk of ice could fall from glaciers teetering above the city into Lake Palcacocha, which could then propel a 100-foot wall of water and debris into the city that is home to 150,000, the Guardian reported.”
“The village of Kevo in Finland’s northernmost municipality, Utsjoki, lost out by a whisker when it came to setting a heat record this week. The Finnish Meteorological Institute (FMI) says the mercury topped out at 29.5 degrees Celsius on Tuesday… Kevo’s average temperature in July is 13 degrees.”
“[Ireland’s] Cattle prices have taken a serious hit in the marts and factories this week as farmers with parched fields and tight grass supplies continue to offload stock. The continuing drought is causing severe problems for both livestock farmers and cereal growers, and there is little chance of respite as Met Éireann has forecast another week of searing temperatures.”
“[Denmark’s] Farmers are having difficulty getting enough food for their animals because of the recent hot, dry summer weather. The drought is causing a shortage of hay and suitable grain, reports DR Nyheder… “We’ve not had such a water deficit as we have now since 1970,” said Troels Toft, the sector director for plants at the agricultural scientific centre Seges.”
“Storms and torrential rain have caused big problems in the northern province of Trentino, especially in the Fassa and Fiemme valleys [of Italy]. The worst-hit town was Moena, where the streets became torrents and violent shower of hailstones covered the area.”
“Heavy rains have triggered flash flooding in eastern and central Romania. More than 750 people have been rescued from the flood waters and at least five people have been reported dead. The flood damage spans across more than two-thirds of the country and has impacted approximately 300 towns and villages.”
“Drought in the southern Russian regions of Rostov, Stavropol, and Volgograd coupled with extreme cold in Ural and Siberia, is threatening this year’s grain harvest, Vedomosti daily reports citing outlooks of several independent market watchers and the US Department of Agriculture.”
“Officials say the death toll from two days of heavy monsoon rains in eastern Pakistan has risen to 15. The heaviest rains seen in Lahore since 1980 continued into Wednesday, flooding streets and causing some residents to join small demonstrations against local authorities. Rescue officials and police confirmed the death toll, saying most deaths were caused by electrocution and homes caving in.”
““As per the rainfall recorded on Tuesday, Shimla [India] witnessed 118.6 mm rain during the last 24 hours. This is the highest rainfall in the city in a day in the last 68 years as per the data available with our department since 1951,” Manmohan Singh, Director of local MeT office, said.”
“The hazardous event was caused by the ongoing rain that has pelted Sichuan Province since the end of June… Heavy downpours have affected more than 200,000 residents and caused 25,000 people to be relocated, according to Xinhua News.”
“Some 130 people who had been stranded at a hot spring resort in Hokkaido were rescued Wednesday after torrential rains triggered landslides in the area the previous day… Over 200 millimeters of rainfall had been recorded in the city of Asahikawa from Monday through Wednesday morning, and major rivers including the Ishikari and Uryu flooded on Tuesday.”
“The rivers of Iraq, above all the Tigris and Euphrates, are drying up. The country is becoming more arid, and desertification is eating into the limited amount of agricultural land.
“Dams built upriver in Turkey, Syria and Iran since the 1970s have reduced the flow of water that reaches Iraq by as much as half and the situation is about to get worse.
“On 1 July, Turkey will start filling the Ilisu dam on the Tigris and this will cause another decline in the inflows to our country of about 50 per cent,” Hassan Janabi, minister of water resources, told The Independent…
“As Iraq begins to recover from 40 years of wars, its existence is being threatened by the rapidly falling water levels in the two great rivers on which its people depend…
“Iraq was once self-sufficient in food, but now imports 70 per cent of its needs. Locally grown watermelons and tomatoes are for sale beside the road or in the markets, but most of what Iraqis eat comes from Iran or Turkey or is purchased by the government on the world market…”
“Standing on his farm in southern Iraq, Amjad al-Kazaali gazed sorrowfully over fields where rice has been sown for centuries — but which now lie bare for lack of water. For the first time, this season Kazaali has not planted the treasured amber rice local to Diwaniyah province. Facing an unusually harsh drought, the agriculture ministry last month suspended the cultivation of rice, corn and other cereals…”
“So far, an estimated one million people – in 13 upazilas – have been affected. Eight people have died and infrastructure has been severely damaged. What’s more, Bangladesh is currently in monsoon season which is not due to end till September/October, meaning even more lives are at risk.”
“There’s no relief in sight for stubborn wildfires flaring all over the Western U.S., including one that began Saturday in northern California that forced the evacuation of hundreds of people northwest of Sacramento.”
“A trade war is taking a heavy toll on Colorado farmers who export more than $2 billion in products each year…[which] comes as the agriculture industry already struggles with drought, a labor shortage and soft commodity prices.”
“The humid air mass coming from Ontario has anchored itself over Southern Quebec, according to a heat warning issued by Environment Canada, and is expected to last another four days. Sunday’s temperatures, with humidex, reached more than 45 C in Montreal and Monday’s are forecast to go up to 44.”
“Scotland has recorded its hottest ever temperature, according to provisional figures from the Met Office. On Thursday 28 June, a temperature of 33.2C degrees was measured in Motherwell, North Lanarkshire. It exceeds the 32.9C recorded in August 2003, at Greycrook in the Borders.”
“Parts of southern England experienced the driest June on record last month, with just 6 per cent of expected rainfall – while it was the hottest June on record for Northern Ireland and Wales, the Met Office revealed today.”
“Hot weather continues to spread across Azerbaijan. The country’s capital city is experiencing its hottest weather in over 120 years.
“Temperature in Baku reached +43-44 ˚C on July 1, according to the Ministry of Ecology and Natural Resources. An abnormal heat is expected in the capital and Absheron peninsula on July 3-4.
“Head of a department at the Ministry of Ecology and Natural Resources Umayra Tagiyeva said earlier that one of the indicators of climate change is the anomalous summer.
““The analysis shows that when comparing the weather in 1961 and 1990, the number of hot air flows has increased significantly. If earlier in the summer three hot airflows were recorded, then over the past 25 years, their number has reached 17,” she said.
“Tagiyeva added that this trend will be observed this year too. The most anomalously hot weather will rule on the territory of the Republic in July and August. At the same time, the heat will be long. The air temperature on some days will exceed the climatic norm by five to six degrees.
“Earlier, Baku citizens experienced abnormally hot weather last August. The temperature reached +41.6 ˚C.”
“Saudi Arabia’s General Authority for Meteorology and Environmental Protection is forecasting a heatwave in some areas of the kingdom from Tuesday. The organisation said temperatures in the Eastern Province and eastern parts of Riyadh could exceed 48 degrees celsius and dust may affect horizontal vision during the day from Tuesday until the beginning of next week.”
“The past month was the second-hottest June on record in China. And to make matters worse, the heat wave isn’t going away anytime soon, with temperatures expected to flirt with 40 C within the next few days in some regions, weather forecasters warned.”
“Typhoon Prapiroon will bring potentially flooding rain and strong wind to southern Japan and South Korea during the beginning of the week. On Monday morning, local time, Parapiroon strengthened from a severe tropical storm to a cyclone as it approached South Korea.”
“Heavy rains have stalled flights and ferries across South Korea, causing massive flooding in farms and residential areas in some parts of the country. Torrential rain has led to warnings as the country experienced 80mm to 440mm rain per day over the weekend, according to forecasters.”
“Flash floods in Des Moines, Iowa, have claimed the life of Larry Cotlar, a popular longtime sports radio host, according to the Des Moines Police Department… Six to 8 inches of rain fell in a 12-hour period in Polk County and neighboring Story County. One creek just west of downtown Des Moines rose over 15 feet in just 3.5 hours.”
“Record-challenging temperatures were felt across a majority of the Northeast on Sunday, including several bigger cities. Allentown, Pennsylvania, was one of the hottest spots in the region, where the temperature reached a blistering 98 degrees Fahrenheit with a maximum AccuWeather RealFeel Temperature of 105 F.”
“Britain’s summer heatwave could see lettuces disappear from supermarket shelves across the UK, growers have warned. However, experts say the heat is causing chaos for lettuce producers in the UK, with shortages expected to become apparent in shops within the next fortnight… “The record temperatures have stopped the lettuce crop growing, when the mercury hits 30C lettuces can’t grow.””
“It’s bone dry this month as well as hot. Hardly a drop of rain has fallen in many parts of the [UK] over the past few weeks, and with little sign of any rain soon this is going to be one of the driest Junes on record.”
“After an unusually cold and snowy winter, Norway is now in a heat wave that has been there since the beginning of May. There has been too little rain, and many farmers are now at risk of losing their crops. It was also announced last week that there is a lack of CO2 to clean the drinking water.”
“A man was killed when a wall collapsed due to the record downpour in Mathura [UP, India], officials said today. Owing to the record 98 mm rain received in the last 24 hours, the low-lying areas of the city were inundated.”
“A heavy downpour equivalent to half the average rainfall of the entire month of June caused flash floods in the central and western parts of Singapore on Friday (June 29) morning. In a statement, PUB said about 85mm of rainfall was recorded from 9.30am to 11.30am on Friday, more than half the average rainfall of 130.7mm in the entire month of June.”
“About 110 millimeters of rain fell around Kawasaki, Fukuoka Prefecture [Japan], in one hour between 6 a.m. and 7 a.m. on June 29, according to weather radar analysis and rain gauge measurements by the headquarters. Minami-Shimabara, Nagasaki Prefecture, also received about 110 millimeters of rain between 9 a.m. and 10 a.m. on the same day. Yukuhashi, Fukuoka Prefecture, recorded 107 millimeters of rain in three hours through 7:40 a.m., breaking the city’s previous record from 1976.”
“At least a dozen wildfires were raging on Friday in drought-stricken portions of Colorado where hundreds of residents have been evacuated as a wave of prime wildfire weather conditions move through the U.S. West.”
“Severe thunderstorms tore from the mid-Mississippi Valley to the Gulf Coast on Thursday, leaving an extensive trail of damage in their path. The storms were fueled by the intense heat and humidity that continues to build across the eastern half of the country.”
“A city in Oman just posted the world’s hottest low temperature ever recorded: 109 degrees. Over a period of 24 hours, the temperature in the coastal city of Quriyat, Oman, never dropped below 108.7 degrees (42.6 Celsius) Tuesday, most likely the highest minimum temperature ever observed on Earth.”
“Torrential overnight rain in Gifu Prefecture, central Japan, washed away an embankment, temporarily leaving about 80 people stranded… Rainfall of 52 millimeters was recorded in one hour between 3 and 4 AM Thursday in Hagiwara, Gero City.”
“Farmers who know what it’s like to battle drought, fire and floods are loading 400 emergency bales of hay on to 30 semi-trailers to help struggling graziers more than 1,300km away. Feed stock prices have doubled as drought conditions worsen in parts of eastern Australia.”
“Persistent drought in the remote northwestern Chinese region of Inner Mongolia has caused a rat plague now affecting more than 4 million hectares of grassland, an area the size of the Netherlands, the official Xinhua news agency said.”
“An out-of-control wildfire burning southeast of Hinton, Alberta had swollen to an estimated 700 hectares in size by Wednesday night and officials said 25 firefighters were working along with heavy equipment to battle the blaze.”
“This week is set to be hottest on record but on March 18 – just 15 or so weeks ago – schools [in Wales] were closed, roads were shut and communities were forced to pull together to help emergency services get on with their job.”
“Water companies… called for Brits to limit their showers to just four minutes in a bid to safeguard supplies, as the Met Office claimed it was ‘touch and go’ whether or not this month could be the driest June on record.”
“The current rate that we’re clearing the Amazon and other tropical forests in Southeast Asia and Central and West Africa is putting us on a course for rapid, irreversible, and catastrophic climate change, with an intensifying cycle of extreme droughts, more heat, and more forest fires. All told, deforestation accounts for an estimated 15 percent of total greenhouse gas emissions.”
“According to the research team, the rate of [Antarctic] ice loss has accelerated to 219 gigatons per year between 2012 and 2017, a bit more than the peak flow rate of Niagara Falls. That’s 219,000,000,000 metric tons.”
“As far as I know, your work is unique in pulling together stories from all over the world. Very sobering but a better and more complete view. Terrific and necessary work. Thank you!” – Simon
“With the inundation of so much depressing news, Justin Panopticon presents it in a succinct format that one can quickly go thru and see the big picture of climate and economics/politics to stay current and if a particle topic is of interest one can delve into the details… I try never to miss any of his posts…I am a Patreon of his work.”
– Karina S.
About This Site
Weekday updates on both climate change and the global economy. Stay current with what’s happening around the world with a quick scan of top news.