“Well it is truly remarkable. Not so much the result of the election, which is surprising enough. But, rather, the fact that following the “Brexit election”, one in which traditional party loyalties seem to have been stretched to breaking point by the leave-remain divide, we emerge not knowing what kind of Brexit the prime minister intends to deliver…
“Departure itself will be a seismic event….
“The kind of bare bones Free Trade Agreement envisaged by some in the Conservative party would have profound consequences for manufacturing jobs. Industry bodies have not been slow to express their concerns.
“In mid-October, the aerospace, automotive, chemicals, food and drink and pharmaceutical industries wrote to the government to warn that the kind of relationship with the EU that the government seemed to be contemplating could pose a “serious risk to manufacturing competitiveness”. Meanwhile, the Society of Motor Manufacturers and Traders has argued that a WTO exit would lead to UK car production falling by more than a third.
“The stakes, in other words, could hardly be higher.”
“Germany’s worst manufacturing downturn in a decade is set to drag on economic growth at least through 2020 as domestic demand will increasingly be hurt by a weakening labor market, according to the latest projections by the country’s central bank.”
“Forecasts for South African growth were slashed in a Reuters poll of economists taken as rolling power shortages got worse, suggesting the poll’s median 40% chance the country has sunk into a recession may be too low…
“Barclays analysts wrote that they see clear downside risks in South Africa, given the ongoing decline in the South African Reserve Bank’s leading indicator for economic activity.”
“Algeria “is on course for a full-blown economic crisis in less than two years,” Anthony Skinner, Middle East and North Africa director at consultancy Verisk Maplecroft, wrote in a report earlier this year.
“”The pace at which Algeria is burning through its foreign exchange reserves is not sustainable.””
“Ratings agency Fitch cut Lebanon‘s credit rating for a third time in a year on Thursday, warning it now expects the crisis-hit country to restructure or default on its debt…
“Discontent with economic mismanagement and corruption in Lebanon exploded into nationwide protests starting in October.”
“Now Lebanon’s crisis is rippling across the border into Syria. Their economies have long been linked…”
“India’s economy continued to report deepening signs of a slowdown with October factory production figures contracting as much as 3.8%, dragged by manufacturing which shrank 2.1% as well as power and mining, which declined even more.
“Government data also showed retail inflation shot up to a 40-month high of 5.54% in November.”
“A a severe slump [has] taken hold in India’s gems and jewellery industry, a key sector of the economy employing almost 5 million workers and contributing about 7% of India’s gross domestic product.
“It’s the latest pillar of the economy to wobble, as a funding crisis hits everyone from carmakers to retailers.”
“Onion prices in [India] have soared tenfold this year, sparking a nationwide outcry, questions in parliament, a spate of bizarre onion-related crime and dozens of viral memes as the outraged citizens of the world’s second most populous nation find themselves unable to afford their staple food.”
“Like many of his colleagues, Kevin Wong (not his real name) had been politically apathetic until teargas and a hail of rubber bullets fired a short distance from his downtown Hong Kong accountancy firm made him join an anti-government protest movement and reconsider his future in Asia’s once glittering financial hub.”
“Reports that the US and China have reached an initial trade deal were met with silence in Beijing where officials declined to confirm whether an agreement had been made.
“Asked about the status of the trade talks during a daily briefing on Friday, the Chinese foreign ministry spokeswoman Hua Chunying reiterated that Beijing was committed to resolving outstanding issues but that a deal had to be mutually beneficial.”
“A key economic conference presided over by Chinese President Xi Jinping has called for “contingency plans” to deal with the daunting economic slowdown of the world’s second largest economy accentuated by the 18-month long trade with war with the US.”
“Car sales in China are set to slump for a third year running, indicating that the industry may already have hit “peak car” in an alarming development for motor manufacturers… Luo Lei of the China Association of Automobile Manufacturers (CAAM) warned that there are still no signs of recovery in the market as the forecast was unveiled.
“The falls …are part of a worldwide trend…”
“U.S. business debt exceeded that of households for the first time since 1991, a potential warning sign for the economy as corporate investment softens. …
“The Fed’s Powell has said corporate leverage ‘historically high’.”
“The $2.2 trillion repurchase agreement market – part of the inner workings of the U.S. financial system – is facing what could be another strain as the year comes to a close. That could have wider implications than just Wall Street.
“Whether [the Fed’s intervention] will be enough to offset the traditional year-end strains will be tested next week, when companies will again face tax obligations while $78 billion in Treasury supply will also need to be settled. At the year-end there is also typically a reluctance by banks and fund managers to lend, which can leave borrowers struggling to raise cash.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“The U.S. budget deficit rose by 2% last month to $209 billion, another step in a journey back toward $1 trillion-a-year budget shortfalls.
“The Treasury Department reported Wednesday that the federal government took in $225 billion in tax and other revenue but spent a record $434 billion in November.
“November is the second month of the government’s 2020 budget year.
“In the 2019 budget year, the government ran up a deficit of $984 billion, the most in seven years.
“The Congressional Budget Office is forecasting that the deficit for 2020 will hit $1 trillion and will stay above $1 trillion for the next decade. The country last ran annual $1 trillion annual deficits from 2009 through 2012 during and after the financial crisis…
“So far this budget year, the government is running a deficit of $343 billion, up 12% from a year earlier.”
“The Federal Reserve left borrowing costs unchanged at its last policy meeting of the year on Wednesday and signaled that policymakers saw no need to boost the economy further anytime soon…
“Policymakers lowered the benchmark interest rate three times this year, to a target range of 1.5% to 1.75%, which appeared to help stabilize an outlook that had become increasingly uncertain.”
“Home Depot… cut its sales forecast for 2020, signaling to investors that there could be weakness in the housing market ahead. Shares fell 2% in early trading Wednesday.
“The disappointing 2020 forecast comes amid reports that the US housing market is poised to slow in 2020.”
“Argentina will open talks with bondholders to delay the nation’s debt payments, Guzmán said in his first public comments as minister, adding that he’s already negotiating with the International Monetary Fund (IMF) for a new programme amid a recession.
“He believes investors understand Argentina can’t currently pay its debt.”
“Vaca Muerta, a huge sweep of western Patagonian wilderness, sits on the world’s second largest reserve of shale gas and its fourth largest oil reserves.
“A push to develop extraction amid Argentina’s crippling economic crisis has made the area a magnet for international oil companies. Crucially, Vaca Muerta is also home to indigenous Mapuche communities who say their rights are being denied.”
“The Venezuelan refugee crisis is the most underfunded in modern history, according to an analysis from the Brookings Institution published this week.
“About 4.7 million Venezuelans, 16 percent of the country’s population, have fled Venezuela since its economy suffered a 65 percent contraction in 2013, the largest outside of war in 45 years.”
“Lack of fuel is forcing Cubans to return to animal power for farming, transport and travel…
“Once the fields were ploughed by tractors, plus some animal help, but now beasts of burden are the only option, meaning the job of ploughman has made a comeback too in Cuba’s fields.”
“Algeria on Thursday held a presidential vote bitterly opposed by a protest movement that sees it as a regime ploy to cling on to power…
“Turnout was expected to be extremely low after demonstrators shouting “no vote” again pressed their demand for a boycott on the eve of the polls, facing off with truncheon-wielding riot police in Algiers.”
“Southern Africa’s third largest economy is a textbook example of the increasing debt facing a fast-growing continent…
“Resentment of China is growing, especially in the copperbelt region, which generates 70% of Zambia’s export earnings. The government is widely criticised over its social policies.”
“Zimbabwe is in the grip of its worst economic crisis in 10 years, with inflation soaring to 300 percent and the population suffering fuel shortages, power rationing and currency woes.
“Emmerson Mnangagwa, who succeeded Robert Mugabe after a military intervention forced the longtime president to resign, has struggled to revive the economy while the long-standing financial troubles have been worsened by extreme weather shocks.”
“Lebanon‘s 2019 budget deficit will be much bigger than expected after a sharp drop in state revenues, caretaker Finance Minister Ali Hassan Khalil said on Wednesday
“…as the country struggles with its worst financial crisis since the 1975-90 civil war.”
“Saudi Arabia may tap international debt markets as early as next month as it seeks funding to help bridge its widening budget deficit, reported Bloomberg.
“Fahad Al-Saif, the Head of the Finance Ministry’s Debt Management Office, said, “Most of the debt will be local and around 45 per cent will be raised overseas through Sukuk and conventional bonds.””
“Rents for residential property in Hong Kong will continue to decline over the next few months as a weakening economy raises concerns over employment, market observers said…
“Between August and November, rents fell by 5 per cent as the anti-government protests escalated and the city’s economy entered a technical recession, said Wong Leung-sing, senior research director at Centaline.”
“A major Chinese commodities trader became the biggest dollar bond defaulter among the nation’s state-owned companies in two decades, in a moment of reckoning for Beijing as it struggles to contain credit risk in a weakening economy.
“Tewoo Group Corp announced results of its unprecedented debt restructuring, which saw a majority of its investors accepting heavy losses.”
“Several mutual funds with exposure to Peking University Founder Group Co.’s bonds plunged after Founder defaulted last week on a 2 billion yuan ($285 million) bond.
“Meanwhile, as a deadline for repaying investors drew near, Founder’s largest shareholder made a move that could affect the company’s ability to resolve the crisis.”
“Japan saw another decline in machinery orders in October in a fresh sign business spending, one of the few points of strength in the world’s third-largest economy, is stalling as slumping exports bruise investment appetite…
“Core machinery orders fell 6.0% in October from the previous month, down for a fourth straight month…”
“Credit ratings agency Moody’s has downgraded its outlook for European banks to negative, predicting that weak economic growth will cause loan quality and profitability to suffer over the coming year.
“The agency has already downgraded its outlook for the UK, German and global banking systems, again citing weak growth and a highly uncertain 2020.”
“The U.S. economy may be chugging along this holiday season, but according to a new survey of CFOs by the Duke University/CFO Global Business Outlook, 52% of CFOs of U.S. companies expect a recession next year.
“Another 24% predict that recession to hit by mid-2021.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“Trillions of dollars of market value could go up in smoke due to climate change.
“The damage hits the global economy in multiple ways. The first is the most obvious. Physical damage from more powerful natural disasters is on the rise. 2017 and 2018 were the costliest back-to-back years for economic losses related to natural disasters, according to risk and reinsurance firm Aon.
“But the danger grows worse when the physical damage starts to reprice portions of entire asset classes.”
“In the land of rising household debt, Canadians have one more thing to worry about.
“Delinquency rates are moving higher as the cost of living increases and servicing debt takes a bigger share of disposable income, according to TransUnion Canada.”
“The productivity of American workers in the third quarter fell a bit less than previously reported, but it still marked the first contraction of productivity in almost four years.
“Nonfarm business sector labor productivity, a measure of economic output for each hour worked, fell 0.2 percent in the third quarter…”
“Argentina is willing but unable to pay its debts under current conditions and needs the economy to grow again before meeting its obligations, President Alberto Fernandez said in his first speech after being sworn in.
“The government will seek “constructive and cooperative” dialogue with the International Monetary Fund and bondholders to address the debt load.”
“An economic downturn with ballooning inflation and a lack of investment in low income districts [Haiti] has… helped boost crime, turning them into no-go areas.
“The situation – which diplomats fear represents a growing threat to regional stability that could have knock-on effects on migration and drugs and weapons trafficking – is causing alarm in international circles.”
“High household debt levels and high property prices pose significant risk to Norway’s financial stability, the country’s bank regulator said in a report on Tuesday…
““The debt burden, measured by the ratio of debt to disposable income, has reached a historically high level and is higher than in the majority of other countries.””
“Boris Johnson and Jeremy Corbyn are to embark on a final frantic 24 hours of campaigning as both teams insist the UK election remains closely fought and that polls giving the Conservatives a lead could be wrong.
“Both Labour and the Conservatives have branded Thursday’s vote the “most important in a generation” as the two sides have vastly different plans for Brexit and spending on public services.”
“France is experiencing another day of disruption and protests over major changes to the pension system planned by the government.
“Mass union-called demonstrations have been held on Tuesday – the sixth straight day of action. Public transport in Paris has been badly affected and workers have also blockaded several oil refineries.”
“The years of economic upturn in Germany appear to be over for the time being. Downturn is the word of the moment as international trade conflicts, a slowdown in world trade, and the Brexit cliffhanger all impact Germany’s economy.
“These global conflicts are striking particularly hard at Germany’s export-oriented industry.”
“Protesters have been out in force ahead of Algeria’s presidential election on Thursday, arguing it offers no real choice to the public.
“In the wake of months of demonstrations, two former prime ministers and other senior political figures were jailed for corruption, in an apparent attempt to calm protests.”
“Protesters in Tripoli, Lebanon took to the streets outside leading the home of Sunni Muslim politician, Saad al-Hariri, after he re-emerged as a candidate for prime minister.
“The clashes come amid the country’s worst economic crisis since the 1975-90 civil war…”
“Iraq‘s south saw further protests and explosions, as demonstrations against the government and its Iranian sponsor that erupted on October 1 persist unabated, according to security sources.
“The southern city of Amara was rocked overnight by four near-simultaneous explosions targeting premises of two pro-Iran armed factions, according to police.”
“[In India] Consumption demand has fallen as disposable incomes have shrunk due to low growth.
“The sales of domestic vehicles declined across all categories in India by 12.05% in November compared to last year’s figures. “
“India‘s power demand fell 4.3% in November from a year ago, representing the fourth straight month of decline, government data showed, potentially reflecting a worsening industrial slowdown which has stifled overall economic growth.”
Coal’s use for power in India is set to shrink for the first time in at least 14 years as demand slows… Coal generation fell for a fourth month in November, the longest such streak in government data going back to 2005. That echoes a decline in consumption…”
“China‘s new energy vehicle output fell 36.9% year on year to 110,000 units on November, continuing year-on-year declines posted each month since July…
“The country’s NEV sales fell 43.7% on year to 95,000 units in November…”
“Global TV advertising sales fell almost 4 per cent in 2019, the steepest drop since the depths of the economic recession in 2009…”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
““We live in a world where we have been hit by waves of social unrest, populism, nationalism, asset bubbles, trade wars, currency wars — we have a chaotic environment,” economist Vikram Mansharamani said, adding that the root causes for all of these include oversupply in the field of technology and energy, and ageing of the world’s largest economies that prompt consumers to spend less.
“When we put these together we have global deflationary pressures,” he said. “So in a world where there is not enough demand and too much supply, countries compete using currencies to boost exports, resulting in a winner-take-all market, inequality and social unrest.”
“This is tailed by nationalism and populism, with people being led to assign blame, followed by protectionism and taxes on imports, Mansharamani said…
““The global economic uncertainty does not limit to just US-China, but ripple effects extend into US-Europe, Japan-Korea, which are paralysing corporate boardrooms of multinational companies as they are no longer investing the way they were,” Mansharamani said. “Global supply chains are shifting away right now, companies are saying that they cannot have sole supplier risk in China or others.”
““So when we put all these pieces together, it shows that in the next 24 months there is a high propensity or high probability that we will face the heat of a recession,” he said, adding that these signs, which usually come 12-18 months before we have a recession, show that the economy is within 36 months of a downturn.”
“A dairy farmer cannot plan for the future because the price paid for his milk has been held hostage by Brexit; a customs broker is cautiously preparing for a big expansion of business, but fearful if he makes the wrong call; a tech executive in London whose payroll relies on European Union workers wonders how she will fill her job vacancies; and two building cleaners, whose livelihood has been rocked by outsourcing, dread the loss of job protections built on rules from the Continent.”
“French commuters experienced a chaotic journey getting to work on Monday as public sector workers entered a fifth consecutive day of nationwide strikes.
“The traffic lines totaled more than 500 kilometers (310 miles) getting into the French capital Monday morning… Nationwide, public sector workers have protested against government plans to update the pension system since Thursday.”
“Namibia’s economic crisis, lack of jobs and the crippling drought are increasing the risk of suicidal behaviour, experts have warned on Monday.
“Statistics released by the Namibian police Friday show that 373 people committed suicide in the first nine months of this year.”
“South Africa’s state power company intensified rolling blackouts to a record, signaling a deepening crisis at the debt-ridden utility and raising the risk of a second recession in as many years…
“The utility is curbing power for a fifth straight day as it struggles with breakdowns at plants and heavy rains that have soaked coal used as fuel.”
“Six weeks since Saad al-Hariri resigned as prime minister, prompted by protests against the ruling elite, the financial crisis is generating concerns for Lebanon’s stability:
“banks are enforcing capital controls, dollars are scarce, and the Lebanese pound has lost a third of its value on a black market.”
“UN representative in Iraq Jeanine Hennis-Plasschaert is calling for action against what she called “pervasive corruption” in the government, as the death toll from ongoing, massive protests has exceeded 400 since early October…
“Protesters say rampant government corruption is to blame for severe unemployment, grossly inadequate public services and unwanted Iranian influence on security and politics.”
“Global rating agency Moody’s on Monday said pressure on Indian finance companies continues to build up, with some banks heavily exposed to non-bank credit providers, hinting that India’s NBFC crisis is far from over, even after a year since the troubles began when a major shadow bank IL&FS Group abruptly defaulted.”
“About 30 per cent of respondents in a survey by the Hong Kong Retail Management Association said they’ll cut jobs while 43 per cent said they can’t continue to operate beyond six months.
“”If cash flow doesn’t improve and landlords don’t help, there will be a wave of layoffs and business shutdowns,” Ms Annie Tse, the association’s chairwoman said in a press briefing on Monday (Dec 9). “This will be the worst ever in history.””
“China’s consumer prices rose at their fastest pace in almost eight years in November as food costs surged but producer prices declined for the fifth straight month, complicating policymakers’ efforts to boost demand as economic growth slows…
“However, domestic demand stayed subdued as core inflation – which excludes food and energy prices – showed only modest pressure.”
“Following a series of rate cuts by China’s central bank, the corporate bond market has been cheered by declining yields, but only state-owned enterprises seem to have benefited from lower borrowing costs and private companies are still struggling… The number of bond defaults by Chinese onshore companies just broke another record this year.”
“The first problem Fernández will have to face is the renegotiation of Argentina’s debt, both external debt held with private bondholders and that owed to the International Monetary Fund (IMF).
“For this task, he has chosen Martín Guzmán as his economic minister, who considers it “imperative” that payments for both capital and interest are restructured.”
“…the mobilizations in South America took many by surprise.
“Over the past three months, virtually every Andean nation…
“…Venezuela, Ecuador, Peru, Bolivia, Chile and Colombia — has erupted into mass protest.”
“The [US] trucking “bloodbath” of 2019 is taking another remarkably dire turn as the year draws to a close. Indianapolis-based Celadon, a truckload carrier that grossed $1 billion as recently as 2015, filed for bankruptcy on Dec. 9. It’s poised to be the largest truckload bankruptcy in history, leading industry publication FreightWaves reported on Friday.”
“Tullow Oil has been plunged into crisis after it ousted its boss, slashed production forecasts and axed the dividend – sending shares crashing to a 20-year low…
“It will trigger massive paper losses for thousands of retail investors, who hold around 15pc of Tullow’s stock between them.”
“This is a Google Trends chart on searches for the word “recession” that I published in a column over the weekend. It shows that fears suddenly spiked in midsummer to their highest level since the last actual recession:”
“Interest rates are ultra-low in part because global investors are starved of “safe” assets that will still payout in the event of a sharp downturn or economic catastrophe. But can governments, in fact, provide that insurance for free if there is a risk that interest rates will rise in the next major systemic crisis?
“A recent International Monetary Fund study of 55 countries over the last 200 years showed that although economic growth exceeded interest rates on government debt almost half the time, this was not a good predictor of whether the surveyed countries were safe from interest-rate spikes in a crisis.
“Modern economies have many important uses for debt. But it is never a risk-free option for governments, which is why it should be taken on and managed wisely, even when rock-bottom borrowing costs prevail.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“Other than the record bull market in stocks, it is hard to name one good thing on the global economic front. Trade and investment are declining, as are economic growth rates and business confidence…
“…But stock markets in the US and elsewhere have marched on regardless, buoyed by continuing monetary easing…
“This financial house of cards must surely collapse and it looks like this will happen sooner rather than later.
“If stock markets do enter a correction, that could create a perfect storm. So much hangs upon the wealth effect and inflated asset values created by the equity bull market…
“The sun goes down and the sun comes up but the coming eclipse could be scary indeed.”
“This isn’t just affecting Alberta alone, across the country 38,400 full-time jobs and 32,800 part-time jobs were lost in November. Canada’s overall unemployment rate went up 0.4 percent since October being the biggest one-month hike since 2009…
“Jim Sparrow, a long-time realtor in Calgary told the CBC that “the resale prices have been falling for almost five years since the price of oil fell.”
“The Calgary Herald estimates that Alberta is home to 93,000 inactive and orphaned oil and gas wells.
“While many of those wells are owned by financially viable companies, an increasing number are not. This represents a “looming financial and environmental crisis” reminiscent of the 2008 subprime mortgage crisis…”
“South Africa’s state power utility Eskom is one of the biggest challenges facing the country. Mess up Eskom, and you mess up the country. And it looks as though key players are doing just that…
“What we see in Chile, where public anger has spilled out onto the streets, is what can be expected to emerge as ordinary South Africans experience the true implications of this failure to decisively resolve the crisis. are responsible for triggering a crisis that will be resolved on the streets.”
“Lebanese caretaker Prime Minister Saad al-Hariri wrote to the leaders of Germany, Britain and Spain on Saturday to request help in securing credit for imports, his office said.
“Lebanon is suffering an economic and financial crisis that has led to hard currency shortages, impeding imports.”
“As a consequence of the year-long slowdown in sales of automobiles across the country, the total turnover of the automotive component manufacturing industry declined by 10% year-on-year to ₹1.79 lakh crore in the first half of the fiscal ending March 2020…”
“China’s economy is slowing and that could bring more bad news for India already hit by six-year low GDP growth in the last quarter.
“The ‘dragon nation’ is expected to try and dump products not only in India’s traditional markets abroad, posing a challenge to its faltering exports, but also in the Indian marketplace, making life more difficult for domestic manufacturers, already buffeted by a demand crunch.”
“China’s car sales continued their decline in November, extending a historic slump and all but ensuring a second straight annual drop for the world’s biggest market.
“Sales of sedans, sport utility vehicles, minivans and multipurpose vehicles fell 4.2% from a year earlier to 1.97 million units…”
“China’s exports in November fell 1.1 per cent from a year earlier, marking a fourth successive monthly decline as the pain of the trade war with the United States continues to hit the world’s second-largest economy.
“The dip was below the expectations of a group of analysts polled by Bloomberg…”
“China’s coal imports plunged 19% in November from the previous month as tighter import rules at ports curbed shipments towards the year’s end…
“Customs officials at several ports in Guangdong, Jiangsu and Shandong province in eastern China have halted clearance for vessels carrying coal since late October…”
“A state-owned enterprise (SOE) in China’s northern province of Inner Mongolia defaulted on part of a 1 billion yuan ($142.1 million) privately-issued bond over the weekend, the latest in a string of corporate delinquencies that has raised concerns about contagion risk as the economy slows.”
“The South Korean economy continues to be mired in an economic slump for the ninth month in a row without clear signs of recovery in exports and investment, state think tank said on Sunday…
“The state-run think tank noted that industrial production in the manufacturing sector has slowed down amid a significant fall in exports due to sluggish demand at home and abroad.”
“First it was Japan. Then Europe. Now investors are scanning the world for the next outbreak of stagnant inflation and tumbling yields.
““Central banks have no choice but to be supportive of risk assets and asset prices until such time as fiscal expansion is possible,” said Nomura Asset Management’s Richard Hodges.”
“European [bank] bosses have been left with little option but to slash tens of thousands more jobs to try to address their chronically poor profitability.
“Hemmed in by the European Central Bank’s long-term extension of negative rates, slowing economic growth, Brexit and burgeoning regulatory requirements, lenders across Germany, UK, France, Spain and Switzerland have collectively announced more than 60,000 jobs cuts this year.”
“The great global deregulation has begun.
“The signs are subtle so far, but last week threw up four pieces of evidence that the US and Europe are poised to compete to ease bank regulation — in turn threatening the co-ordinated global approach that has helped make the international banking system safer in the decade since the financial crisis.”
“When one of the more arcane bits of the global financial system’s plumbing seized up in September the authorities were quick to dismiss it as a one-off event. It’s now clear the meltdown in the US “repo” market was due to circumstances that were more complex and disturbing than the initial diagnosis suggested.
“Significantly, the malfunctioning of the US repo market showed the policies of central banks and prudential regulators have changed the roles and diminished the capacity of banks to respond to stresses in key parts of the financial system.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“Warnings abound about a repeat of the 2008 financial crisis, which stemmed from reckless property market lending in the US.
“This time the risks are different. If a crisis erupts it will be due to high national debt, primarily in the US, Japan and UK, as well as the liquidity pumped into the global system over the last decade…
“As governments are reluctant to raise taxes or cut spending on welfare, the only option left is for central banks to print money. This has produced the strange phenomenon of ‘free money’. Unfortunately, even with money available at little to no cost, lacklustre growth is holding the business sector back from borrowing to invest.
“Banks are left with useless cash. If they wish to deposit money with a central bank, they must pay to do so. Burdened with too much cash, they cannot offer attractive interest rates to people and institutions depositing money. Squeezed between deposits with no remuneration and a lack of lending opportunities, banks lose their normal role as an intermediary between saver and investor, experiencing a worrying fall in earnings and solvency needed to survive if a crisis erupts.
“Normally, such policies would lead to inflation, but consumer prices have been steady and in some instances falling. ‘Free money’ has, however, placed property prices, gold and new assets like bitcoin in an inflationary cycle. Traditional remuneration linked to economic activity has been replaced by the purchase of assets in the expectation of capital gains.
“This explains stock markets’ astonishing performance. Rather than paying to deposit money in a bank, investors are flocking to stocks, driving prices up to record highs, out of tune with the real economy in the grip of low growth. These investors are mainly financial funds, looking to make a profit off stocks rather than run the companies in which they invest.
“The lack of confidence in the system has popularised new assets linked to digitalisation…
“In a sound economy, the asset market is linked to the markets for goods and services. This allows investors to switch from goods and services to assets and vice versa. There is a certain equilibrium between asset prices and prices on goods and services, reflecting what market forces see as reasonable prices on assets that ultimately will be converted into consumption and investment. Investment in assets can be viable in the long run only if it is underpinned by production capacity for consumption. That is possible only if money and capital are not drained from productive investment into assets like gold and bitcoin.
“The next crisis will materialise when investors realise that the two markets have disconnected. Asset prices will be seen as too high compared to the market for goods and services. Investors will rush to sell assets, wishing to purchase goods and services. Asset prices will plummet as there will be no demand for this surge in supply. Investors who borrowed easy money will go bankrupt and drag the economy down. Banks will be hit as investors will be unable to repay their loans.”
“Central banks are set to keep pumping money into the economy in 2020.”
“Weakening economic growth, low interest rates and more volatile operating conditions will increase the credit challenges for lenders across the world, Moody’s Investors Service said in a report published today. The agency cut its outlook [for banks, globally] from stable to negative.
“A return to monetary easing and the use of negative interest rates in some regions has ramped up the pressures on profitability.”
“Former Fed Gov. Daniel Tarullo on Thursday said the turmoil in the crucial short-term lending [repo] market in September raises a fundamental question for regulators — will the new rules put in place in the wake of the 2008 financial crisis exacerbate an “over-hoarding” of capital during market stress?”
“For all the marked policy differences between the different parties in the UK election, they share a common blindspot. They all seem to assume that the UK is the sole determiner of its economic fate.
“There is nothing in the party manifestos about how they would respond to the very real threat of another major downturn.”
“Police have been seen dragging and beating protesters as demonstrations in Paris turned violent.
“Officers deployed tear gas and used pepper spray as demonstrators threw projectiles and firecrackers.”
“Germany’s sprawling industrial sector is suffering its steepest downturn for a decade, underlining how the engine of the eurozone’s biggest economy is sputtering.
“Industrial output, which includes Germany’s dominant factory sector, dropped 5.3 per cent [!] in October from the same month in 2018, according to the Federal Statistics Office.”
“South Africa‘s rand was weaker early on Thursday as a batch of economic indicators showed the economy was still on its knees following a surprise third quarter contraction.
“On Tuesday, the statistics agency said growth shrank 0.6% in the third quarter, raising concerns the country could lose its last investment grade credit rating.”
“With an increasingly cash-strapped and hungry citizenry, the survival of Zimbabwe‘s current government will hinge heavily on keeping its security forces paid and happy.
“Though doing so will be no easy feat given the country’s depleted reserves…”
“More than a dozen people have been stabbed in a Baghdad square that has become a focal point for anti-government and anti-Iran protests after supporters of an Iranian-backed militia flooded the area.
“Thousands of men waving sticks, Iraqi flags and the insignia of the Hashd al-Shaabi armed group descended on Tahrir Square on Thursday morning.”
“A perfect storm of factors has created this situation — a disruptive monsoon, high NPAs and self-defeating policies.
“In just four quarters, India’s economic growth has declined from 8 per cent to a six-year low of 4.5 per cent.”
“Crisis-hit Hong Kong Airlines (HKA) is expecting a substantial amount of money to be pumped into its hands for survival by Saturday, when the government will decide its fate, CEO Sun Jianfeng has said.
““We will try our best to get enough money,” he said. “But it’s very short notice to get a huge [amount] of money.””
“China’s leaders are well aware that the post-2008 stimulus “became excessive”, says Simon Hunt in Halkin’s Thought For The Day newsletter. Too much of the lending and spending splurge ended up in “the stockmarket, property and other speculative activities” rather than the real economy.
“From local government to state-owned enterprises to a “myriad of small banks”, the indebted financial system is now paying the price.”
“Chinese private companies are defaulting on their debt obligations even after receiving government bailouts, raising questions over Beijing’s efforts to rescue listed groups using public funds…
“Of 339 listed private companies that have received government funding since the rescue campaign began in August 2018, 75 later reneged on payments even after local courts ordered them to pay up, according to public records.”
“Former Treasury boss Ken Henry says “something is desperately wrong” with Australia‘s economy, which is beset by “structural deficiencies” that cannot be fixed by interest rate cuts or government largesse…
“Dr Henry said the nation’s current economic weakness was potentially far more concerning because it appears to be driven by long-term “secular” problems, not a one-off shock.”
“The blockbuster growth in the world’s major cities in recent years will slow sharply in 2020 and 2021…
“Nine of the top 10 biggest global cities will slow next year, with the stars of the US Silicon Valley showing the most dramatic signs of slamming on the brakes…”
“The Opec oil cartel is considering deeper cuts to production next year to avert a price slump in the market as the global economy falters.
“Ministers from some of the world’s biggest “petro-nations” are expected to cut an extra 400,000 barrels of oil a day from the global market and may consider even deeper cuts of up to 800,000 barrels, according to reports.”
“Economies on the verge of collapse, a yearning for greater democracy, revulsion against corruption and inequality–the grievances that drove people into the streets in 2019 were consistent across continents.
“Some marched peacefully, others clashed violently with security forces, and in at least five places the unrest helped topple government leaders.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.