8th April 2020 Today’s Round-Up of Economic News

With each passing day, the 2008 global financial crisis increasingly looks like a mere dry run for today’s economic catastrophe. The short-term collapse in global output now under way already seems likely to rival or exceed that of any recession in the last 150 years.

“Even with all-out efforts by central banks and fiscal authorities to soften the blow, asset markets in advanced economies have cratered and capital has been pouring out of emerging markets at a breathtaking pace. A deep economic slump and financial crisis are unavoidable…

The problem, however, is that we are experiencing not just a demand shock but also a massive supply shock. Propping up demand may contribute to flattening the contagion curve by helping people stay locked down but there is a limit to how much it can help the economy if, say, 20-30% of the workforce is in self-isolation for much of the next two years.

“I have not even touched on the profound political uncertainty that a global depression can spark. Given that the 2008 financial crisis produced deep political paralysis and nurtured a crop of anti-technocratic populist leaders, we can expect the Covid-19 crisis to lead to even more extreme disruptions.”

https://www.theguardian.com/business/2020/apr/08/the-2008-financial-crisis-will-be-seen-as-a-dry-run-for-covid-19-cataclysm


‘Universal stay-at-home is the most devastating economic force in modern history and it is man-made. It very suddenly reverses the gains of underprivileged groups, kills and creates drug addicts, beats and terrorizes women and children in violent now-jobless households, and more. It bleeds deep anguish and suicide.’”

https://www.marketwatch.com/story/big-short-investor-who-made-a-killing-during-the-financial-crisis-the-economic-shutdown-is-worse-than-the-coronavirus-2020-04-07


Nearly one-third of U.S. adults who anticipate receiving a stimulus check say the money wouldn’t be enough to sustain their financial well-being for one month, according to a new Bankrate. com report.”

https://eu.usatoday.com/story/money/2020/04/08/coronavirus-how-far-will-your-stimulus-check-go/2960784001/


“The U.S. government’s massive effort to nurse the economy through the coronavirus crisis was billed as a send-money-and-don’t-sweat-the-details flood of cash to people and businesses in a $22 trillion system that has ground to a halt.

So far, the checks are not in the mail.”

https://uk.reuters.com/article/uk-health-coronavirus-usa-fiscal-analysi/wobbly-u-s-fiscal-response-could-deepen-coronavirus-recession-idUKKBN21Q0GO


US coal production will fall by 22% in 2020, as coronavirus-related stay-at-home orders drag down demand for electricity and coal mines have been idled for extended periods as a result of Covid-19.”

https://www.miningweekly.com/article/us-coal-production-to-slump-22-this-year-eia-2020-04-08/rep_id:3650


A higher proportion of Canadians are anxious about their economic situations during the COVID-19 outbreak than during the height of the global financial crisis in 2008, a new Research Co. poll has found.”

https://www.thestar.com/news/canada/2020/04/07/more-canadians-worried-about-coronavirus-affecting-savings-than-were-worried-about-2008-financial-crisis-poll.html


Fears are growing of a crisis in the UK’s £75bn car loan market, where 6.5m vehicles have been financed through leasing deals with monthly payments that are already proving unaffordable for some laid-off as a result of the coronavirus.”

https://www.theguardian.com/business/2020/apr/08/fears-of-crisis-in-uk-car-finance-market-as-owners-seek-payments-help


Hidden within [UK Chancellor] Rishi Sunak’s announcement that he is to bolster his interruption loans for small businesses is a startling confession; as of last Friday, of 130,000 enquiries made by businesses, just over 900 had been approved by banks

“Suddenly Sunak is asking the banks to take nearly half of the risk on loans to companies whose prospects are intrinsically uncertain as they face the greatest economic meltdown of our times.”

https://www.thelondoneconomic.com/business-economics/sunaks-small-business-rescue-plan-has-one-major-flaw-the-banks-dont-want-to-lend/07/04/


In its worst performance since 1945, the French economy shrank around six percent in the first quarter of this year as the coronavirus pandemic decimated business activity, the Bank of France said Wednesday.

“Official figures showed previously that the economy shrank 0.1 percent in the last three months of 2019, meaning that with two consecutive quarters of negative growth, the country is now technically in recession.”

https://www.france24.com/en/20200408-french-economy-drops-by-6-in-first-quarter-officially-in-recession


The eurozone banking system entered the coronavirus crisis in a weakened state with the sector’s profitability declining in 2019 for the first time in three years, according to new data from the European Central Bank.”

https://www.ft.com/content/a1a62090-eb86-49e8-a326-dda868110d46


Everyone knows that fighting a pandemic is costly. What’s even more worrying is how the costs of a slowdown—the sudden pressure on incomes and demand, in particular—will widen pre-existing cracks in the Indian growth story…

“The weakest link in the Indian economy is its banking sector.”

https://theprint.in/opinion/why-indian-banks-could-make-the-covid-19-economic-crisis-only-worse/397515/


Virus may swell China’s bad-debt pile by $790 billion: S&P…

“The economic dislocation from Covid-19 threatens to add 5.6 trillion yuan ($790 billion) of bad debt — more than double the amount Chinese banks already sit on — according to S&P Global Inc.”

https://www.bloomberg.com/news/articles/2020-04-07/china-braces-for-wave-of-soured-loans-with-new-bad-debt-manager


Even with a record stimulus package, Japan’s economy is heading toward a record contraction of 25 percent this quarter after Prime Minister Shinzo Abe declared a state of emergency in Tokyo, Osaka and some other parts of the country, according to Goldman Sachs.”

https://www.japantimes.co.jp/news/2020/04/08/business/economy-business/japan-economy-25-percent-contraction/#.Xo2EPchKjIU


Legitimate questions will arise about IMF resource adequacy… IMF staff are preparing for the possibility that more resources will be needed to weather the storm.”

https://www.omfif.org/2020/04/imf-facing-financing-quandary/


Stock markets are “totally unprepared” for how long economies will take to normalize after the coronavirus crisis, one strategist told CNBC Tuesday.”

https://www.cnbc.com/2020/04/07/coronavirus-markets-unprepared-for-time-economies-need-to-normalize.html


The number of ratings downgrades is skyrocketing. Defaults and bankruptcies are sure to follow. The pandemic is going to open quite a few cans of worms. One of those cans is the new New York Fed plus FDIC rule that banks don’t have to disclose balance sheets for the duration of the pandemic.

“This is… government complicity in banks lying to the public and institutional depositors and investors. Little children are taught that lying is always Bad.”

https://www.fxstreet.com/analysis/is-this-going-to-be-worse-than-the-2008-financial-crisis-202004071321


“”…An induced economic coma over more than three months could cause a self-feeding credit and liquidity crisis. The economic and financial storms would then reinforce each other to overwhelm the defensive system.”

https://www.telegraph.co.uk/business/2020/04/07/world-banking-system-cannot-weather-long-lockdown/


Unless the virus is contained within several weeks, declining output and falling demand for trade may provoke a vicious cycle that only worsens the outlook for corporate investment and employment, compounding the labor market’s problems.”

https://www.livemint.com/news/world/coronavirus-impact-the-evidence-mounts-that-the-global-recession-is-already-here-11586331002751.html


“Worldwide debt reached 322% of GDP last year, according to new figures which will worry governments planning post-coronavirus economic recoveries.

Worldwide debt across all sectors rose by $10trn (£8trn) in 2019 to more than $255trn (£206trn), and that was before COVID-19…”

https://news.sky.com/story/warning-after-worldwide-debt-reaches-322-of-gdp-11969934


Read the previous ‘Economic’ thread here and visit my Patreon page here.

7th April 2020 Today’s Round-Up of Economic News

As the coronavirus pandemic penetrates more deeply into global supply chains, prices for key staples are starting to soar in some parts of the world.

“Rice and wheat — crops that account for about a third of the world’s calories — have been making rapid climbs in spot and futures markets. For countries that rely on imports, this is creating an added financial burden just as the pandemic shatters their economies and erodes their purchasing power. In Nigeria, for example, the cost of rice in retail markets soared by more than 30 percent in the last four days of March alone…

“What is clear is that, while the world isn’t about to run out of food anytime soon, anxiety over policymakers’ ability to deliver it to the right place at the right time and at the right price is mounting.”

https://www.japantimes.co.jp/news/2020/04/07/business/economy-business/key-food-prices-surge-areas-virus-upends-supply-chains/#.Xowxy8hKjIU


The financial fallout from the coronavirus is spreading rapidly and that’s ugly news for many developing countries.

“The risk of contagion, where the collapse of one currency triggers a global panic, is very real.”

https://business.financialpost.com/pmn/business-pmn/emerging-markets-are-peering-over-the-precipice


Under current conditions, many countries simply cannot service their debts, which, in the absence of a global stay on repayment, could lead to massive, rolling defaults.

“In many developing and emerging economies, the government’s only choice is either to funnel more income to foreign creditors or allow more of its citizens to die.”

https://www.theguardian.com/business/2020/apr/07/world-must-combat-looming-debt-meltdown-in-developing-countries-covid-19


Fitch Ratings on Monday cut Argentina’s foreign currency sovereign credit rating to restricted default after the government announced a plan to postpone payments on $9.8 billion worth of local-law, US dollar-denominated bonds until December 31, 2020, at the latest.”

https://www.latinfinance.com/daily-briefs/2020/4/7/fitch-puts-argentina-in-restricted-default


“Never has the metaphor of an economy on life support been more appropriate than for the twin health and economic crises the entire world now faces.

Canada, like nearly every other nation on the planet, has put its economy into an induced comaas it attempts to fight off the invading COVID-19 virus.”

https://www.macleans.ca/economy/economicanalysis/coronavirus-plunges-canadas-economy-into-the-abyss/


The economic toll of the coronavirus pandemic hit home for Americans last month, as consumers braced for job losses, anticipated spending cuts and grew more pessimistic about their ability to cover their bills, according to data released by the Federal Reserve Bank of New York on Monday.”

https://uk.reuters.com/article/us-health-coronavirus-fed-consumerexpect/u-s-consumers-fear-for-jobs-debt-payments-due-to-coronavirus-ny-fed-survey-idUKKBN21O1ZR


The First State Bank based in Barboursville, WV has become the first bank to fail since the coronavirus pandemic spread across the United States. The Federal Deposit Insurance Corporation (FDIC) made this announcement on Friday.”

https://finance.yahoo.com/news/first-bank-collapses-amid-coronavirus-151303366.html


Eurozone countries will on Tuesday battle over how to rescue their economies from the deepening recession the coronavirus pandemic is triggering across the continent…

“The issue of mutualised debt haunted the eurozone after the 2008 financial crisis and is back on the agenda after nine euro countries, including France, Spain and Italy, called this month for coronabonds.”

https://www.theguardian.com/business/2020/apr/06/fear-and-mistrust-as-eurozone-ministers-debate-reconstruction


The coronavirus shock is beginning to deflate an enormous credit bubble, which was likely to burst in any case. The longer the ongoing stress continues, the more severe the eventual debt crises will be

“The eurozone is particularly vulnerable because its member nations depend heavily on trade and they have extremely large debt ratios.”

https://www.spectator.co.uk/article/the-coronavirus-crunch-leaves-europe-facing-terrible-choices


The coronavirus crisis has hit the world economy “much harder and much faster than anything before”, and will have a deeper impact than the 2008 financial crash, former International Monetary Fund (IMF) chief Ajai Chopra has warned.”

https://www.irishtimes.com/business/economy/chopra-warns-coronavirus-will-have-deeper-impact-than-financial-crisis-1.4222223


The fantasy held by many in government today, and in the media and public at large, at least so far, is that even if this awful situation comes to pass, jowill be short-lived.

“The pandemic will end or wind down, perhaps over the summer or by the end of the year, this story goes, and the economy will bounce back… But that scenario is actually very unlikely.”

https://www.counterpunch.org/2020/04/06/neither-pandemic-nor-economic-collapse-is-going-to-be-a-short-lived-crisis/


“Unfortunately for the best-case scenario, the public-health response in advanced economies has fallen far short of what is needed to contain the pandemic, and the fiscal-policy package currently being debated is neither large nor rapid enough to create the conditions for a timely recovery.

“As such, the risk of a new Great Depression, worse than the original – a Greater Depression – is rising by the day.”

https://www.weforum.org/agenda/2020/04/depression-global-economy-coronavirus/


The nation’s former top central banker called the damage “absolutely shocking.” The head of America’s largest bank said he’s preparing for financial dysfunction similar to 2008.

https://www.politico.com/news/2020/04/06/economic-warnings-mount-coronavirus-damage-169217


…the intensification of the global economic crisis will also tighten the global debt chain and credit chain, the quality of bank assets will deteriorate, and the phenomenon of debt default will continue to increase.

“Each of these partial crises will eventually be transmitted to the financial system and evolve into greater financial risks.”

https://www.fxstreet.com/analysis/from-economic-crisis-to-the-financial-crisis-202004061545


It’s worth noting that during the financial crisis of 2008-09, early opinions were that the crisis is limited to the housing sector. However, it was just a matter of time that the crisis spilled over to the entire economy.

“There is no doubt that this is a bigger black swan event and the impact is likely to be prolonged. In particular, when the world is more leveraged than it was during 2008-09.

“As a matter of fact, global debt has increased to $253 trillion with global debt-to-GDP at 322%. It goes without saying that this can have disastrous consequences for the banking sector as the crisis prolongs.”

https://seekingalpha.com/article/4336135-financial-sector-stress-points-to-bigger-impending-crisis


From Russia’s northeastern coast of Sakhalin to the Permian basin in the U.S., oil is going cheap as sellers slash prices in a desperate attempt to attract buyers.

“Refiners across the world have made deep cuts to crude-processing rates due to slumping consumption and a growing fuel glut, leaving producers struggling to find buyers for their cargoes. Sellers, meanwhile, are aggressively dropping the price of their oil while they tussle for the remnants of demand, with the prospect of forced output cuts looming as global storage swells.”

https://finance.yahoo.com/news/desperate-oil-producers-slash-prices-010000306.html


Read the previous ‘Economic’ thread here and visit my Patreon page here.

6th April 2020 Today’s Round-Up of Economic News

With some governments saying they’re unable to offer direct support, the fate of Africa’s large informal sector could be a powerful example of what experts predict will be unprecedented damage to economies in the developing world. Among the millions made jobless are casual laborers, petty traders, street vendors, mechanics, taxi operators and conductors, housekeepers and waitresses, and dealers in everything from used clothes to construction hardware.

“Unless the virus’ spread can be controlled, up to 50% of all projected job growth in Africa will be lost as aviation, services, exports, mining, agriculture and the informal sector all take a hit, Eziakonwa said.

“”We will see a complete collapse of economies and livelihoods. Livelihoods will be wiped out in a way we have never seen before,” she warned…

“Noting that “the rich countries are unlocking staggering sums” to stimulate their economies, Benin’s President Patrice Talon said that his West African country, “like most African countries, does not have these means.””

https://abcnews.go.com/International/wireStory/complete-collapse-economies-ahead-africa-faces-virus-69982974


As the coronavirus crisis deepens in emerging economies around the world, collapsing currencies, commodity prices, export earnings and tourism revenues threaten to shred the finances of many governments, leaving them scrambling to avoid default….

“The plunge in most emerging market currencies against the dollar has sharply increased the cost of servicing hard-currency debts, creating a serious threat to financially weaker states.”

https://www.ft.com/content/e3634816-66bd-4355-bc71-156016761dab


Fourteen Latin American and Caribbean countries have requested urgent help from the IMF as the region braces for its worst recession in 50 years, according to a senior Fund official.

“Alejandro Werner, head of the western hemisphere department, told the FT that Latin America was particularly exposed to the impact of the coronavirus crisis because many of its economies were struggling even before they were hit with multiple shocks from weaker commodity values, the oil price crash and capital flight.”

https://www.ft.com/content/dfd1aeed-6d56-466a-be6c-7bb73fc8da23


“More than ever, the global community needs leadership to address the immediate effects of the coronavirus pandemic and its economic fallout.

“In addition to coordinated fiscal spending across countries, we urgently need to tackle the debt crisis that will soon unfold. It is time to start thinking about debt resolution and restructuring.”

https://www.bangkokpost.com/business/1894005/the-covid-19-debt-deluge


The question that regulators and central bankers are asking themselves now is whether the measures they took in recent years to crisis-proof the [EU’s] banking system will be enough to prevent a credit crunch, bank failures and a financial meltdown with global ramifications.”

https://www.firstpost.com/business/coronavirus-outbreak-european-banks-are-well-prepared-for-a-crisis-just-not-this-particular-one-8231581.html


The so-called Frugal Four, the Netherlands, Germany, Austria and Finland (or the Frugal Six, if also Denmark and Sweden are included), will claim that every EU member state is responsible for its own borrowing and that prudent “Northerners” should not have to pay for profligate “Southerners”.”

https://www.brusselstimes.com/all-news/eu-affairs/104932/the-frugal-four-repeats-the-same-policy-as-in-the-previous-financial-crisis/


[Spain’s] Prime Minister Pedro Sanchez has urged the EU 27 to issue so-called “corona bonds,” which would share the financial burden caused by COVID-19 across all member states.

“But the more frugal northern countries, including the Netherlands and Germany, argue against the move.”

https://www.forbes.com/sites/pascaledavies/2020/04/05/coronavirus-threatens-spain-with-new-economic-crisis/#31d73ceb1893


Something else is spreading virally across Europe. Anti-EU sentiment is surging in Italy, and Prime Minister Giuseppe Conte warned Brussels that if it mismanages this crisis, the EU will lose its entire reason for existing…

“The eurozone, and perhaps the EU itself, could be one of COVID-19’s victims.”

https://www.washingtonexaminer.com/opinion/will-coronavirus-take-down-the-eurozone-and-eu


Japanese Prime Minister Shinzo Abe’s government is to pledge to take “all steps” encompassing fiscal, monetary and tax policies to battle the deepening fallout from the coronavirus in a stimulus package to be approved on Tuesday, a draft document reviewed by Reuters showed.

“Abe has pledged to craft an “unprecedented” stimulus package…”

https://www.reuters.com/article/health-coronavirus-japan-stimulus/japan-vows-to-fight-biggest-global-crisis-since-wwii-with-massive-coronavirus-stimulus-package-draft-idUSL4N2BU1LV


…the private corporate debt market is likely to completely implode, which risks pushing a substantial number of businesses over the edge.”

https://qrius.com/corporate-debt-is-in-serious-trouble/


The global spread of COVID-19 has had a widespread and devastating impact on the aviation industry.

“The aviation industry supports $2.7 trillion of the world’s GDP. This represents 3.6% of global gross domestic product, and if aviation were a country, it would rank 20th in size by GDP.”

https://www.forbes.com/sites/jamesasquith/2020/04/05/global-airline-industry-may-now-need-a-1-trillion-bailout/#223829e4274e


Truckers hauling food are facing delays across the globe in the latest disruption to supply chains snarled by the coronavirus pandemic.

“They’re enduring lengthy wait times in Europe because of restrictions that have been imposed to control the virus’s spread.

“In South America, local laws have at times conflicted with country-wide ordinances that deem hauling food an essential service, leaving supplies sometimes stuck in storage.

“In parts of Africa, the shuttering of public transportation means drivers aren’t even able to make it into work. And huge spikes in demand have caused lags for loading at some U.S. warehouses.”

https://eu.detroitnews.com/story/business/2020/04/05/truck-coronavirus-food-supply-weak-link/111519790/


Last week, we made the case that tech manufacturing was uniquely vulnerable to pandemic problems, from a combination of just-in-time manufacturing practices and a far-flung network of suppliers. But just a week later, the news is even worse.”

https://www.theverge.com/2020/4/4/21207276/tech-manufacturing-china-supply-chain-lithium-benchmark


The United Nations is facing a “dire” liquidity crisis as it deals with added expenses related to the need to “respond to the global health crisis” of coronavirus, according to an email from Movses Abelian, the U.N. undersecretary general for General Assembly and conference management.”

https://www.cbsnews.com/news/u-n-official-warns-of-dire-financial-crisis-due-to-coronavirus-in-leaked-documents/


The global economy is already contracting, and is losing steam faster than in the early days of the financial crisis: That’s the main takeaway from Bloomberg Economics’ new global GDP tracker. The tracker reading for March shows the global economy contracting at an annualized rate of 0.5%, down from 0.1% in February.”

[The global economy as a totality needs to be growing at at least 2.5%, 3% really to not be in recession]

https://www.bloomberg.com/news/articles/2020-04-06/global-gdp-tracker-shows-recession-started-in-march-chart


The sinking global economy is suffering through a colossal disinflationary shock that could briefly push it into dangerous deflation territory for the first time in decades.

““A powerful disinflationary tide is now rising,” said Joseph Lupton, global economist at JPMorgan Chase & Co.”

https://www.japantimes.co.jp/news/2020/04/06/business/economy-business/world-economy-dangerous-disinflationary-shock-coronavirus/#.Xorwy8hKjIU


Read the previous ‘Economic’ thread here and visit my Patreon page here.

3rd April 2020 Today’s Round-Up of Economic News

An unprecedented number of Americans have resorted to food banks for emergency supplies since the coronavirus pandemic triggered widespread layoffs.

“The demand for food aid has increased as much as eightfold in some areas, according to an investigation by the Guardian, which gives a nationwide snapshot of the hunger crisis facing the US as millions become unemployed.”

https://www.theguardian.com/environment/2020/apr/02/us-food-banks-coronavirus-demand-unemployment


““Our estimate is that by the end of June, 20 million people [in the US] will have lost their jobs — and I am wondering if even that is optimistic,” Shierholz said.

“The political ramifications of such a huge economic shock are unknowable.”

https://thehill.com/homenews/administration/490938-the-memo-scale-of-economic-crisis-sends-shudders-through-nation


As many as 30% of Americans with home loans – about 15 million households –- could stop paying if the U.S. economy remains closed through the summer or beyond, according to an estimate by Mark Zandi, chief economist for Moody’s Analytics.

““This is an unprecedented event,” said Susan Wachter, professor of real estate and finance at the Wharton School of the University of Pennsylvania.”

https://www.bloomberg.com/news/articles/2020-04-02/home-lenders-brace-for-up-to-15-million-u-s-mortgage-defaults


About 110 million U.S. adults had credit-card debt at the start of the coronavirus outbreak, according to new data from CreditCards.com.

“Almost two-thirds of them ran up the debt to pay for necessities like groceries, child-care or medical treatment.”

https://www.bloomberg.com/amp/news/articles/2020-04-02/virus-rips-into-middle-class-america-where-finances-are-fragile


“The response [to the government’s relief programme] is overwhelming — it’s unlike anything I’ve ever seen in my career,” said Craig Street, the chief lending officer of United Midwest Savings Bank, a community bank in Columbus, Ohio. “We’re talking about attempting to do 10 times our normal monthly loan volume, and maybe more than that.”

https://www.nytimes.com/2020/04/02/business/small-business-coronavirus-stimulus.html


We were already in a global auto sales recession in 2019.

Europe’s car makers may be facing the worst crisis they’ve ever dealt with as production ceases and retail operations close during the coronavirus-induced lockdown. New car registrations have plummeted in the past few weeks as nationwide lockdowns are put in place.”

https://www.autocar.co.uk/car-news/industry/european-car-industry-faces-%E2%80%9Csevere%E2%80%9D-financial-crisis


The Eurozone is teetering in the edge of a collapse. The massive economic costs caused by the coronavirus outbreak and the draconian measures needed to contain it are pillaging the world economy.

“However, they will deliver their worst hit on the Eurozone [even worse for the emerging markets IMO].”

https://reaction.life/the-looming-collapse-of-the-eurozone/


Japan’s services sector contracted in March at the fastest pace since the global financial crisis more than 10 years ago, as a shock to demand from the coronavirus pandemic slammed business activity and expectations.

“The world’s third-largest economy is on the brink of a recession [it already was, prior to coronavirus]…”

https://www.aljazeera.com/ajimpact/japan-services-drop-fastest-pace-2009-financial-crisis-200403030604213.html


China’s central bank on Friday lowered its official yuan midpoint to the weakest level since the 2008 global financial crisis, reflecting broad dollar gains as investors sought safety amid the deepening economic fallout from the coronavirus pandemic.”

https://business.financialpost.com/pmn/business-pmn/china-sets-yuan-midpoint-set-at-weakest-level-since-global-financial-crisis


India is on the verge of an unprecedented economic catastrophe as the humanitarian disaster from the Covid-19 pandemic unfolds.

“The sheer scale of disruption from the ongoing 21-day national lockdown, announced by prime minister Narendra Modi on March 24 to contain the outbreak, is unprecedented in Indian history.”

https://qz.com/india/1830822/coronavirus-may-push-indias-struggling-economy-off-the-cliff/


Investors are bracing themselves for an emerging market credit crisis as the economic fallout from the coronavirus pandemic hits vulnerable countries and limits their ability to repay debts.

“Commodity prices have plunged and demand has frozen as the outbreak has spread across the globe, with currencies tumbling against the dollar. This has hit all emerging markets, particularly those burdened with high debts and fiscal deficits. 

Zambia, one of Africa’s biggest copper producers, has joined Ecuador in telling investors it was struggling to repay debts… The woes of the two countries reflect broad distress in emerging markets.”

https://www.ft.com/content/bcdcf566-4dae-4d8b-8bc8-2dbbb54da1f8


Coronavirus-ravaged corpses have been rotting in the streets of the port city of Guayaquil in Ecuador — while others lay unclaimed in hospitals and clinics because morgues were filled to capacity, according to a report.”

https://nypost.com/2020/04/02/rotting-corpses-litter-ecuador-streets-as-coronavirus-spreads/


The world’s top oil and gas companies are rushing to raise tens of billion of dollars in debt to help them weather one of the worst downturns in the sector’s history while faced with high fixed costs and looming dividend payments.”

https://uk.reuters.com/article/us-global-oil-majors-debt/oil-majors-rush-to-raise-billions-in-debt-as-crude-prices-sink-idUKKBN21K2UP


In a chilling reminder of how fast the coronavirus epidemic has spread around the world, Fitch Ratings changed its 2020 view on the global economy to “deep global recession” from slow growth in just 10 days.

““The speed with which the coronavirus pandemic is evolving has necessitated another round of huge cuts to our [gross domestic product] forecasts,” Fitch said in a research report.”

https://www.marketwatch.com/story/fitch-sees-deep-global-recession-just-10-days-after-predicting-slow-economic-growth-2020-04-02


Read the previous ‘Economic’ thread here and visit my Patreon page here.

2nd April 2020 Today’s Round-Up of Economic News

This is how I suspect things will play out:

I do believe we will start seeing problems emerging among some of the fiscally weaker countries around the world and a crisis could spread up the pecking order...

“As weaker entities will start defaulting, either officially or through currency devaluation the pressure of the markets will most likely shift towards the stronger sovereign debt issuers. The trend will be driven by growing default risk perceptions as more and more countries will renege on their debt obligations. The market will start asking that very dangerous question, namely; “Who will be next”?

“Several countries are seeing a very similar trend to what Turkey is experiencing in terms of their borrowing costs. Major sovereign debt issuers like Brazil, South Africa, Mexico, Egypt have all seen a spike in bond yields in the past few months. Such spikes can be just an early glimpse into things to come this year and there is no telling how far up the chain it could go…

“The [government stimulus] money is going into the real economy, meaning that people, enterprises and local governments will be spending money they did not earn. At the same time, the value of goods and services being produced will be greatly reduced…

“…the economic consequences will require further fiscal and monetary measures to avoid social breakdown. This in turn will lead to a massive imbalance in terms of goods and services produced on one hand and money available for spending in the real economy on the other. It is the classic hyperinflation scenario where more and more money will be chasing dwindling goods and services.

“The risk of this fiscal and monetary experiment blowing up and ushering in a massive crisis is now much higher than it was just a few months ago and probably much higher than it was in the 2008 crisis and we should not dismiss it, just because we also thought back in 2008 that a catastrophe was imminent and yet we managed to get through it.

“Many factors make this crisis very different. This is unprecedented in modern economic history…”

https://seekingalpha.com/article/4335420-after-pandemic-possible-sovereign-defaults-and-hyperinflation


“In many respects this is worse than the global financial crisis for the emerging markets,” Nariman Behravesh, chief economist at IHS Markit, told DW.

“”The collapse in commodity prices is bigger, the recession in the developed world is worse and the debt levels in the emerging world have risen largely since the financial crisis because interest rates have been so low.””

https://www.dw.com/en/developing-countries-brace-for-bigger-blow-than-2008-crisis/a-52988709


In a matter of days, a slew of trades unraveled to expose various forms of soured levered bets at their heart.

“Michael Hintze’s flagship hedge fund scrambled to contain losses on a structured credit trade gone awry. Banks including Citigroup Inc. tried to sell $1.3 billion of risky loans to unwind clients’ leveraged wagers. Funds that borrow to load up on mortgage bonds fed a flood of liquidations. A similar situation played out at municipal-bond funds…

““Everyone knows you are playing with fire with leverage,” said Michael Terwilliger, a portfolio manager at Resource Credit Income Fund. “Response to the last panic has built the new panic.””

https://www.bloomberg.com/amp/news/articles/2020-04-01/supercharged-debt-bets-unravel-and-expose-wall-street-s-big-risk


Too much debt; too few toolsThe worst is likely yet to come for high-yield bonds as more defaults loom, according to Goldman Sachs Group Inc…

“Credit has been at the center of the financial market turmoil sparked by the worsening pandemic, as unprecedented lockdowns and travel bans leave scores of businesses grappling to build out cash buffers. That’s sent the cost of money surging. Average spreads on high-grade dollar bonds jumped 179 basis points in the first quarter, the most ever in a Bloomberg Barclays index going back to 1989.”

https://www.bloomberg.com/news/articles/2020-04-02/worst-yet-to-come-for-junk-debt-as-defaults-loom-goldman-says


As many people have fallen out of work in the initial weeks of the coronavirus crisis as in the entire global financial crisis, according to initial indications from the US and European labour markets…

““Unemployment is rising 20 times faster than in the financial crisis,” Danny Blanchflower, professor at Dartmouth College told the Financial Times. “We have never seen anything like the speed of this and it suggests [governments] should throw caution to the wind in finding a response.””

https://www.ft.com/content/6eab2018-ac41-4849-84e3-7109d968eef8


Factories fell quiet across most of Europe and Asia in March as the coronavirus pandemic paralyzed economic activity, with evidence mounting that the world is sliding into deep recession.

“Manufacturing activity tumbled, purchasing managers’ index (PMI) surveys showed on Wednesday…”

https://www.irishtimes.com/business/economy/global-manufacturing-slump-as-coronavirus-shock-deepens-1.4217695


Small business owners say the [UK] Government’s emergency coroanavirus loan scheme is failing them

“…as banks including HSBC, NatWest, Barclays and Lloyds ‘take advantage’ of them at their most vulnerable.”

https://metro.co.uk/2020/04/01/1000000-businesses-struggle-survive-uk-banks-refuse-government-backed-loans-12492827/


U.S. shale producer Whiting Petroleum Corporation, once one of the top producers in the Bakken, said on Wednesday that it had filed for bankruptcy protection, becoming the first major victim of the oil price war and the coronavirus pandemic that sent oil prices to $20.”

https://oilprice.com/Energy/Crude-Oil/Shale-Giant-Files-For-Bankruptcy-As-Oil-Price-War-Rages-On.html


The world’s biggest oil and gas companies are cutting spending this year following a collapse in oil prices driven by a slump in demand because of the coronavirus crisis and a price war between top exporters Saudi Arabia and Russia.”

https://www.channelnewsasia.com/news/business/oil-majors-slash-2020-spending-by-20per-cent-after-prices-slump-12598784


The world is almost certainly ensnared in a devastating recession delivered by the coronavirus pandemic. Now, fears are growing that the downturn could be far more punishing and long lasting than initially feared

““I feel like the 2008 financial crisis was just a dry run for this,” said Kenneth S. Rogoff, a Harvard economist… “This is already shaping up as the deepest dive on record for the global economy for over 100 years,” he said. “Everything depends on how long it lasts, but if this goes on for a long time, it’s certainly going to be the mother of all financial crises.””

https://www.nytimes.com/2020/04/01/business/economy/coronavirus-recession.html


Read the previous ‘Economic’ thread here and visit my Patreon page here.

1st April 2020 Today’s Round-Up of Economic News

With their populations at risk, their public finances stretched, and financial markets in turmoil, many emerging market states and developing countries face a huge challenge. Will they have the resources to ride out the challenge? And if not, where will they look for outside assistance in an increasingly divided and multipolar world in which the United States, the European Union, and China have all been through an unprecedented shutdown?

“At the head of the list of vulnerable countries is South Africa… In Brazil… the currency was reeling even before Bolsonaro decided to discard any strategic approach to the virus. Chile, Thailand and Turkey have all been knocked back. Argentina’s much-needed debt restructuring has been blown off course.

“India’s sharemarket is plunging, its exchange rate has slumped and its banks are under pressure.

“The shock has delivered a blow not just to sharemarkets and government bonds but also to commodities…

“Think of desperately poor Nigeria; think of fragile Algeria, where oil and gas account for 85 per cent of export revenue.”

https://www.afr.com/policy/economy/the-coronavirus-is-the-biggest-emerging-markets-crisis-ever-20200330-p54fg4


“The more difficult and pressing problems rise among those countries around the world with weaker external balance sheets. There are a number of emerging economies with more external debt than liquid reserve assets, or for that matter, foreign assets of all sorts. In a crisis, the countries that most need financing are least able to get it.”

https://www.cfr.org/blog/not-one-emerging-market-financial-crisis-many


Some countries’ banking systems might have to be recapitalized or even restructured if their economies are severely damaged by prolonged disruption from the coronavirus outbreak, officials at the International Monetary Fund said on Tuesday.”

https://business.financialpost.com/pmn/business-pmn/global-banking-systems-may-need-recapitalization-restructuring-following-slowdown-imf


Zambia’s Eurobonds extended losses on Wednesday after the country asked banks for proposals on reorganizing as much as $11.2 billion of foreign debt.”

https://finance.yahoo.com/news/zambia-seeks-advisers-reorganization-foreign-143143276.html


Iran’s vice president for economic affairs lamented the free fall of the country’s oil revenue.

“Mohammad Nahavandian told Iranian state TV that oil inventory has dropped to one-eighth of where it stood in 2011… Iran is now wrestling with the coronavirus epidemic, a costly fight that, according to government estimates, will require an extra $1 billion budget.”

https://www.al-monitor.com/pulse/originals/2020/03/iran-battle-coronavirus-slump-oil-income-rouhani.html


Factory activity contracted sharply across most of Asia in March as the coronavirus pandemic paralyzed economic activity across the globe, with sharp falls in export power-houses Japan and South Korea…

“Manufacturing gauges also tumbled in Indonesia, Vietnam and the Philippines.”

https://www.nasdaq.com/articles/global-economy-asias-factory-activity-plunges-as-coronavirus-shock-deepens-2020-04-01


The [UK’s] National Federation of Fish Friers urged its 10,000 members to shut up shop because social distancing measures could not be guaranteed, although some have continued to deliver.

Cambridgeshire-based potato supplier Abbey Produce said the closure of up to 90 per cent of fish and chip shops has left it with high quality potatoes that retailers cannot take and processors do not want…”

https://www.fginsight.com/news/news/chip-shop-slump-leaves-potatoes-without-a-market-107324


Hotel industry lobbying groups [in the US] have fired a warning shot, exhorting lawmakers to provide them with financing to avoid a series of debt defaults they say could set off a widespread financial crisis

“Without the bailout — which would be in addition to government funds from the $2 trillion CARES Act — the industry says its members could be the first in a wave of debt defaults that would hit everyone from real estate investors and pension funds to average homeowners.”

https://www.axios.com/hotel-industry-warns-looming-financial-crisis-17f9ccc2-36c7-497e-9644-64e3ab3fdf4c.html


Too much debt; too few toolsIn a single week in March, as financial markets convulsed and major parts of the economy began shutting down, banks made over $240 billion in new loans to companies — twice as much in new lending as they would ordinarily extend in a full year.

“Brian Foran, an analyst at Autonomous, a research firm that did the calculations, initially thought it was a typo. “That’s really an unprecedented figure,” he said. “I’ve never seen anything like it.””

https://www.nytimes.com/2020/03/31/business/coronavirus-companies-banks-loans-credit.html


Having a central bank help the government spend by magic-wanding cash into existence has long been considered an economic-policy taboo, a dangerous last resort for failing states.

“But no less an authority than Ben Bernanke has argued that it might be a government’s best option “under certain extreme circumstances.” Now many mainstream economists and Wall Street financiers are arguing that those extreme circumstances have arrived.”

https://www.theatlantic.com/ideas/archive/2020/03/we-need-start-tossing-money-out-helicopters/608968/


The Bank of England should print money to fund the Government’s battle against coronavirus and limit its effects on the economy, a former top official has said.

“Sir Charlie Bean called for Threadneedle Street to break a major economic taboo and buy debt directly from the state using freshly minted cash.”

https://www.telegraph.co.uk/business/2020/03/31/print-money-fund-battle-against-coronavirus-says-ex-bank-england/


Suffice it here to pose the question of possible inflationary tendencies due to huge amounts of fiat currency being created out of nothing in order to fight the current crisis.

“In the event that the crisis is in fact averted, one may suspect that the foundation for the next crisis has been laid and that it will be even bigger and worse than the present one, assuming that the present situation due to the coronavirus fear and underlying faults in the system does not lead to the mother of all depressions.”

https://seekingalpha.com/article/4335368-danger-of-inflation


The Fed is trying to prevent a liquidity squeeze amid a worldwide rush into dollars, as the virus wreaks havoc on a global economy that is heavily dependent on the greenback as its linchpin

“Emerging-market borrowers are especially at risk. Encouraged by low US interest rates, they’ve loaded up on a dollar-denominated debt in recent years. They now face a squeeze as their exports plummet due to economic shutdowns worldwide to combat the coronavirus contagion.”

https://www.straitstimes.com/business/economy/fed-takes-on-role-of-worlds-central-bank-by-pumping-out-dollars-amid-coronavirus


“…oil prices for the U.S. and global crude benchmarks suffered the largest quarterly percentage declines on record and lost more than half their value for the month amid a demand slump caused by the coronavirus pandemic and a glut of supply thanks to a Russia-Saudi oil-price war.

“Prices had settled Monday at their lowest level since 2002.”

https://www.marketwatch.com/story/crude-prices-rebound-after-tapping-18-year-low-2020-03-31


A new quarter has brought a fresh jolt of volatility to global equity markets, with stocks in Europe and Asia dropping as the coronavirus crisis worsens in the US and pressure on global economies mounts

“The falls, which follow the worst quarter for global markets since the 2008 financial crisis, came after President Donald Trump warned that nearly 250,000 people could die in the US from Covid-19.”

https://www.ft.com/content/db37c3d0-e51b-4542-8bd7-99c946057783


Read the previous ‘Economic’ thread here and visit my Patreon page here.