20th September 2019 Today’s Round-Up of Economic News

My apologies for the hiatus yesterday – work rather got on top of me. Today:

“OECD chief economist Laurence Boone wrote in a blog post: Trade disputes between the U.S. and China, Europe and other countries is causing some businesses to hold off on investing in new equipment or hiring, while U.S. manufacturing has fallen into recession despite President Donald Trump’s vows to revive the sector.

“An urgent response is required, failing which we run the risk of finding ourselves stuck in a long period of low growth, the brunt of which will be felt primarily by the most vulnerable,” Boone wrote.”

https://www.cbsnews.com/news/oecd-economic-forecast-2020-the-global-economy-may-weaken-to-its-worst-pace-since-the-financial-crisis/


“A drastic shortage of liquidity in US funding markets has forced the Federal Reserve to intervene for a third consecutive day, resorting to measures last seen in the global financial crisis.

“The upheaval points to mounting stress in core parts of the US financial system and suggests that the Fed’s quarter point cut in interest rates this week did not go far enough to bring the bond markets back into equilibrium. At the very least it raises serious questions about the central bank’s monetary toolkit.”

https://www.telegraph.co.uk/business/2019/09/19/federal-reserve-takes-action-stem-seizure-us-money-markets/


“The Federal Reserve seems a lot more concerned about the state of the economy than it’s been letting on. The Fed lowered its target interest rate by a quarter point on Sept. 18, the second such cut since July – and the first reductions since the Great Recession more than 10 years ago.

“What is especially challenging now is that there seems to be little room for policymakers to respond if – or perhaps we should say “when” – a recession hits.”

https://theconversation.com/feds-rate-cut-signals-a-recession-may-be-ahead-and-it-may-not-have-enough-ammunition-to-fight-it-123850


“Brazil’s Central Bank has slashed interest rates to a record low for the second time in less than two months, as Latin America’s biggest economy struggles to grow.

“The bank cut its main rate to 5.5 percent from the previous historic low of six percent, citing risks of a “more intense slowdown in the global economy.””

https://www.batimes.com.ar/news/latin-america/brazilian-central-bank-cuts-interest-rate-to-record-low.phtml


“Buenos Aires, Argentina – More than 100,000 Venezuelans now live in Argentina. They have left one country in crisis only to find themselves in another mire…

“A persistent recession with high inflation, growing Argentine unemployment – and a 25-percent currency collapse in a single day last August – make finding a job incredibly difficult for most people who live in the South American country.”

https://www.aljazeera.com/ajimpact/venezuelans-argentina-economic-crisis-190918232818561.html


“A drought, cyclone-induced floods and an economic collapse have left Zimbabwe on the verge of its worst-ever food crisis.

“The southern African nation will probably run out of corn — its staple food — by January and about three out of five Zimbabweans won’t have enough to eat, according to the United Nations World Food Programme.”

https://www.moneyweb.co.za/news-fast-news/worst-ever-famine-threatens-zimbabwe-as-economy-collapses/


“UK retail sales fell in August as British shoppers bought fewer goods than in July… The UK economy contracted by 0.2 per cent in the second quarter under the weight of Brexit uncertainty and a global slowdown.

“Consumer spending has been a bright spot but today’s figures are a sign it is showing.”

https://www.cityam.com/uk-retail-sales-unexpectedly-fall-in-august/


“Germany should act sooner rather than later to revive its flagging economy, France’s finance minister said on Thursday, as he struggled to hide frustration with the pace of Berlin’s efforts to engineer a recovery.

“French policymakers are growing anxious as Germany, Europe’s largest economy, dithers over how to pull itself back from the brink of recession, and they want Berlin to do more with its budget surplus.”

https://www.reuters.com/article/us-france-germany-economy/france-germany-at-odds-over-pace-of-response-to-global-slowdown-idUSKBN1W41JM


“China’s economy is grinding to its slowest levels of growth in decades…

“China’s economy faces trouble from several different sectors, Nomura Research Institute chief economist Richard Koo wrote in a Wednesday report.”

https://markets.businessinsider.com/news/stocks/china-economic-growth-faces-triple-threat-trade-war-economist-says-2019-9-1028538839


“Marathon Asset Management CEO Bruce Richards said government bond yields trading at negative levels “is the most absurd thing central banks have done and it will blow up in their face,” at the CNBC Institutional Investor Delivering Alpha conference on Thursday…

“Richards said investors may be tempted to reap as much gains as they can from this year’s relentless rally in government bonds, but said it was a “fool’s game.””

https://www.marketwatch.com/story/bond-investor-says-negative-yields-are-most-absurd-thing-central-banks-have-done-2019-09-19


“Further evidence was on full display Thursday that top central banks are doing little more than pushing on a string in an attempt to spark their economies by flooding the financial system with ever more cash. The European Central Bank’s offer to provide money to lenders free resulted in it handing out just $3.4 billion euros ($3.8 billion), far less than estimates of 20 billion to 100 billion euros, according to Bloomberg News.

“The result is a clear message from banks that there’s just no real demand for loans from their customers, no matter the cost.”

https://www.bloomberg.com/opinion/articles/2019-09-19/when-free-money-no-longer-appeals-watch-out


“World economic growth is “fragile” and “under threat,” former International Monetary Fund director Christine Lagarde says, and is over-reliant on the actions of central banks.”

https://www.marketwatch.com/story/world-economic-growth-is-fragile-lagarde-says-and-central-banks-arent-always-the-answer-2019-09-19


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

18th September 2019 Today’s Round-Up of Economic News

“Borrowing rates skyrocketed on Tuesday in a corner of the markets the public rarely notices but that is critical to the functioning of the global financial system.

“The spike in overnight borrowing rates forced the New York Federal Reserve to come to the rescue with a special operation aimed at easing stress in financial markets. The funding markets are clearly stressed.”

“It was the NY Fed’s first such rescue operation in a decade, the last occurring in late 2008.

“”It’s unprecedented, at least in the post-crisis era,” said Mark Cabana, rates strategist at Bank of America Merrill Lynch.”

https://edition.cnn.com/2019/09/17/business/overnight-lending-rate-spike-ny-fed/index.html


“It seems like somebody needed a whole lot more cash than they had anticipated, and for some reason other banks were reluctant to lend it.

“Maybe that’s because the other banks really were short of cash.

“But it might also be because they knew who the counterparty was and they were afraid that even a 12-hour loan ran the risk of not getting paid back. It’s the kind of thing that happens during a banking crisis—which, as it happens, is the last time the Fed had to intervene in the repo market.”

https://www.motherjones.com/kevin-drum/2019/09/whats-wrong-with-the-repo-market/


“A rate cut on Wednesday would lower the Fed’s target policy rate to a range of between 1.75% and 2.00% and dovetail with moves by central banks around the world to ease monetary policy to offset the impact of a U.S.-China trade war and other risks to the global economy.”

https://uk.reuters.com/article/uk-usa-fed/from-oil-shocks-to-funding-strains-fed-confronts-new-complexities-idUKKBN1W30F5


“The survey, released on Tuesday, surveyed 235 fund managers who manage a combined total of $683 billion, showed that 38% of fund managers expect a recession within the next year — the highest net percentage to say so since the depths of the financial crash in 2009.”

https://markets.businessinsider.com/news/stocks/baml-fund-manager-survey-finds-fears-of-recession-at-highest-since-2009-2019-9-1028529820


“American business is holding back on investment, and that’s holding back the economy.”

https://www.bloomberg.com/news/articles/2019-09-17/meager-corporate-spending-appetite-boosts-u-s-recession-risk


““Relief credit card holders get from the Fed won’t be huge. It’s not something that’s going to move the needle for most folks with just this one rate reduction,” Matt Schulz, chief industry analyst at Comparecards. com, told FOX Business.

““In terms of reduction on your actual monthly bill, you’re only talking about a few dollars a month for most people.””

https://www.foxbusiness.com/financials/americans-with-credit-card-debt-wont-get-much-relief-from-fed-rate-cut


“Britons are £128 a year worse off on average than they were in 2008, according to a report that reveals household incomes were hit harder in the wake of the financial crash than official figures have revealed.

“The New Economics Foundation said figures used to calculate GDP, which is adjusted to take account of rising prices, failed to include essential items that affected the cost of living over the last 10 years.”

https://www.theguardian.com/business/2019/sep/17/britons-are-still-worse-off-than-in-2008-new-research-claims


“A record of number of Britons sought debt advice in the first half of 2019, and charities are warning that households are vulnerable to any future economic turbulence.

“More than 331,000 people contacted StepChange wanting help, the charity said in a report published Wednesday.”

https://www.bloomberg.com/news/articles/2019-09-17/record-numbers-seek-debt-help-with-u-k-on-brink-of-brexit


“European car registrations dropped 8.6% in August as volume brands Nissan, Renault, Fiat and Volkswagen posted double-digit sales declines, according to industry data published on Wednesday…

“Registrations fell to 1.07 million cars last month from 1.17 million a year earlier across the European Union and EFTA countries, the Brussels-based association said in a statement.”

https://uk.reuters.com/article/uk-europe-vehicleregistrations/european-passenger-car-registrations-slump-8-6-in-august-acea-idUKKBN1W30JA


“India is the world’s fourth-largest economy, but it is showing signs of a slowdown. Almost 300,000 people have lost their jobs in recent months in the car industry alone and the unemployment rate country-wide is at a three-year high.”

https://www.aljazeera.com/news/2019/09/indias-car-industry-slowdown-mode-190918045457650.html


“China’s $14 trillion economy, second in size only to the U.S., accounts for almost a third of global growth each year. … The fire-hose stimulus that followed the global financial crisis kept China from a Great Recession like the U.S. suffered but swelled the debt mountain.

“Now it’s trying to do just enough to prevent a hard landing — where the economy flat-lines or flirts with recession — while avoiding another debt buildup.”

https://www.washingtonpost.com/business/as-chinas-economy-slows-why-the-world-should-care/2019/09/17/48cddcd6-d9bc-11e9-a1a5-162b8a9c9ca2_story.html


“The pain for [Singapore’s] exporters continued in August with shipments down for the sixth consecutive month.

“Signs that the worst is over are now being offset by fresh geopolitical concerns that could hurt trade.

“Non-oil domestic exports fell 8.9 per cent from the same month last year…”

https://www.straitstimes.com/business/economy/exports-fall-again-as-fresh-worries-emerge-on-horizon


“Japan’s exports slipped for a ninth straight month in August as the Sino-U.S. tariff dispute hit demand from China and other Asian trading partners, heightening risks for the world’s third-largest economy.

“The negative reading adds some pressure to the Bank of Japan to expand stimulus at its policy meeting on Thursday…”

https://uk.reuters.com/article/us-japan-economy-trade/japans-exports-drop-for-ninth-straight-month-as-global-demand-falters-idUKKBN1W302P


“A Turkish regulator on Tuesday told banks to write off 46 billion lira ($8.1 billion) of loans by year end and set aside loss reserves, one of Ankara’s most aggressive moves to clean up the worst remnants of last year’s currency crisis.”

https://www.reuters.com/article/us-turkey-economy-debt/turkey-tells-banks-to-write-off-8-billion-in-bad-loans-idUSKBN1W22BZ


“Shuttered schools, hospital services pared back to a minimum, officials on strike — Argentina’s southern oil-producing province of Chubut is a microcosm of the country’s crippling economic crisis.

“The debt-burdened Patagonian province is suffering the same explosive cocktail of galloping inflation, a plummeting peso and colossal debt.”

https://www.france24.com/en/20190918-strikes-as-recession-squeezes-argentina-s-oil-rich-south


“Nigeria has received a legal hiding after a UK court awarded a private company a $9.6 billion judgment debt against the West African nation. The ruling has generated significant attention in both domestic and international media.

“This is understandable given that the sum amounts to 20% of the country’s foreign reserves. This means it poses a significant threat to its economy…

“How did Nigeria end up in this costly situation? For the answer, we must look back to January 2010 and a gas supply contract that went horribly wrong.”

https://qz.com/africa/1710707/how-nigeria-got-hit-with-a-9-6-billion-judgment-debt-in-the-uk/


“After issuing more than 17 billion cedis ($3.1 billion) in bonds over the past two years to bail out banks and repay energy arrears, Ghana faces a new debt risk. Independent power producers dismissed a plan by Finance Minister Ken Ofori-Atta to renegotiate deals for surplus supply and said they will only accept a termination settlement of $2 billion.

“The West African nation has almost double the capacity to meet its peak demand of about 2,700 megawatts, a luxury that contributed to an additional 5.1 billion cedis, or 1.5% of gross domestic product, to Ghana’s liabilities this year alone.”

https://www.bloomberg.com/news/articles/2019-09-18/after-bank-bailout-ghana-power-deals-risk-new-debt-headache


“…extremely low interest rates may lead to slower growth by increasing market concentration. If this argument is correct, it implies that reducing interest rates further will not save the global economy from stagnation.

“The traditional view holds that when long-term rates fall, the net present value of future cash flows increases, making it more attractive for firms to invest in productivity-enhancing technologies. Low interest rates therefore have an expansionary effect on the economy through stronger productivity growth.

“But if low interest rates also have an opposite strategic effect, they reduce the incentive for firms to invest in boosting productivity. Moreover, as long-term real rates approach zero, this strategic contractionary effect dominates. So, in today’s low-interest-rate environment, a further decline in rates will most probably slow the economy by reducing productivity growth.”

https://www.fnlondon.com/articles/more-rate-cuts-wont-save-the-economy-in-fact-theyre-making-it-worse-20190918


“World Bank President David Malpass said the global economy is poised to decelerate more than previously estimated, with the pile of negative-yielding debt indicating growth will be slower in the future.

““The slowdown in global growth is broad based,” Malpass said Tuesday in a speech in Washington. Recent developments signal the 2019 world expansion will likely to fall short of the lender’s June projection of 2.6% in real terms, Malpass said.”

https://www.bloomberg.com/news/articles/2019-09-17/world-bank-chief-malpass-sees-steeper-global-growth-slowdown


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

17th September 2019 Today’s Round-Up of Economic News

“”I’m not sure the global economy is in a state where it’s going to be able to absorb [higher oil prices] if [they] stay elevated,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

“No one knows how long higher oil prices will last or where the economy’s breaking point is. The point is: It’s awful timing…

“It could also handcuff central banks, which are cutting interest rates around the world to boost growth. Persistently low inflation has given central banks room to push rates lower. Higher inflation, meanwhile, might hamper their ability to continue adding stimulus.”

“…there are signs that Saudi production could be in trouble for an extended period of time. Two Saudi sources familiar with the kingdom’s oil operations told CNN Business that fully restoring production “will take weeks, not days.”

“The potential for further escalation between the United States and Iran, which it’s blamed for the attacks, also looms large.”

“The situation certainly poses risks for China, the world’s top importer of crude.

“Following the release of fresh data for August, analysts at Societe Generale pointed out Monday that the industrial sector is “losing momentum at an alarmingly rapid pace,” and expressed concern that weakness could spill over into consumer spending and the services sector. Higher oil prices, which would come as the price of pork soars, are the last thing the country needs.”

https://edition.cnn.com/2019/09/16/economy/saudi-attack-world-economy/index.html


“Parts of Wall Street’s debt securitisation engine are back running at levels not seen since the pre-financial crisis boom.

“Data group Dealogic’s indices of US securitisation activity show that issuance of collateralised debt obligations — structured products made up of bundles of bonds and loans — rose above its pre-crisis peak late last year and is currently back close to those levels this year.”

https://www.ft.com/content/482f7ba6-d884-11e9-8f9b-77216ebe1f17


““The shipments index has gone from warning of a potential slowdown to signaling an economic contraction [USA],” according to the commentary included in the report. “We see a growing risk that GDP will go negative by year’s end.””

https://www.ttnews.com/articles/cass-freight-index-signals-us-economic-contraction-years-end


“Between 2007 and 2012 the [US] government’s publicly held debt doubled as a share of the economy. That was partly due to the Great Recession, but even since then the debt has continued to mount.

“It now stands at its highest level since the Truman administration and is on course to eclipse the size of the entire economy in about a decade. At some point investors will abandon Treasury notes or demand much higher returns.”

https://thehill.com/opinion/finance/461477-tom-price-the-fiscal-crisis-at-hand


“With growth and inflation both slowing, the ECB cut rates deeper into negative territory last week and said it would start an open-ended bond purchase programme to depress already low borrowing costs…

““We judge that, if needed, we can further lower the deposit facility rate and, with it, the overnight money market rate,” said Philip Lane, ECB Chief Economist.”

https://uk.reuters.com/article/uk-ecb-policy-bonds/ecbs-commitment-to-lifting-inflation-unwavering-lane-idUKKBN1W11GV


“Britain’s household savings rate – a measure of how much households save from their disposable income – stands close to record low levels. Households have also been net borrowers for 10 quarters in a row, an unprecedented stretch in records dating back to the 1960s.

“Their lack of financial headroom could spell trouble if a downturn hits, whether triggered by events at home or abroad.”

https://uk.reuters.com/article/uk-britain-economy-recession-graphic/stretched-households-could-mean-lengthy-uk-downturn-if-it-comes-idUKKBN1W11FV


“A prolonged shadow-banking crisis and hurdles in bankruptcy rules have left India holding the world’s worst bad-debt pile.

“Seeking to spur lending needed to revive economic growth from a six-year low, Prime Minister Narendra Modi’s government said on Aug 30 that it plans to merge smaller banks to create four new lenders that would hold more than half of the Indian banking industry’s assets.”

https://www.businesstimes.com.sg/banking-finance/mega-mergers-fail-to-attract-funds-to-india-state-run-bank-stocks-0


“A slowdown in India’s steel sector is spreading to medium and small enterprises, with several companies cutting production in response to lower demand…

“The steel companies are facing the heat from the slowdown in one of their biggest clients, the automotive industry. Demand for real estate has also been falling in a slowing economy and a liquidity crunch.”

https://www.livemint.com/industry/manufacturing/slump-in-steel-sector-spreads-to-small-medium-companies-1568661627422.html


“South Korean companies continued to suffer setbacks in their sales and profits in the second quarter amid slower economic growth and sluggish exports, central bank data showed Sept. 17.

“In the April-June period, the average sales of local companies shrank 1.1 percent from the same period last year, according to the data from the Bank of Korea.”

http://www.theinvestor.co.kr/view.php?ud=20190917000656


“The two-year-long economic crisis in Argentina has intensified in recent months, leaving even some middle-class families struggling to afford food… Inflation has topped 55 percent and 10 percent of the population has newly fallen below the poverty line this year.

“As government food aid to schools is growing more meagre, nearly 50 percent of Argentinian children are suffering from malnutrition and 30 percent of Argentinians overall.”

https://www.france24.com/en/20190916-crisis-argentina-we-don-manage-feed-ourselves-anymore


“For many years now, people in Zimbabwe have turned to one refrain over and over – when Robert Mugabe dies, things will be better. Mugabe was ousted from power in 2017, and now the longtime former ruler has died.

“But Zimbabwe’s new government has used many of the same repressive tactics that its longtime leader once did, and the country is once again in a deep economic crisis.”

https://www.npr.org/2019/09/16/761126871/why-zimbabwe-is-again-in-a-deep-economic-crisis


“Shares in African diamond miner Petra Diamonds hit an all-time low on Monday after reporting a net loss of $258.1 million for the year ending in June, compared to a $203.1 million-loss in 2018, amid challenging market conditions.

“The company, which has mines in South Africa and Tanzania, said the loss reflected an impairment charge of $246.6 million triggered by lower diamond price assumptions.

“Richard Duffy, who has been at Petra’s helm since April, said the diamond market was in its worst state since the financial crisis in 2008…”

https://www.mining.com/petra-diamonds-shares-hit-all-time-low-as-loss-widens/


“EM equities fell in August and lost more ground than developed market stocks amid mounting fears of a global economic slowdown.

“The US-China trade row intensified as both countries announced new rounds of trade tariffs, while an inversion of the US Treasury yield curve stoked worries that the United States could be headed for a recession. EMs registered portfolio outflows, and EM currencies declined against the US dollar.”

https://seekingalpha.com/article/4291705-august-ruled-global-economic-slowdown-trade-fears


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

16th September 2019 Today’s Round-Up of Economic News

“The record oil-price surge after a strike on a Saudi Arabian oil facility couldn’t come at a worse time for a world economy already in the grip of a deepening downturn.

“While the severity will depend on how long the price spike endures, the development will further erode business and consumer confidence that already are fragile amid the U.S.-China trade dispute and slowing global demand. A manufacturing slump around the world is hammering growth in export powerhouses China and Germany.

““A negative supply shock like this, when global growth is in a synchronized slowdown with many geopolitical hotspots simmering, is just what we don’t need,” said Rob Subbaraman, head of global macro research at Nomura Holdings Inc. in Singapore.

“The oil shock comes amid a flurry of warning signs for the global economy…”

https://www.bloomberg.com/news/articles/2019-09-16/oil-price-shock-couldn-t-come-at-worse-time-for-world-economy


“Saudi Arabia’s economic transformation is under threat from the kingdom’s ballooning debt pile as recession worries strike bond markets, economists have warned.

“Emerging markets enter the latest global downturn “in an even more precarious state of solvency”, with public finances in the kingdom and South Africa most under threat, said Bank of America Merrill Lynch.”

https://www.telegraph.co.uk/business/2019/09/14/soaring-debt-threatens-saudi-drive-transform-economy/


“The first exit polls in Tunisia’s presidential elections suggest a shock victory for two political outsiders, law professor Kaïs Saïed and media mogul Nabil Karoui, who is on remand in prison on corruption charges he denies.

“The early results indicate that faced with widespread disillusion over the country’s progress in the past eight years since its revolution…”

https://www.theguardian.com/world/2019/sep/15/its-all-lies-tunisia-heads-to-the-polls-amid-widespread-disillusionment


“EU officials have rejected Boris Johnson’s claim that “a huge amount of progress” is being made in Brexit talks, as Jean-Claude Juncker warned that time is running out.

“Juncker, who will stand down as European commission president on 31 October, is expected to ask Johnson to spell out his ideas for replacing the Irish backstop when the pair meet over lunch in Luxembourg on Monday.”

https://www.theguardian.com/politics/2019/sep/15/eu-officials-reject-boris-johnson-claim-huge-progress-brexit-talks


“Brexit uncertainty and a global economic slowdown amid the US-China trade war has set Britain on course for the most prolonged slump in business investment in 17 years, according to the British Chambers of Commerce…”

https://www.theguardian.com/business/2019/sep/16/britain-facing-most-prolonged-investment-slump-in-17-years


“The slowdown in China’s economy deepened in August, with industrial production growing at its weakest pace in 17-1/2 years amid rising U.S. trade pressure and softening domestic demand.

“Retail sales and investment gauges also worsened, data on Monday showed, reinforcing views that China is likely to cut some of its key interest rates this week…”

https://uk.reuters.com/article/us-china-economy-activity/chinas-aug-industrial-output-growth-grinds-to-17-1-2-year-low-idUKKBN1W102H


“Police in Hong Kong have used water cannon and tear gas against protesters throwing petrol bombs and bricks near government offices in the city. The violence broke out after thousands of pro-democracy demonstrators marched, despite being denied a police permit…

“Earlier hundreds rallied outside the British Consulate, demanding the UK press China to maintain freedoms guaranteed during the 1997 handover.”

https://www.bbc.co.uk/news/world-asia-49705988


“About 48,000 members of the United Auto Workers union went on strike early Monday as contract talks with General Motors broke down. Union members walked out of factories and set up picket lines at 33 plants across the nation as well as 22 parts warehouses.

“The strike, depending on its length, could easily cost GM hundreds of millions of dollars.”

https://www.cnbc.com/2019/09/15/uaw-calls-strike-against-general-motors-for-the-first-time-since-financial-crisis.html


“Emerging market central banks have turned more dovish than at any point since at least the global financial crisis…

“…according to analysis of the language in 4,000 monetary policy publications.”

https://www.ft.com/content/111d9ec2-d60e-11e9-8367-807ebd53ab77


“The global economy is slumping as the trade war infects nations across the world, putting growth this year and next year on track to slide to its worst performance since 2009, at the height of the financial crisis.

“US growth is slipping, China’s expansion will fall to its weakest pace in decades, and the eurozone will spend 2020 on ‘the brink of recession’, investment banks warned as they slashed forecasts for almost every economy.”

https://www.telegraph.co.uk/business/2019/09/14/global-growth-slump-lowest-since-2009-trade-war-forces-banks/


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

13th September 2019 Today’s Round-Up of Economic News

“The declining economic outlook and increasing political pressure are pushing central banks into more aggressive unconventional monetary policies.

“Simultaneously, fears are growing that such steps, especially negative interest rates, actually threaten the stability of the financial system. They risk setting off dangerous feedback loops in credit markets and the real economy, where the second and third-order effects are difficult to anticipate or control.”

https://www.bloomberg.com/opinion/articles/2019-09-13/negative-rates-threaten-health-of-banks


“Mass-selling German newspaper Bild on Friday accused European Central Bank President Mario Draghi of “sucking dry” the bank accounts of Germany’s savers, a day after the ECB cut interest rates deeper into negative territory…

““Banks could soon pass on lower interest rates to even more customers,” Joachim Wuermeling, a board member of Germany’s central bank, the Bundesbank told Focus magazine.”

https://uk.reuters.com/article/uk-ecb-policy-germany/count-draghila-is-sucking-our-accounts-dry-says-german-daily-bild-idUKKCN1VY0MG


“…cheap debt has fueled growth in the United States for decades. But in Europe, corporate debt is in a very different place than it is stateside. As of August 1, a staggering 40% of investment grade corporate debt was yielding negative.

“And after the ECB’s new policy announcement this morning? That number’s guaranteed to grow.”

https://unseenopp.com/why-europes-latest-rate-cut-could-cause-the-next-financial-crisis/


““A recession is threatening the German economy. The industry’s weakness is gradually spreading into other sectors of the economy, such as the logistics sector, which is one of the service providers,” said ifo economic affairs director Timo Wollmershäuser, commenting on the institute’s new forecast published on Thursday (12 September).”

https://www.euractiv.com/section/economic-governance/news/all-signs-point-towards-recession-in-germany/


“…the headline assumptions [in the event of a no-deal Brexit] are that there will be increases in the cost of fuel and food, possible shortages of medicine and potentially riots as a result of all of the above.

“The government’s rhetorical shield is that this is just the reasonable worst case scenario – which is a clever way of hiding that it is also their central forecast. Yes, it’s possible that it could be better – but it is equally possible it could be worse.”

https://www.newstatesman.com/politics/brexit/2019/09/yellowhammer-isnt-just-worst-case-scenario-its-governments-main-forecast


“German Chancellor Angela Merkel’s government is watching with alarm the growing number of migrants reaching the Greek islands from Turkey.

“The swell of asylum seekers crossing the western Aegean Sea is a sign of trouble in the arrangements hashed out with Turkey that eventually staunched the flow of arrivals during the crisis of 2015 and 2016. A new influx, even if nowhere near the same scale, has the potential to stir up trouble for Merkel…”

https://www.bloomberg.com/news/articles/2019-09-12/germany-alarmed-by-spike-in-migrants-reaching-greece-from-turkey


“The world hasn’t seen such staggering numbers of people fleeing violence, persecution and desperation since World War II — and countries that had offered safe harbor are beginning to turn them away…

“The vast majority of displaced people flee not to wealthy Western countries, but to their neighbors. It’s there that efforts to curb protections are most acutely felt.”

https://www.axios.com/syria-refugee-crisis-rohingya-bangladesh-trump-cd761f56-8cdb-4820-94b1-20765a8a0664.html


“Argentine lawmakers on Thursday unanimously approved a draft emergency food law to free up resources for social programs amid a worsening economic crisis…

“Soaring inflation and rising poverty have stirred outrage at austerity measures introduced by center-right President Mauricio Macri’s government in order to comply with the terms of a record $57 billion IMF bailout.”

https://www.france24.com/en/20190913-argentina-economic-crisis-lawmakers-approve-emergency-food-bill


“…these aren’t normal times:

“Grim reports this week showed Australian firms and households deep in the doldrums, with little sign that recent Reserve Bank and government efforts are set to change that. Earlier data showed that retail sales actually went backwards in July.”

https://finance.yahoo.com/news/australias-biggest-economic-stimulus-since-190000032.html


“Japan’s exports likely contracted at the fastest pace in more than three years in August, a Reuters poll showed on Friday, indicating increasing pressure on shipments as the economy is being hit by the U.S.-China trade war and slower global growth.

“Adding to the challenges policymakers face, Japan’s core consumer inflation is seen in the poll as slipping to the lowest level in more than two years.”

https://kdal610.com/news/articles/2019/sep/13/japan-august-exports-seen-in-sharpest-fall-in-three-years-core-inflation-to-dip-reuters-poll/936893/


“The Bank of Japan is brainstorming ways to deepen negative interest rates at minimal cost, as it considers adopting it as a main policy response to a slowing economy and intensifying global risks, sources familiar with the bank’s thinking said.”

https://uk.reuters.com/article/us-japan-economy-boj/boj-considering-ways-to-deepen-negative-rates-at-minimal-cost-sources-idUKKCN1VX10M


“Another shadow financier in India has defaulted on a debt repayment, signaling the nation’s yearlong credit crisis is far from abating.

“Altico Capital India Ltd., a non-banking finance company that focuses on lending to the real-estate sector, didn’t pay 199.7 million rupees ($2.8 million) of interest on borrowings from Dubai-based Mashreqbank PSC, Altico said in an exchange filing on Thursday.”

https://www.bloomberg.com/news/articles/2019-09-13/clearwater-backed-shadow-bank-default-adds-to-india-credit-woes


“The Trump administration may begin issuing 50-year “ultralong” bonds next year as the government seeks new ways to finance ballooning deficits and tries to take advantage of low interest rates.

“Treasury Secretary Steven Mnuchin said on Thursday that he had been studying whether there was sufficient market demand for a 50-year bond, which would overtake the 30-year bond as the longest-term debt that the government issues.”

https://www.nytimes.com/2019/09/12/us/politics/treasury-50-year-bonds.html


“The finances of U.S. farmers continued to deteriorate, with 2.32% of all farmland loans in arrears at the end of June, up from 2.15% a year earlier and the highest share since 2013.

“Default rates on other agricultural loans accelerated to 1.82% from a recent low of just 0.77% back in 2015 and the highest since 2011.

“The other troubling trend was the increasing delinquency rates for credit cards and other consumer loans, which have been gently but consistently rising since 2015.”

https://uk.reuters.com/article/us-usa-borrowing-kemp/us-consumers-show-growing-signs-of-debt-distress-kemp-idUKKCN1VX1XW


“The yield curve was once just a wonky graph for academics and policymakers. But in recent years it has become a way to forecast looming recessions.

“The curve has helped predict every recession over the past 50 years. That means the curve accurately predicted even largely unforeseen downturns like the dot-com bubble of 2001 and the Great Recession in 2007.”

https://www.cnbc.com/2019/09/12/stocks-and-bonds-what-is-a-yield-curve-inversion.html


“Right now may be as good as it gets for the OPEC+ mission to shrink global oil inventories.

“This quarter’s contraction in stockpiles won’t last and next year they’ll start to expand without deeper cuts from the producer group. That’s the consensus view from the three big oil-forecasting agencies.”

https://www.bloomberg.com/news/articles/2019-09-12/oil-agencies-this-may-be-as-good-as-it-gets-for-opec-producers


“…in addition to the yield curve in the United States now being inverted, we’ve got a strange situation where as much as 16 trillion dollars — I repeat, 16 trillion dollars — of global bonds, a third of the global bond market, now trades at negative interest rates. So for instance in Germany, in order to have the privilege to lend to the government for 10 years, you have to actually pay the government something like half a percent a year for the next 10 years.

“At that point, you’re just looking for a safe place to put your money, right?

“You’re either looking for a safe place to put your money, or what you’re betting is that the interest rates are going to go even more negative. So you’ll get capital appreciation on those bonds. So the bond market is telling you one thing; both in the United States and globally we’re not simply going to have a recession, but likely a prolonged recession of a fairly severe type.

“And what is the stock market missing?

No, well, the stock market could be thinking of something that has legitimately served them well in the past. This is that the central banks are there to bail them out…

“What is of concern to me is not simply that stock market prices are very high valuations, but it is that loans to risky borrowers have been made at very low interest rates. So because we’ve had a period of prolonged period of very low interest rates and very easy money, borrowers who shouldn’t have been in the market have actually borrowed at low interest rates.

“So Janet Yellen, for instance, is very concerned right now about the leverage bond market in the United States.

“It’s lending to very risky borrowers has now increased as much as $1.3 trillion, and that has been done at very low interest rates without the usual covenants or protections for the lenders.

“If things go wrong, we could have a lot of disruption in the financial market…”

https://www.aei.org/publication/are-we-due-for-a-global-recession-a-long-read-qa-with-desmond-lachman/


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

12th September 2019 Today’s Round-Up of Economic News

“The global economy is set to dive deeper into the realm of negative interest rates as central banks look for new ways to spur growth amid signs of a looming slowdown.

“The issue hit a fever pitch Wednesday morning as President Donald Trump tweeted that the Federal Reserve should lower interest rates “to ZERO, or less,” for the US to refinance its debt.

“The tweet puts the onus further on the Fed to lower rates, something most economists already expected the central bank to do — though not to the extreme degree Trump appears to want.

“The idea that some investors have become so risk averse that they’re willing to pay money to store capital in a safe-haven investment like a bond suggests a bleak outlook for the global economy.”

https://markets.businessinsider.com/news/stocks/negative-interest-rates-explained-what-they-are-why-they-matter-2019-8-1028516867


“The European Central Bank meeting tomorrow (Sept. 12) is one of the most significant in recent memory—not because it may cut rates, but because it might not.

“Taking a neutral stance will reveal the dirty secret in monetary policy: Central bankers can’t prevent a recession.”

https://qz.com/1706309/what-the-ecb-rate-decision-means/


“…lorries could have to wait up to two and a half days to cross the English Channel and British citizens could be subject to increased immigration checks at EU border posts.

““Certain types of fresh food supply will decrease,” it said. “There is a risk that panic buying will cause or exacerbate food supply disruption.””

https://uk.reuters.com/article/uk-britain-eu-worst-case/uks-worst-case-no-deal-brexit-plan-warns-of-food-shortages-public-disorder-idUKKCN1VW2KV


“Europe’s largest economy is notoriously wary of borrowing. But it’s also on the brink of recession… The possibility of major German spending to upgrade infrastructure and tackle the climate crisis is generating lots of excitement.

“Yet experts caution that the country’s lawmakers, determined to maintain a balanced budget, are unlikely to approve the kind of flashy spending package that could give the region a jolt.”

https://edition.cnn.com/2019/09/11/economy/germany-economy-recession-stimulus/index.html


“A 45-year old Turkish man on Wednesday set himself on fire in capital Ankara after shouting that he was unemployed and hungry…

“Witnesses in Ankara’s Kızılay district informed the police, who came and intervened using fire extinguishers, the news site said… The jobless rate is at 13 percent as of April, according to latest figures of the Turkish Statistical Institute.”

https://ahvalnews.com/unemployment/turkish-man-self-immolates-ankara-over-financial-problems


“Stretched finances are forcing rural households [in India] to live frugally. What may be a necessity in urban households, like a bar of soap or a tube of toothpaste, has attained premium status in rural India…

“According to Jain, over the past two months, daily orders have plunged from ₹70,000 to ₹25,000.”

https://www.livemint.com/news/india/slowdown-stories-from-india-s-heartland-1568226866326.html


“The Chinese auto market is crashing. Data from the Chinese Association of Auto Manufacturers show the passenger car market there contracted 6.9% in August and has fallen 11.0% for the year-to-date period.

“August 2019 marked the 14th consecutive decline for the Chinese auto market…”

https://www.forbes.com/sites/jimcollins/2019/09/11/chinas-car-market-is-heading-from-recession-to-depression/#459e3fa66b55


“China’s central bank will stick to its guns to lower interest rates and boost bank liquidity to encourage more lending and support the economy despite skyrocketing pork prices across the country, analysts said.”

https://www.scmp.com/economy/china-economy/article/3026858/chinas-central-bank-stick-its-guns-lowering-interest-rates


“Business confidence among Japanese manufacturers has soured to hit the weakest level in 6-1/2 years, the Reuters Tankan poll for September showed, underscoring fears that the U.S.-China trade war is undermining Japan’s export-led economy…

“The Reuters Tankan sentiment index for manufacturers fell for a fourth straight month, reaching minus 7, the lowest point since March 2013.”

https://wsau.com/news/articles/2019/sep/11/japan-manufacturers-mood-hits-6-12-year-low-reuters-tankan/936392/


“South Africa’s unsecured lending boom has left 40% of borrowers in default and millions of people in a debt trap, according to fund manager Differential Capital.

“About 7.8 million of the country’s 60 million residents have taken out a combined 225 billion rand ($15 billion) of loans without collateral, mostly for short-term needs such as furniture and urgent family care, the Johannesburg-based firm said in a report.”

https://www.bloomberg.com/news/articles/2019-09-12/s-africa-unsecure-loan-boom-leaves-40-of-borrowers-in-default


“Argentina’s central bank late on Wednesday announced further currency controls in an effort to tame speculation and stem a spiraling debt crisis in Latin America’s third largest economy.

“The new measure requires anyone purchasing foreign currency to present a sworn oath promising to wait at least five days before using it to purchase bonds.”

https://www.reuters.com/article/us-argentina-economy/argentina-announces-new-round-of-currency-controls-amid-economic-crisis-idUSKCN1VX04R


“Cuba’s president warned Wednesday night that the country faces a looming energy crisis due to lack of diesel fuel, but he hopes to avoid blackouts in coming days.

“President Miguel Diaz-Canel blamed U.S. sanctions for shortages and warned Cubans to prepare to see immediate effects from the lack of fuel.”

https://www.citynews1130.com/2019/09/11/cubas-president-warns-that-energy-cutbacks-are-looming/


“Ratings agencies gave a cautiously positive assessment on Wednesday of Mexico’s $5 billion cash injection into state oil company Pemex, but it did not dispel the risk of another downgrade of its bonds to speculative grade, or junk, in the next few months…

“Although it noted that a successful transaction would improve Pemex’s liquidity, Fitch said it viewed government support as “moderate” given Pemex’s heavy tax burden.”

https://uk.reuters.com/article/mexico-pemex/update-2-mexico-gives-struggling-pemex-5-bln-to-pay-debt-refinancing-planned-idUKL2N2620J2


“Global oil demand continues to see downgrades from major energy forecasters, with several downward revisions in just the past week…

“The point is not to pick on the EIA – just about every major forecaster has been forced to dramatically slash their numbers – but rather the global economy has slowed down by much more than expected. If the roughly 890,000-bpd demand growth figure comes to pass as the EIA now predicts, it would be the first time since 2011 that oil demand grew by less than 1 mb/d.”

https://oilprice.com/Energy/Energy-General/Oil-Demand-Growth-Weakest-In-Nearly-A-Decade.html


“…forget about contraction, there is a recession which is coming and one should fasten the seatbelts because turbulent times are coming and the fall could be bigger than what we have seen even in 2008…

“Capital expenditure is falling globally. The global PMI is below 50, which would suggest that the world is headed towards recession. We are seeing the US ISM fall below 50, which increases the probability of recession significantly. We are also seeing Germany, China essentially in recession. We are seeing manufacturing, global trade contract everywhere. All major countries are seeing global exports decreasing. We are seeing big ticket items decreasing as well. This is a lot of leading indicators that suggest there is trouble ahead.”

https://economictimes.indiatimes.com/markets/expert-view/i-am-expecting-a-global-recession-oil-could-go-to-30-if-not-20-a-barrel-raoul-pal-real-vision/articleshow/71078971.cms


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