13th January 2021 Today’s Round-Up of Economic News

Fitch sounds alarm over government borrowing binge

“Credit ratings agency warns on impact of soaring borrowing on global growth and “toxic” issue of cancelling eurozone debt.

“Soaring public debt risks damaging global growth as investors plough money into government bonds rather than companies, a top credit ratings agency has warned.”


[The invasion of the Capitol] was clearly a case of extreme political instability and a harbinger of potentially greater political violence to come…

“An outright U.S. collapse, like in the Civil War of 1860, is still extremely unlikely. But high levels of disruption could still hurt the US’s finances by posing a danger for investors in the country’s sovereign bonds.”


San Francisco’s office market is being hit so hard by the pandemic that, by some measures, it’s worse than the global financial crisis or dot-com collapse.


In the major shopping corridors in Manhattan, where sidewalks are lined by ground-floor shops, retail rents have been declining for years – and not just by a little, but by 20%, 30% or even over 40%, amid ballooning vacancies. The brick-and-mortar retail meltdown, Manhattan style.

Then came the Pandemic.”


When megaproject 20 Times Square broke ground in 2015, it looked like a sure bet.

Fast-forward five years, however, and the hotel and retail development is a mounting source of dismay, as it backs at least $1.9 billion in debt that is either in default or expected to be soon — including $750 million in commercial mortgage-backed securities bonds passed along to investors — according to three sources familiar with the matter.”


US cities are losing their allure for renters, placing early signs of strain on the $1.2tn market in bonds backed by mortgages on apartment blocks

Investors in commercial mortgage-backed securities, where loans backed by properties like apartment buildings are bundled together to underpin the sale of fresh debt, are watching closely.”


UK retail sales suffered the biggest decline in 25 years last year as the closure of non-essential shops during lockdowns more than outweighed the online spending boom fuelled by Covid-19.”


About 2.2 million unemployed in ‘very difficult period’ for economy, says Bank of England governor.

Andrew Bailey talks unemployment and negative interest rates at a Scottish Chambers of Commerce event.”


From 1 January [under our Brexit agreement], the UK government introduced a rule that VAT must be collected at the point of sale rather than the point of importation.

This essentially means that overseas retailers sending goods to the UK are expected to register for UK VAT and account for it to HMRC if the sale value is less than €150 (£135).

This has led to a number of Europe-based retailers deciding they will no longer deliver to the UK.”


Italy’s government is expected on Tuesday evening to approve a 220-billion-euro coronavirus recovery spending package – and collapse shortly afterwards over a row on how to spend the money.

“Former prime minister Matteo Renzi is widely expected to withdraw his small but pivotal Italy Alive (IV) party from the ruling centre-left coalition after complaining that the EU funds risked being wasted.”


A Covid borrowing binge has made Italy and Spain highly vulnerable to another shock to investor confidence, Moody’s has warned as it sounded the alarm on the eurozone’s soaring debt piles.

The credit ratings agency gave the region’s sovereign debt a “negative” outlook for 2021, warning its governments face “a critical policy challenge” to stabilise public finances…”


Japanese household inflation expectations hit an eight-year low in the three months to December, a central bank survey showed on Tuesday, suggesting the coronavirus pandemic has heightened deflationary risks in the world’s third-largest economy.”


A new coronavirus variant has been detected in four travellers from Brazil’s Amazonas state, Japan’s Health Ministry said on Sunday, the latest new mutation of the virus discovered.

A ministry official said studies were underway into the efficacy of vaccines against the new variant, which differs from highly infectious variants first found in Britain and South Africa…”


South Korea lost the most jobs in two decades and the unemployment rate hit a 10-year high as the country’s worst coronavirus outbreak yet forced businesses to slash hiring.

“The nation shed 628,000 jobs in December compared with the prior year, a tenth straight monthly drop…”


Investors have a new default worry in China’s credit market: Investor confidence in China Fortune Land Development Co. Ltd. is tumbling as concerns grow about its debt repayment abilities just as Beijing steps up efforts to cut risk in the real estate sector.”


China’s food security is again on Beijing’s agenda, with the nation’s bitter history of hunger and famine in mind.

After a quarter century, the issue of ensuring China’s grain supply has returned to prominence. China’s reliance on imports to ultimately feed its increasingly affluent citizens is much higher than the headline figures suggest.”


“Banking stability indicator has improved on all five parameters but as investors chase returns in the low interest-rate scenario, the disconnect between the real economy and the financial markets is getting worse, India’s central bank said in its Financial Stability Report Monday.


The crisis facing the Indian Ocean island of Mauritius dramatically worsened last week.

For the first time in its history, armed militarized police were deployed against peaceful protestors in the capital city.”


The number of protests with more than 10,000 participants whose goal is to remove a politician has grown over the past few decades… the number (outside the US) was as follows:

“1990-1999: 78 protests

2000-2009: 55 protests

2010-2020: 282 protests.”


“…the unfortunate truth is that by many metrics, the US and much of the rest of the world have already been in a mild depression for the past 12 years, ever since the 2008 global financial crisis.

“It’s just not as obvious as the 1930s depression, because higher levels of technology and anti-deflationary monetary policy disguised it in a nominal sense.”


After several years of being bombarded by peak oil demand or oil glut scenarios, the market is without any doubt heading towards a major supply crisis. The COVID-era has not only removed short-term demand and increased interest in a global energy transition, it has also brought down global upstream investments.

“Analysts have already indicated a possible peak oil investment scenario, but that has been countered by many claiming that renewables will make up for losses. The reality, however, is very worrying.”


The global economy starts 2021 with record amounts of debt that will slow the recovery and could destabilise some countries, the Institute of International Finance (IIF) warned

The surge in global debt levels has been unprecedented since the onset of the pandemic, increasing by over $17 trillion to $275 trillion last year.”


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11th Jan 2021 Today’s Round-Up of Economic News

As spending climbs and revenue falls, the coronavirus forces a global reckoning:

“A rising ‘debt tsunami’ threatens even stable, peaceful middle-income countries… The pandemic is hurtling heavily leveraged nations into an economic danger zone, threatening to bankrupt the worst-affected.”


From Japan to the US, young people give up on finding jobs:

Young people and former part-timers account for most of the labor market exiles. Worse, the young people among this group might also miss out on opportunities to gain the kind of work skills and experiences that further careers.”


Derek Wood was about to achieve a lifelong dream [of making a living as a musician]. Unemployment benefits may prove to be his foil…

His story shows how the US’s safety net for the jobless has broken down, and the intangible costs of the crisis.”


According to Eurostat Friday, unemployment rates slightly decreased in November in the euro area to 8.3 percent, but it is still rising sharply year-on-year due to the health crisis caused by the pandemic…

However, young people are the most affected by the deterioration in the labor market, as the unemployment rate for those under the age of 25 rose in November to 18.4 percent (+0.4 points) in the euro area…”


Decision-time looms on EU budget rules as pandemic fallout grows: Positive developments for economy cannot mask long-term pain from soaring public debt.

“Faced with a Covid-induced economic disaster last year, EU member states fired every fiscal weapon they had… The question facing EU finance ministries in 2021 is what comes next.”


Italy is considering a new stimulus package worth 24 billion euros ($29 billion) to support its healthcare system and its COVID-battered economy, Economy Minister Roberto Gualtieri said in a newspaper interview on Sunday.

We’re considering a package worth 1.5% of our gross domestic product,” Gualtieri told Il Corriere della Sera daily newspaper.”


The supply chain between Northern Ireland and the rest of the United Kingdom is a “boat breakdown” away from collapse as a result of the post-Brexit regulatory border, the UK’s Road Haulage Association has warned the British government.”


There will be no spring recovery [for the UK. Chancellor Rishi] Sunak must prepare for a double-dip recession.”


British minister Rishi Sunak expressed concern that higher interest rates might one day jack up the cost of servicing government debt, in comments published on Sunday.”


Small UK businesses call for more support to face Covid impact: More than 250,000 companies at risk of collapse this year, quarterly FSB survey suggests.”


Councils across England are facing having to make unprecedented cuts to services in the coming years, after coronavirus left them with multimillion-pound black holes in their funding.

“Early intervention and prevention projects for vulnerable families, as well as recycling schemes, are among the cutbacks most likely to be in the firing line as local authorities seek to claw back cash to avoid meltdown. And council taxpayers will be asked to stump up more…”


[South Africa’s] Eskom Holdings SOC Ltd. is unprepared for maintenance work at Africa’s sole nuclear power plant after a steam generator leak brought forward a planned shutdown at one of the 1,800-megawatt facility’s two units…

The shutdown, which Eskom said will last until May, will sap its ability to meet national demand. The state-run company that supplies almost all of South Africa’s power has instituted intermittent power outages across major cities since 2008 because it can’t supply the electricity the country needs. Last year was the worst on record for power cuts in the country.”


Pakistan’s national power grid has experienced a major breakdown, leaving millions of people in darkness, government officials have said.

“”A countrywide blackout has been caused by a sudden plunge in the frequency in the power transmission system,” Power Minister Omar Ayub Khan said on Twitter.”


Syria’s petroleum ministry on Sunday blamed U.S. sanctions for forcing it to cut by up to 24% its distribution of fuel and diesel because of delays in arrival of needed supplies.

“The war-ravaged nation already is facing a severe economic crisis that has caused major shortages in wheat and fuel products. Long lines have formed outside of gas stations and bakeries.”


A policeman was killed Sunday in Iraq, the army said, as security forces fired to disperse a third consecutive day of protests in the city of Nasiriyah, according to medics…

“Witnesses said security forces opened fire to disperse demonstrators — including some throwing stones — from a city square that served as an epicentre of a widespread protest movement that began in 2019.


Iran’s capture of a South Korean-flagged tanker at sea last week has been described by the US as extortion. But Tehran says it is Seoul that is the hostage taker — accusing it of holding $7bn of its cash.

“Just weeks before US president-elect Joe Biden is due to take office, the Islamic regime engaged in two moves seen as highly provocative by the west.”


“U.S. sanctions aimed at stopping oil sales have battered Iran’s economy, which has been shrinking since 2018. By disrupting the Hormuz strait, Iran shows it has the power to hit back at the U.S. and drive up crude.

“Any boost in the price of oil also helps make up for the revenue Iran is losing due to the sanctions.”


Hundreds of thousands of Taiwanese enterprises are bidding farewell to China because of rising costs and trade tensions between Washington and Beijing, marking a dramatic shift for Taiwan’s corporate landscape with significant implications for global manufacturing.

““I see a structural collapse among the ranks of Taiwanese-owned businesses in China,” said Liu Jen, editor in chief at CRIF China…”


Ship owners facing looming deadlines to use less-polluting fuels have slashed the number of new vessels on order because they don’t know which alternative technology to switch to.

Ammonia, hydrogen, biofuels and electrification are some of the many contenders to power the world’s future merchant fleet, but most are only in the trial stage and won’t be scalable for at least a decade. With the life of a commercial ship averaging around 20 years, opting for a technology that doesn’t take off could be very costly.

But owners are running out of time to make the choice.”


The global economy could be on the brink of a new commodity “supercycle” as governments prepare to use a green industrial revolution to kickstart growth following the coronavirus pandemic

““Things like copper, nickel and cobalt are all likely to see a boost from the extra demand to build infrastructure. Even steel and petrochemicals will be needed,” said Chris Midgeley, the head of analytics at S&P Global Platts.”

[If this is “green” then what does “green” even mean?]


Are we on the cusp of a global solvency crisis? …2020 has been characterised by a sweeping wave of corporate deterioration, which in turn has triggered widespread credit downgrades and even defaults in many instances…

“…as social-distancing measures and economic contractions persist, levels of corporate-default risk were expected to “exceed those of the 2008 financial crisis”.”


Is ‘hysterical’ market speculation pushing us towards another crash?

Despite Covid, global stocks started 2021 on a high. But some analysts warn of an ‘epic’ bubble, amid fears that the flow of stimulus has created a monster.”


On various measures, there are reasons to be fearful. The graph below shows that the US stock market is as expensive as it was on the eve of the 1929 Wall Street Crash…”


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8th Jan 2021 Today’s Round-Up of Economic News

Global food prices reached a six-year high in December and are likely to keep rising into 2021, adding to pressure on household budgets while hunger surges around the world.

A United Nations gauge of food prices has jumped 18% since May, as adverse weather, government measures to safeguard supplies and robust demand helped fuel rallies across agricultural commodities from grains to palm oil. Prices will likely climb further, the UN’s Food & Agriculture Organization said.

The spike threatens to push up broader inflation, making it harder for central banks to provide more stimulus to shore up economies, while stirring up memories of a food-price crisis a decade ago…”


Victory for the Democratic party in this week’s Senate run-offs will add to the long-term pressure on the US dollar, which was already expected to continue its slide this year, analysts say.

“The dollar has kicked off 2021 on a subdued note after notching up losses of 7 per cent last year against a basket of its peers. This week, it touched its weakest levels since April 2018, helping to push the euro and the Chinese renminbi to multiyear highs.”


The euro and yen are flirting with valuations unseen for years as dollar weakness creates headaches for policy makers the world over.”


China’s home appliance manufacturers left cursing export orders as costs rise, profits vanish amid yuan rally:

Lockdowns and work from home arrangements in the West have increased the demand for home appliances manufactured in China. But a strong yuan is causing profits to decline, with firms also under pressure from soaring metal prices.”


A week on from Brexit, the main road to Dover has been so quiet that officials were able to close half of it Thursday for a litter-picking operation without causing delays for drivers.

“But behind such placid scenes, many truckers are still warning of chaos as they struggle to adjust to the new paperwork required by Britain’s departure from the European Union. Drivers are being held up for hours because they lack the right documents, they say.”


About 4,000 City firms are at a heightened risk of failure due to the Covid crisis, and nearly a third of those businesses could potentially harm consumers if they collapsed, the financial watchdog has warned.

“The regulator said insurance intermediaries and brokers, payments and electronic money firms, and investment management companies experienced the largest drop in cash and assets, which can act as a buffer during a downturn.”


Financial markets are likely to be hit more frequently by the kind of upheaval unleashed by the COVID-19 pandemic and central banks need new tools to deal with powerful investment firms which were at the heart of it, a Bank of England official said.”


Bank of France Says High Debt Puts Financial System at Risk:

Low interest rates, rising credit risk weigh on banks’ profits… Extended lockdown would make it harder to pay off loans.”


Danes Get 20-Year 0% Mortgages: The country with the longest history of negative central bank rates is offering homeowners 20-year loans at a fixed interest rate of zero…

The once unthinkable notion of borrowing for two decades without paying interest comes as central bankers across the globe shy away from rate hikes.”


Eurozone retails sales contracted more than expected in November and inflation was negative for the fifth consecutive month in December, adding to the pressure on policymakers to support the economy…”


Europe’s top auto markets posted their biggest annual sales declines in decades, with ongoing coronavirus restrictions expected to crimp a recovery early this year.

“Registrations fell by about 25% last year across Germany, the U.K., France, Italy and Spain, Europe’s five largest car-buying countries…” [Worth noting that car sales were falling in Europe, and indeed globally, in 2019.]


Japan is considering extending a state of emergency from the Tokyo metropolitan area to other regions as novel coronavirus cases increase but that could raise the risk of a double-dip recession for the world’s third-largest economy

““There’s no doubt it will affect January-March growth,” Finance Minister Taro Aso told reporters, when asked about the economic impact.”


India’s economy is set for its biggest annual contraction in records going back to 1952 as the rapid spread of coronavirus cases and measures to contain them hurt businesses and households.

“Gross domestic product will shrink 7.7% in the financial year ending March 2021, the statistics ministry said in its first advance estimate published on Thursday.”


A weak banking system has come back to haunt India’s economy during the pandemic.”


Cubans have suffered food shortages for years. Then the country’s economic situation deteriorated even further due to the Covid-19 crisis.

Suddenly, after years of gradual economic decline, the crisis seems to have accelerated.

“The main symptom is a severe shortage of food.”


Venezuelans risk lives to buy flour:

“Residents and traders from the Venezuelan port town of Guiria travel to Trinidad and Tobago by boat, risking their lives, to stock up on flour, rice, oil and other essentials that have become scarce and prohibitively expensive at home.”


Already suffering under stringent U.S. and U.N. sanctions, North Korea’s economy faced a double whammy of severe floods and the coronavirus pandemic this year, which prompted Pyongyang to shut its border with China and ditch outside aid…

The U.N.’s World Food Programme said in July, just before the monsoon season, that more than 10 million people, or 40% of the population, were already facing food shortages.”


Zimbabwe is in the throes of a deepening economic crisis characterised by hyperinflation that has pushed food prices beyond the reach of many, in addition to stagnant salaries, foreign currency shortages, a rapidly weakening currency, low production, water shortages, power blackouts and rising poverty.”


Six years of war have culminated in dire economic conditions across Yemen. Millions of people suffer from food insecurity and famine is looming….

“Since September 2016, Yemen’s public employees have not received their salaries regularly, which has left millions of families exposed to harsh living conditions.”


It is, to put it mildly, counterintuitive. In the midst of a global pandemic and one of the steepest recessions ever, mainstream investment markets are very fully valued by historic standards

“…part of the reason for the rich valuations in today’s markets, according to Longview Economics, a research boutique, is that ever more newly-created [central bank] money is chasing an ever-shrinking pool of investable assets as the central banks take assets on to their own balance sheets… [How do you make a good return in an era of ever diminishing returns?]

“William White, former economic adviser and head of the economic and monetary department at the Bank for International Settlements, suggests that by keeping interest rates too low in the attempt to generate economic growth central banks have induced corporations and households to take on more debt.

“This, says Mr White in an interview, creates a debt trap and rising instability. When a financial crisis strikes central banks have to save the system, but in doing so they create even more instabilities.”


Bitcoin has surged above the $40,000 (£29,500) mark for the first time in its history after doubling its value in less than a month.

“The record comes just days after the cryptocurrency hit an all-time high of more than $34,800 on Sunday, which was also the 12th anniversary of the bitcoin network being created. Bitcoin first breached the $20,000 mark in mid-December.”


You can read the previous ‘Economic’ thread here. I’ll be back tomorrow with a ‘Climate’ thread.

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

World Economy Faces Debt Doom Loop: The world economy will be exiting the pandemic weighed down by much bigger debts and increased inequality that could hobble growth in the longer term. That was one of the memes making the rounds at the annual meeting of the American Economic Association that winds up on Tuesday.

“We have met every crisis in the recent past with yet more aggressive central bank accommodation and yet more leverage, both public as well as private,” said former Reserve Bank of India Governor Raghuram Rajan. “The real question is: Is this a doom loop? Does it keep going until it is forced to stop?”


More large U.S. companies filed for bankruptcy in 2020 than in any year since the global financial crisis, after the pandemic tipped swaths of the economy into distress.

“Energy, retail and consumer services companies led a total of 244 filings, according to data compiled by Bloomberg. That was the most since 2009…” [We ain’t seen nothing yet, as the Fed has been backstopping corporate debt].”


Corporate debt boom resumes as 2021 kicks off: Borrowing for January could reach $100 billion or more, despite lapse of Fed program.”


Companies may find themselves excessively indebted after the coronavirus pandemic even if their businesses rebound, Oaktree Capital founder Howard Marks has warned, underlining the strain facing corporate America.”


Britain began its third COVID-19 lockdown on Tuesday with the government calling for one last major national effort to defeat the spread of a virus that has infected an estimated one in 50 citizens…

“Chancellor Rishi Sunak’s latest package of grants adds to the eye-watering 280 billion pounds in UK government support already announced for this financial year to stave off total economic collapse.”


The Bank of England is on course for a difficult 2021, after a Financial Times survey found investors believe the central bank’s quantitative easing programme is a thinly veiled attempt to finance the government’s deficit to keep its borrowing costs down.”


Figures released by the organisation on Wednesday showed new car sales in the UK fell by close to 30 per cent to 1.63m during 2020, the biggest annual fall since 1943.

“It was the worst sales year since 1992, and the first time the number of new cars sold fell below 2m since 2009, during the financial crisis.”


The food and drink industry has raised serious concerns about the new EU-UK trade deal because businesses face punitive tariffs on goods from the bloc processed at British distribution hubs that are re-exported to member states.

“Industry bodies on both sides of the Channel have warned that the so-called “rules of origin” chapter of the deal effectively blocks existing supply chains…”


Economic activity in the euro zone contracted more sharply than previously thought at the end of 2020 and could get worse as renewed lockdown restrictions imposed to contain the coronavirus hit the bloc’s dominant service industry, a survey showed…

“With much of the service industry being forced to close demand also shrank a lot more than thought.”


Italian Prime Minister Giuseppe Conte faces a showdown with his coalition partner and former premier Matteo Renzi this week that could bring down his government even as it struggles to contain the COVID-19 pandemic.”


No one should be surprised by Turkey’s recent economic and financial woes.

“The country’s triple crisis (currency, banking, and sovereign debt) has been unfolding for years. Whether this economic turmoil will incite political turmoil is now a widely debated question.”


Youth unemployment in Turkey stood at 24 per cent in September, the most recent available data, as young people between the ages of 15 and 24 found themselves at the sharp end of a broader employment crisis that has been compounded by the economic consequences of Covid-19…

“The slump has political implications for Mr Erdogan, who has seen his popularity slide and faced sharp criticism from opposition parties over the lack of jobs.”


Japan’s likely decision to declare a state of emergency in the Tokyo area will most probably trigger a contraction in January-March, analysts say, adding to the headache for policymakers struggling to cushion the blow to the economy from the pandemic…

“Media reported on Monday that preparations were being made for a state of emergency that would take effect by Friday.”


New car sales in Japan slumped 11.5 percent in 2020 from a year earlier amid the coronavirus pandemic, marking the largest fall in nine years.

“The 11.5 percent decline was the biggest since 2011, when auto sales tumbled 15.1 percent to about 4,210,000 vehicles, in the aftermath of the massive earthquake and tsunami that ravaged northeastern Japan and disrupted supply chains.”


Xi Jinping orders China’s military to be ready for war ‘at any second’:

“As the PLA kicks off its training programme for 2021, its ultimate commander stresses combat readiness and more hi-tech. Frontline frictions must be used to polish troop capabilities and training exercises need to incorporate technology, Xi said.”


Saudi Arabia’s decision to cut oil production probably reflects expectations for demand to weaken further as coronavirus lockdowns return around the world, according to Goldman Sachs Group Inc…

“Goldman said its supply-demand balance for the first quarter is weaker than previously thought…”


Simply put, Iraq is running out of money to pay its bills.

“With its economy hammered by the pandemic and plunging oil and gas prices, which account for 90 percent of government revenue, Iraq was unable to pay government workers for months at a time last year.”


[Nigeria’s] Power ‘stressing out’ under unsustainable cash flow challenge:

“Despite the intervention of Central Bank of Nigeria (CBN) and Nigerian Electricity Regulatory Commission (NERC) to address the liquidity crisis rocking Nigeria’s electricity market, the sector continues to struggle under heavy debt.”


Chad and several other countries are already in deep debt distress and more will join their ranks this year, given the severity of the global recession triggered by the COVID-19 pandemic, World Bank Group President David Malpass said…

“The African oil producer Chad may need a deep reduction in the net present value of its debt, and creditors would need to work with the country to find a viable solution to its debt overhang, Malpass told reporters on Tuesday.”


Rising Debt Triggers Growing Alarm, Especially for Poorer Nations: How are countries going to cope with the sea of pandemic-related debt — will they drown in it?

“Lockdowns and coronavirus restrictions have caused some government revenues to collapse at the same time public spending increases to try to save jobs and livelihoods. Poor and developing countries are the hardest hit, but even rich, powerful nations are straining to cope with the economic wreckage…”


As we head into 2021, investors will likely maintain an attitude that has served them well this year: put your faith in central banks’ ability to shield financial markets from any and all economic and corporate shocks.

This will encourage more irresponsible risk-taking by investors and debt issuers. It will also fuel investment approaches that fail to account for a longer term in which governments and central banks themselves face massive and persistent policy and operational challenges.”


In Bloomberg’s quarterly review of monetary policy that covers 90% of the world economy, no major western central bank is expected to hike interest rates this year.

“China, India, Russia and Mexico are among those predicted to cut their benchmarks even further.”


Unprecedented government spending has helped ward off a grave economic depression in nations around the world, but the debt load governments like the U.S. are taking on to fund such stimulus measures could stall economic growth for years to come, the World Bank warned Tuesday.


Debt defaults among businesses and countries are rising, and these could cascade through the financial system and possibly trigger another financial crisis, the former head of the Bank of England said Monday.”


As 2020 drew to a close with severe limitations to travel still in place, the World Tourism Organization (UNWTO) expects international arrivals to have declined by 70 to 75 percent compared to the previous year.

“That equates to a decline of around 1 billion international arrivals, bringing the industry back to 1990 levels.”


You can read the previous ‘Economic’ thread here. I’ll be back tomorrow with a ‘Climate’ thread.

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4th Jan 2021 Today’s Round-Up of Economic News

The ‘black swan’ Covid catastrophe shows us just how fragile our world is:

“Covid-19 has forced us to rethink the way we work, how we shop, the role of government, how the economy works at a national and global level.

“Above all, it has shown us how fragile everything is.”


America’s dangerous reliance on the Fed:

“…the risk is that each new chapter tightens a doom loop in which the US sovereign must eventually reckon with the ever-widening class of risk it is underwriting. America’s national debt is already past 100 per cent of gross domestic product for the first time since the second world war. It nearly doubled after 2008 and is rising sharply again…

The most visible threat, however, is to US political stability [because] the Fed’s inescapable bias towards asset owners has combined with the financial sector’s preference for size to produce a very skewed recovery.”


Some Republicans who once scolded about fiscal austerity are now embracing government spending, underlining that the public supports more generous relief

“The political rethinking about the deficit — especially in times of economic weakness — is a stark change from earlier eras.”


Economists expect the UK economic recovery in 2021 to be slower than in peer countries, because of a lower starting point, a larger services sector, low business investment and the impact of Brexit…

“Many economists say the government should not raise taxes at least until the economy has fully recovered…”


European airlines are stepping up pressure on airports to slash landing charges, leading to warnings of a race to the bottom in an industry decimated by the pandemic.

“Ryanair, Wizz Air and easyJet are among the carriers pushing airports to discount fees as they decide where to fly when passengers begin returning in significant numbers.”


The coronavirus crisis has devastated the tourism sector in Spain, creating a kind of volcanic fissure of considerable dimensions that oozes lava, destroying almost everything in its path.

“The figures speak for themselves, with revenues plunging by more than 75%…”


Valuation Caution Returns as Emerging Markets Face 2021 Reality: Rarely, if ever, can a year have started with price levels in emerging markets looking so divorced from the fundamental backdrop…

“Rising Covid-19 case numbers and uneven rates of recovery in the biggest of the developing economies underscore a nagging concern that this will be about as good as it gets for stocks, bonds and currencies.”


“The COVID-19 pandemic will undoubtedly be remembered as one of the most difficult episodes in the history of modern capitalism… nowhere are the difficulties greater than in highly indebted countries.

“In Argentina, the pandemic hit at a time when the country had no access to credit.”


Is there a new wave of inflationary risk [for Indonesia]? …recently, many economists have started expressing their concern again about the increasing inflationary risk after the pandemic.

“There are a number of factors that can cause higher inflationary risk in Indonesia during the post-pandemic era… the central bank has… been buying a vast amount of public debt as part of its monetary expansion…”


“While vaccines remain a source of great hope in 2021 against the new wave of the Covid-19 virus outbreak, there is a fundamental problem that poses a risk of becoming a ticking time bomb for the Thai economy.

The Bank of Thailand revealed last week the critical problem concerning skyrocketing household debt.”


Has COVID-19 killed Asia’s growth miracle? …The COVID-19 pandemic has brought the global economy to a standstill, disrupting supply chains and highlighting the vulnerabilities of a system of interdependent national economies — many of which are set to experience a deep recession this year.

“The pandemic has shown that disruption of one critical part of a supply chain can shut down an entire industry or sector.”


The People’s Bank of China has taken steps to ease financial conditions after interbank rates doubled in the second half of the year, reflecting the challenge it faces in navigating a return to normal monetary conditions…

Concerns over the creditworthiness of some borrowers compounded existing concerns about overall high levels of leverage in China. JPMorgan estimates that the country’s ratio of debt to economic output has risen 27 percentage points to 306 per cent in 2020, based on all government, corporate and household borrowing.”


A Chinese court ruled that a local ratings firm should help compensate some creditors for a construction firm’s 1.4 billion yuan (US$216 million) bond defaults three years ago, a first in the country as Beijing raises pressure on agencies to improve their due diligence.

“Dagong Global Credit Rating is responsible for repaying up to 10 per cent of at least 494 million yuan of combined debt claims…”


Regional governments across China are evading borrowing limits by transferring assets on to the books of local investment companies to lower their official debt-to-asset ratios, according to executives and officials.

“The practice has allowed local government finance vehicles to raise more money for infrastructure and other construction projects. But analysts warn that many of the assets are of poor quality, setting the stage for a surge in bad debts after a wave of bond defaults at government-backed companies in recent weeks.”


Chinese oil majors may be next in line for delisting in the U.S. after the New York Stock Exchange said last week it would remove the Asian nation’s three biggest telecom companies.

“China’s largest offshore oil producer CNOOC Ltd. could be most at risk as it’s on the Pentagon’s list of companies it says are owned or controlled by Chinese military…”


Defaults by American oil and gas producers are set to outstrip all other sectors again in 2021 as an industry battered by this year’s price crash faces yet more pain, according to a forecast from a rating agency.

“Energy will account for $15bn-$18bn of US high-yield bond defaults in 2021, Fitch predicted. That is more than double both healthcare and industrials…”


OPEC sees plenty of downside risks for oil markets in the first half of 2021, its secretary general said on Sunday, a day before meeting allies led by Russia to discuss output levels for February.

““Amid the hopeful signs, the outlook for the first half of 2021 is very mixed and there are still many downside risks to juggle,” said OPEC Secretary General Mohammad Barkindo.”


Parts of the Middle East could see conditions further deteriorate in 2021, with a warning from a leading NGO that the world must step up assistance to these countries in order to prevent conflict, poverty and Covid-19 claiming thousands of more lives.

“The International Rescue Committee (IRC) named Yemen, Afghanistan, and Syria as the three countries most at risk of humanitarian deterioration this year.”


Bitcoin has topped $30,000 for the first time, extending a rally that saw its value climb by 300% in 2020.

The cryptocurrency rose to as high as $31,824 early on Saturday – just two weeks after passing the $20,000 mark.”


The Russian Energy Giant Mining Bitcoin With Virtually Free Energy:

Gazpromneft recently began a cryptocurrency mining operation based in one of its Siberian oil drilling sites, “unlocking the power of Russia’s oil and gas resources for the needs of bitcoin mining,” Yahoo! Finance reported this week.

In slightly better news for Bitcoin’s carbon footprint, Russia’s new mining operation will be powered by natural gas from the oil field, located in the Khanty-Mansiysk region of northwestern Siberia, which has its own power plant to convert the gas into electricity for Bitcoin production.”


You can read the previous ‘Economic’ thread here. I’ll be back tomorrow with a ‘Climate’ thread.

If you found value in this content, please help me continue this work by becoming a patron of my work via Patreon

1st Jan 2021 Today’s Round-Up of Economic News

Central bankers will spend 2021 trying to tame the debt monsters they made in 2020. The pandemic-induced market meltdown forced Federal Reserve Chair Jay Powell to buy corporate debt for the first time, while European Central Bank President Christine Lagarde unveiled plans to spend an unprecedented 1.85 trillion euros propping up markets.

“Yet in helping resolve the crisis, rate-setters sowed the seeds of the next one.”


Another 787,000 Americans filed for unemployment benefits in the week before Christmas, the last snapshot of 2020’s appalling jobs market before the New Year.

“Unemployment claims have been rising again in recent weeks to their highest levels since the autumn as surging coronavirus rates have slowed hiring and led to more layoffs.”


Indiana mattress maker loses sleep over new COVID-related supply chain delays

“Lauren Taylor’s small mattress factory in northern Indiana has managed to survive during the coronavirus pandemic, with the help of a federal emergency loan…

“But as COVID-19 infections worsen again in the United States, the American-made parts her company, Holder Mattress Co., relies on are taking months to arrive, forcing customers to wait for their new beds.”


The coronavirus has wreaked havoc in Britain’s labour market, with a health crisis becoming a jobs crisis throughout 2020.

“Mass redundancies hit the headlines throughout the year, despite the government’s furlough scheme, loans and grants, as well as employment growth in a handful of sectors. Many employers buckled under the weight of the virus…”


Britain’s blue-chip share index has suffered its worst year since the 2008 financial crisis, as the Covid-19 pandemic and Brexit uncertainty hit stocks during a turbulent 12 months for investors.

“The FTSE 100 index of top shares listed in London fell by 14.3% during 2020, the poorest performance among the largest international stock indices, and its biggest decline since 2008.”


Spain’s gross domestic product has likely to contract by more than 10% this year as a consequence of the coronavirus pandemic and the restrictions imposed on economic activity to curb it, Prime Minister Pedro Sanchez said on Tuesday.

“”We are now 10% poorer than a year ago,” he told a news conference.”


The US will impose new import taxes on some French and German goods as part of a long-running trade dispute.

“It announced tariffs on aircraft manufacturing parts along with certain non-sparkling wine, cognac and other grape brandies.”


China has dramatically slashed how much wheat it imports from Australia to a nine-year low amid a worsening trade war between Beijing and Canberra.

“Customs data shows the Asian superpower bought only 880 tonnes of wheat from Australia last month – the lowest November total since 2011.”


China’s top credit-rating firm was banned from rating new bonds for three months, after an investigation found it ignored red flags at a state-owned coal miner whose default last month rattled the country’s bond market

The series of events spooked investors, triggering price declines that pushed up bond yields and raised borrowing costs for other companies.”


“…if China were to make the RMB fully convertible, money would first flow in to take advantage of interest rates, but then it would flow out to hedge against poor fundamentals and cash out.

Then the Chinese economy could easily collapse, bringing down the political system, as happened to Indonesia or the Philippines in 1998, with the Asian financial crisis, where a similar mechanism was at play.”


A quieter crisis seems to be gaining momentum in the financial sector. Even without a Lehman moment, it could jeopardize prospects for economic recovery for many years to come.

“The high leverage of countless firms on the eve of the pandemic will amplify the financial sector’s balance-sheet problems in the coming year.”


An overwhelming majority (83%) of institutional investors in the eurozone, the UK, the US and Canada among other countries see a risk of a global financial crisis as the world deals with the economic fallout of the coronavirus pandemic, new data has revealed.”


COVID-19 shook, rattled and rolled the global economy in 2020.”

Yes, it did – but we’re still here.

Happy New Year, all, and huge thanks to those who donated or subscribed. Let’s see what 2021 brings… Enjoy those fresh groceries and hot showers while you can! 


You can read the previous ‘Economic’ thread here. I’ll be back with a ‘Climate’ thread over the weekend.