by Panopticon | Feb 19, 2020 | Economy
“In my 2010 book, Crisis Economics, I defined financial crises not as the “black swan” events that Nassim Nicholas Taleb described in his eponymous bestseller but as “white swans”. According to Taleb, black swans are events that emerge unpredictably, like a tornado, from a fat-tailed statistical distribution. But I argued that financial crises, at least, are more like hurricanes: they are the predictable result of builtup economic and financial vulnerabilities and policy mistakes.
“There are times when we should expect the system to reach a tipping point – the “Minsky Moment” – when a boom and a bubble turn into a crash and a bust. Such events are not about the “unknown unknowns” but rather the “known unknowns”.
“Beyond the usual economic and policy risks that most financial analysts worry about, a number of potentially seismic white swans are visible on the horizon this year. Any of them could trigger severe economic, financial, political and geopolitical disturbances unlike anything since the 2008 crisis…
“Financial markets, meanwhile, remain blissfully in denial of the risks, convinced that a calm if not happy year awaits major economies and global markets.”
https://www.theguardian.com/business/2020/feb/19/the-white-swan-harbingers-of-global-economic-crisis-are-already-here
“The Federal Reserve has doled out tens of billions to calm the short-term lending markets after they went haywire in September.
“But initiatives by the U.S. Treasury Department — to ensure it always has enough cash to pay its bills as the deficit soars to a trillion dollars — could make it harder for the Fed to prevent a repeat.”
https://finance.yahoo.com/news/fed-doesn-t-want-another-110000351.html
“The build-up of corporate bonds has hit unprecedented levels since the 2008 financial crisis and created a global stock of outstanding debt with a lower rating quality and higher payback requirements compared with past cycles, the OECD said.”
https://www.reuters.com/article/us-corpbonds-oecd/quality-of-corporate-debt-falls-as-bond-stocks-hit-all-time-high-oecd-idUSKBN20C2DS
“Rail blockades have brought Canada’s manufacturing industry to a virtual standstill, and the industry will start seeing plant closures and temporary layoffs soon if it continues, the group that represents the industry says.
“Rail and transport protests are hurting a key cog of Canada’s economy at a time when it can hardly afford the hit…”
https://www.cbc.ca/news/business/manufacturing-rail-blockades-1.5466893
“A Dubai-based operator of ports and terminals around the world is returning to full state ownership with a proposed transaction and a subsequent delisting from Nasdaq Dubai.
“This could be one of the latest signs that the oil-rich countries in the Middle East are still struggling to shore up budgets and finances in the aftermath of the 2014 oil price crash.”
https://oilprice.com/Energy/Energy-General/A-Middle-East-Financial-Crisis-Is-In-The-Making.html
“Japan’s exports fell in January from a year earlier for the 14th consecutive month, and economists expect the coronavirus outbreak to weigh on demand in the months ahead.
“The country’s exports fell 2.6% on year in January, the Ministry of Finance said Wednesday, compared with a 6.3% drop in December and 7.0% contraction forecast by a FactSet poll of economists.”
https://www.marketwatch.com/story/japans-exports-fall-for-14th-straight-month-2020-02-18?mod=mw_latestnews
“The coronavirus outbreak in China could be about to affect menus in Japan.
“China is Japan’s biggest foreign supplier of vegetables, and imports have slumped. The agriculture ministry says imports of processed onions dropped 88 percent year-on-year in the first week of February. Leek imports were down 81 percent and carrots down 76 percent.”
https://www3.nhk.or.jp/nhkworld/en/news/20200218_49/
“The illness, now officially labeled COVID-19, has raced across the globe, infecting tens of thousands of people and killing more than 2,000, predominantly in China.
“Countries have closed their borders to Chinese travelers; airlines have slashed flights and limited routes. Points of transit across Asia—train stations, bus depots, airports—have seen traffic plummet, and some are nearly deserted.”
https://www.theatlantic.com/international/archive/2020/02/economy-coronavirus-myanmar-china-tourism/606715/
“As the second-largest national economy in the world, China both lies at the heart of global supply chains and is a key consumer market relied on by manufacturers.
“The outbreak has opened up vulnerabilities in global supply chains.”
https://www.scmp.com/comment/opinion/article/3051072/coronavirus-crisis-drags-cracks-are-showing-global-supply-chains
“European stock markets are set to open in positive territory Wednesday, helped by gains in Asia, as market participants expect central bank largesse to mitigate the damage caused by the outbreak of the coronavirus in China.
““Any investor concern around impact on demand globally from the virus will be offset by expectations that global central banks will ride to the rescue,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.”
https://www.investing.com/news/stock-market-news/stocks–europe-seen-higher-looking-for-central-bank-largesse-2088052
“How can central banks and the outside world tell that their vaunted independence is under threat?
“In view of clouds over the world economy and controversy over whether monetary policy can counter lower growth, central bankers believe political pressure can become a major factor hindering their ability to fulfil their mandates.”
https://www.omfif.org/2020/02/when-central-bankers-powers-run-out/
“Mexico’s central bank cut interest rates to 7% last week, marking the 800th interest rate cut by a central bank since the Lehman Brothers’ bankruptcy in September 2008, Bank of America Global Research notes.
“What’s happening: The number of rate cuts from central banks have picked up steam since last year when the global economy’s growth rate stumbled to its slowest since the financial crisis.”
https://www.axios.com/central-banks-interest-rate-cuts-great-recession-35ddfceb-41ad-4819-9e0b-fb89fb449d4d.html
“It is not unusual for these organizations [like the World Bank and IMF] to be optimistic: after all, they do not want to be seen as naysayers, or prophets of doom, especially if their pronouncements are later denounced as self-fulfilling prophecies.
“But ‘talking up the economy’ can have grave consequences, as with the 2008-2009 global financial crisis (GFC). Then, the IMF revised its forecast upward in July 2007, a month before the US ‘sub-prime’ mortgage crisis morphed into the worst global downturn since the Great Depression of the 1930s.
“Meanwhile, the OECD was confident that any US ‘soft-landing’ would be offset by robust European economic performance. Such forecasts fostered a false and ultimately dangerous sense of invulnerability and complacence before the storm broke.”
https://www.pressenza.com/2020/02/global-economy-still-slowing-dangerously-vulnerable/
Read the previous ‘Economic’ thread here and visit my Patreon page here.
by Panopticon | Feb 18, 2020 | Economy
“Extreme weather has the potential to trigger an economic recession worse than anything else in human history, experts warn. Current financial markets do not account for the risk posed by extreme natural disasters such as floods and droughts, according to a study published in the journal Nature Energy.
“As a result, investors are at risk of a sudden correction and crash which devastates the global economy unless unless action is taken to mitigate its impact. Researchers believe a disaster-induced crash would dwarf the infamous Great Depression and 2008’s Great Recession and be the worst economic meltdown ever.”
https://www.dailymail.co.uk/sciencetech/article-8012119/Extreme-weather-trigger-catastrophic-economic-recession-like-weve-never-seen-before.html
“Shortages of food and fuel could be among the fallout from continuing rail blockades by Indigenous groups and environmental activists protesting against a natural-gas pipeline project on Canada’s west coast, warn the country’s retailers and manufacturers…
“Canada’s largest cargo rail network has been ground to a halt in Ontario and in the west coast Canadian province of British Columbia.”
http://www.xinhuanet.com/english/2020-02/17/c_138792837.htm
“…while the market’s focus is on the issues surrounding a debt relief agreement that is “sustainable”, there is a surprising lack of debate about the fact that [Argentina’s] economy – on its current trajectory – is itself completely unsustainable and headed for a sharp crisis.”
https://www.euromoney.com/article/b1kcxd1ppgm92n/is-argentina-headed-for-the-rocks
“European car sales fell in January, hit by a sluggish global economy, higher car taxes in some EU countries and uncertainty over Britain’s departure from the bloc, the European Auto Industry Association (ACEA) said on Tuesday.
“In January, new car registrations dropped 7.4%…”
https://auto.economictimes.indiatimes.com/news/passenger-vehicle/cars/european-new-car-sales-down-7-4-in-january/74187969
“Once Asia’s fastest-growing major economy, India’s recent downturn has seen the government hit the fiscal panic button.
“Will the coronavirus kill off its rescue effort? …Unfortunately for India’s corporate sector, the coronavirus outbreak is set to damage some of its most indebted businesses.”
https://thediplomat.com/2020/02/coronavirus-deepens-indias-economic-chill/
“The Chinese economy is on course to suffer its worst quarterly performance since the Tiananmen Square protests in 1989 because of the coronavirus outbreak, economists have said.
“Chinese officials cut a key medium-term interest rate yesterday, pumping more liquidity into the system and raising hopes of further stimulus to curb the economic impact of Covid-19…”
https://www.thetimes.co.uk/edition/business/china-slowdown-biggest-in-30-years-mm08x00d2
“HSBC has said it will slash 35,000 jobs over three years as part of a major shake-up after revealing that annual profits plunged 33%.
“The bank also issued a warning over the coronavirus outbreak in Asia, which makes up the bulk of its profits, saying it could have an impact on its performance in 2020.”
https://www.theguardian.com/business/2020/feb/18/hsbc-to-cut-35000-jobs-worldwide-as-profits-plunge-coronavirus
“The [Chinese] factory shutdowns are having knock on effects globally…
“…in the UK and elsewhere, consumer-facing industries are extremely dependent on these imports and a delay to just one specialist small component sourced from China could potentially delay production of goods by several months if the country remains unable to go back to work.”
https://www.handyshippingguide.com/shipping-news/how-is-coronavirus-affecting-the-shipping-and-logistics-sectors_12675
“The global supply chain is being disrupted, triggering production stoppages in other industrial centres… The odds are high, and rising, that the coronavirus crisis will last through March, which may be enough to push the global economy into recession.
“There is a significant chance that the crisis will last until summer. The economic disruption may pack enough of a punch to pop the biggest global bubble – centred around the US stock market – in modern history.”
https://www.scmp.com/comment/opinion/article/3050960/luck-may-be-only-thing-standing-between-coronavirus-and-us-stock
“The WTO’s latest forward-looking Goods Trade Barometer [which measures global trade] stood at 95.5, compared with a level of 96.6 in November [before the coronavirus].
“Readings of 100 indicate growth over the next quarter in line with medium-term trends, while [sub-100 denotes contraction].”
https://www.caixinglobal.com/2020-02-18/coronavirus-epidemic-to-deepen-slump-in-global-trade-wto-says-101516747.html
“Finance ministers and central bankers from 20 major economies will gather in Saudi Arabia this weekend to discuss the economic challenges posed by the outbreak.
“The meeting will test how transparent and cooperative the countries can be to tackle a growing health and economic emergency.”
https://www3.nhk.or.jp/nhkworld/en/news/backstories/879/
Read the previous ‘Economic’ thread here and visit my Patreon page here.
by Panopticon | Feb 17, 2020 | Economy
“The novel coronavirus is spreading silently and invisibly through its human carriers, inflicting fear and sickness. Likewise, malaise can spread through the “carriers” of the global economy: the supply chains that link myriad manufacturing and service-sector firms around the world.
“These supply chains are the circulatory or nervous systems of the global economy and, like their equivalents in the human body, receive little or no attention until things go wrong. Once they do – which is increasingly often – our extreme vulnerability to these hidden links is exposed.”
https://www.scmp.com/comment/opinion/article/3050728/coronavirus-chaos-lays-bare-price-uncertainty-connected-global
“We’ve been here before: recession, growing poverty, high inflation, billions of dollars in debt, a looming deadline for repayment and simmering anger toward the International Monetary Fund.
“These are crucial days for Argentina, which this week began hosting an IMF mission team for talks on restructuring US$44 billion in debt owed to the lender.”
https://www.batimes.com.ar/news/economy/argentina-and-imf-discuss-debt-in-shadow-of-2001-crisis.phtml
“Thousands of schools across this oil-rich South American nation [Venezuela] are in… dire straits
“…as pauperized teachers abandon their profession or skip the country altogether amid one of the worst economic downturns in modern history. They leave behind students so malnourished they faint during class or fail to turn up; schools so neglected they often lack even water and electricity…”
https://www.theguardian.com/global-development/2020/feb/15/venezuela-schools-collapse-amid-economic-crisis
“Fayez al-Sarraj, the head of Libya’s internationally recognised government, has warned that the North African country will face a financial crisis and budget deficit in 2020 because of a blockade of oil terminals and oil fields by groups loyal to his rival, Khalifa Haftar.”
https://www.aljazeera.com/news/2020/02/al-sarraj-libya-faces-financial-crisis-due-oil-blockade-200216014833467.html
“Lebanon may not survive if its new government fails, the powerful Hezbollah warned on Sunday, urging the country’s divided politicians not to obstruct the cabinet as it seeks to address an unprecedented economic and financial crisis…
“Banks are curtailing access to deposits, the Lebanese pound has slumped, inflation has spiked and firms are shedding jobs and slashing wages in a financial crisis.”
https://www.reuters.com/article/us-lebanon-crisis/crisis-puts-lebanons-survival-at-stake-hezbollah-warns-idUSKBN20A0JL
“Prime Minister Boris Johnson has been warned that he will face a tough battle with the European Union in his efforts to secure a trade deal in the aftermath of Brexit.
“France’s foreign minister Jean-Yves le Drian gave the prediction during the Munich Security Conference, as both sides prepare to begin negotiations…”
https://news.sky.com/story/brexit-uk-and-eu-will-rip-each-other-apart-in-talks-france-predicts-11936235
“Pantheon Macro economist Claus Vistesen said the fall of the Eurozone may get worse due to coronavirus spreading… He warned “Germany is on verge of recession again and these numbers are all from before coronavirus”.
“But Berlin is not alone in dragging the Eurozone down into an economic crisis. The French economy has also ground to a halt, largely due to protests triggered by French President Emmanuel Macron’s crippling pension reforms.”
https://infosurhoy.com/news-summary/complete-write-off-germany-drags-eurozone-into-weakest-growth-since-european-debt-crisis/
“”The sharp drop in [Japan’s] output after October’s sales tax hike supports our view that Japan’s economy will shrink this year,” Capital Economics wrote in a note after the data was published. “But after today’s release, our forecast of a 0.2% drop in GDP in 2020 looks optimistic.”
“Other economists warned the longer the virus continues to infect people, the more the risks to Japan’s economy will grow.”
https://asia.nikkei.com/Economy/Coronavirus-threatens-Japan-rebound-as-GDP-falls-most-in-5-years
“Singapore cut its 2020 growth and exports forecasts on Monday due to the expected economic blow from the new coronavirus outbreak, flagging the chance of a recession this year.
“A growing number of Asian Pacific economies are lowering their economic growth forecasts as the virus spreads, with Thailand and New Zealand also cutting their full-year estimates on Monday.”
https://www.aljazeera.com/ajimpact/singapore-cuts-growth-outlook-virus-increases-recession-risk-200217020122036.html
“Hong Kong is likely to see its biggest ever budget deficit in the next financial year in the face of a “tsunami-scale” blow dealt by the coronavirus outbreak after months of social unrest pushed the city into recession, the financial secretary has warned.”
https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3050860/coronavirus-hong-kong-may-see-biggest-ever-budget
“Chinese banks face $944 billion of debt maturities onshore and $90 billion offshore this year.
“Authorities are going back to their old playbook of spewing handouts to get them through. … A stimulus campaign to pull manufacturers out of the trade-war doldrums didn’t do much for their balance sheets last year.”
https://www.bloomberg.com/opinion/articles/2020-02-17/coronavirus-china-s-easier-debt-deepens-financial-trap-for-smes
“China is disinfecting and isolating used banknotes as part of efforts to stop the spread of the coronavirus that has killed more than 1,500 people, officials have said. Banks use ultraviolet light or high temperatures to disinfect yuan bills, then seal and store the cash for seven to 14 day…”
https://www.theguardian.com/world/2020/feb/15/chinese-banks-disinfect-banknotes-to-stop-spread-of-coronavirus
“…Capacity utilisation at major Chinese ports has been 20 to 50 per cent lower than normal and more than a third of ports said storage facilities were beyond 90 per cent full, according to a survey conducted last week by the Shanghai International Shipping Institute, a Beijing-backed think-tank.
“The effects on the shipping industry are likely to prove lasting.”
https://www.ft.com/content/9f543f48-4d96-11ea-95a0-43d18ec715f5
“Airlines have grounded flights, banks have sent staff home. In China and worldwide, the virus has taken its toll…
“With the coronavirus outbreak spreading far beyond its source in China, companies are braced for a hit on profits as demand slumps and production is disrupted in the world’s second largest economy and beyond.”
https://www.theguardian.com/business/2020/feb/15/coronavirus-black-swan-shadow-global-economy
“Global defense spending saw its biggest jump in a decade in 2019, driven by the U.S. and China as rivalries and conflicts stoke military investment.
“The International Institute for Strategic Studies (IISS) said the 4% rise, compared to a year earlier, was fueled by competition between major powers, new military technologies and rumbling warfare from Ukraine to Libya.”
https://www.japantimes.co.jp/news/2020/02/15/world/global-defense-spending-rose-4-2019-study-says/
Read the previous ‘Economic’ thread here and visit my Patreon thread here.
by Panopticon | Feb 13, 2020 | Economy
“Over the past 30 years China has become the world’s factory. For the past few weeks, the production line has been shut down by plant closures deemed necessary to halt the spread of coronavirus. Beijing fears there will be both short- and long-term damage from the outbreak.
“The country is on course for its first quarter of negative growth in decades, while earlier this week China’s ambassador to the World Trade Organization (WTO) called on other countries not to use coronavirus as an excuse to put up trade barriers.
“The fact that Zhang Xiangchen felt the need to make this appeal speaks volumes…
“Countries… get defensive when times are tough, as they have been ever since the financial crisis of 2008…
“Globalisation was sold as a way of boosting prosperity for all by making markets bigger and more efficient. For a while the model worked, but when it blew up and caused extensive collateral damage, a backlash was inevitable. Deglobalisation is the result.”
https://www.theguardian.com/commentisfree/2020/feb/13/globalisation-backlash-open-markets-borders-climate-populism-coronavirus
“…the Chinese economy is in the midst of a difficult and delicate transition, and the virus is weakening key forces — most especially consumer spending — that need to be as strong as possible for the change to go smoothly.
“Meanwhile, China is one of the few remaining major sources of demand in a global economy that’s still struggling to keep its head above water.”
https://theweek.com/articles/895172/coronavirus-hitting-chinese-economy-worst-time
“Chinese auto sales in January declined 18% on year to 1.94 million vehicles, the government-backed China Association of Automobile Manufacturers said Thursday…
“Auto sales in China declined for the second straight year in 2019 to 25.8 million, down significantly on the record-high 28.9 million sold in 2017. The painful start to the year could spell another full-year decline for the Chinese industry in 2020.”
https://www.marketwatch.com/story/chinas-auto-sales-slump-18-in-january-2020-02-13-2485636
“With no end in sight to the health emergency… it is small corporate defaults such as this that threaten to cause big trouble for the country’s banks… China’s banking sector is already in rough shape.
“A decade of excessive credit growth has saddled China’s lenders with heavy bad debts. Sharply declining economic growth [has]… put additional pressure on balance sheets over the past two years.
“…many small banks are deeply troubled and already have bad debt rates exceeding more than 40 per cent of their total loan books. In 2019, regional lenders including Baoshang Bank and Hengfeng Bank required government bailouts or other forms of intervention to stop systemic risk from spreading.
““The resilience of China’s banking system may be tested,” wrote S&P Global analyst Ming Tan in a report.”
https://www.ft.com/content/deb2f19a-4d44-11ea-95a0-43d18ec715f5
“President Xi Jinping proposed more fiscal stimulus, including tax cuts and other aid, to industries affected by the virus outbreak in a renewed effort to rein in the rising damage to the economy.
“Beijing needs to “maintain stable economic operation and social harmony,” the New York Times reported, citing Xi’s comments broadcast on state television.”
https://www.thestandard.com.hk/section-news/section/2/216233/Xi-pledges-more-stimulus-to-rein-in-damage
It is important to note that the global economy was already stagnating pre-coronavirus in 2019, especially trade and manufacturing:
“Malaysia’s central bank says there is “ample room” to adjust interest rates after economic growth slowed to its weakest in 10 years in the fourth quarter of 2019 and the coronavirus outbreak threatened to pile on more pressure this year.
“The coronavirus epidemic in China will put further pressure on the economy this year…”
https://www.aljazeera.com/ajimpact/malaysia-growth-slumps-10-year-china-trade-war-bites-200212090116255.html
Again, this was before the coronavirus outbreak:
“India’s industrial production growth turned negative in December, contracting by 0.3 per cent, mainly on account of a decline in manufacturing sector output, official data showed on Wednesday…
“Electricity generation also fell by 0.1 per cent as against a growth of 4.5 per cent in December 2018.”
https://www.indiatoday.in/business/story/industrial-production-contracts-0-3-in-december-on-manufacturing-slump-1645853-2020-02-12
Also before the outbreak:
“Industry in the eurozone suffered a dramatic collapse in production in December as output levels dived 4.1pc compared with the same month a year earlier.
“Production has not fallen faster since the depths of the financial crisis, according to official data from Eurostat, indicating the scale of the crunch facing the sector.”
https://www.telegraph.co.uk/business/2020/02/12/fresh-fears-eurozone-industrial-production-crashes/
“The number of job openings in the U.S. declined consistently throughout 2019 and took a nosedive in the last two months of the year…
““Net, net, job openings around the country are plummeting in a way that we hate to say looks like a recession,” Chris Rupkey, chief financial economist at MUFG Union Bank, told CNBC.”
https://www.axios.com/job-openings-2019-drop-since-financial-crisis-d58639f4-cdbc-41af-a806-ee2c2cc7c954.html
“Federal Reserve Chairman Jerome Powell said Wednesday the central bank would fight the next economic downturn by buying large amounts of government debt to drive down long-term interest rates, a strategy that has been dubbed quantitative easing, or QE…
““We will use those tools — I believe we will use them aggressively should the need arise to do so,” Powell said.”
https://www.marketwatch.com/story/powell-says-fed-will-aggressively-use-qe-to-fight-next-recession-2020-02-12
“While much has been achieved in strengthening the financial system against systemic risk posed by banks, policy-makers must still do more, a report published by the International Monetary Fund says.
““Enhancing resolvability of systemic banks – at the global, regional and domestic level – is a key priority,” IMF staff write.“
https://www.centralbanking.com/central-banks/financial-stability/4715521/some-countries-lack-systemic-banking-crisis-resilience-imf-report
““I do not think that central bankers will ever be able to pull away from this,” Mark Spitznagel, the founder of Universa Investments, explains. “They will never be able to ‘normalize’ rates… we’ve gone so far down the rabbit hole this time…”
“He doesn’t know when the inevitable crash will come. But he knows that when interest rates start heading up again on their own, which is also inevitable, that “markets are going to crash. It won’t be pretty.””
https://www.vanityfair.com/news/2020/02/nassim-taleb-protege-on-how-to-prepare-for-coming-market-crash
Read the previous ‘Economic’ thread here and visit my Patreon page here.
by Panopticon | Feb 12, 2020 | Economy
The WHO has gone from complacency to what appears to be abject panic:
“The coronavirus is “the worst enemy you can ever imagine” and poses a greater global threat than terrorism, the World Health Organisation has warned.
“Urging the world to “wake up” and be as aggressive as possible in tackling the outbreak, the UN health agency has given a new name to the disease that has sickened more than 44,600 people.
“It is now going to be officially known as COVID-19 – CO stands for corona, VI for virus, D for disease and 19 for the year it emerged.
“Chinese health officials have expressed hope that the outbreak will be over in April, but the head of the World Health Organisation was far less optimistic.
“Dr Tedros Adhanom Ghebreyesus warned the first vaccine for COVID-19 was 18 months away, adding: “To be honest, a virus is more powerful in creating political, social and economic upheaval than any terrorist attack. It’s the worst enemy you can imagine.””
https://news.sky.com/story/coronavirus-is-the-worst-enemy-you-can-imagine-leading-doctors-warn-11931982
“China must be nearing the point where the social and economic costs of trying to stamp out the coronavirus by totalitarian methods are greater than the trauma of letting it run.
“A normal country would eventually conclude that the more rational course is to accept that the disease can no longer be contained…”
https://www.telegraph.co.uk/business/2020/02/11/china-cannot-fight-coronavirus-avert-economic-crisis-time
“The coronavirus outbreak in China has generated economic waves that are rocking global commodities markets and disrupting the supply networks that act as the backbone of the global economy.”
https://www.nytimes.com/2020/02/11/business/china-coronavirus-commodities.html
“China is the world’s largest importer of copper and iron ores, accounting for approximately 50 percent of world demand for copper in 2019, according to World Bank data… Meanwhile, trade in iron ore could be affected in the medium term as the coronavirus prompts a long delay in construction activities…
“Manufacturers with significant operations in China, such as phone maker Apple Inc and large global carmakers, are also warning of a decline in output and profits due to the extended closure of factories.”
https://www.aljazeera.com/ajimpact/weakest-link-global-supply-chains-disrupted-due-coronavirus-200212033618174.html
“The U.S. Energy Information Administration on Tuesday cut its global oil demand growth forecast for this year by 310,000 barrels per day (bpd) as the coronavirus outbreak dents oil consumption in China, the world’s No. 2 economy.”
https://uk.reuters.com/article/us-usa-oil-outlook/eia-cuts-global-oil-demand-forecast-after-coronavirus-outbreak-idUKKBN2052B7
“So far, the best barometer of the economic challenges facing China today is in the energy market…
“A regional chief executive of a global commodity trading house confirmed to me on background that demand has plummeted by 3 million barrels a day and that other data touch points don’t look promising – internal bus traffic is down 87 percent, internal flight traffic cut nearly in half.”
https://gulfnews.com/business/analysis/global-economy-tries-out-several-cures-1.69659005
“Since elections in 2011, Singapore has managed public anger against overcrowding in housing estates and trains by curbing the numbers of foreign-born workers and their families, who still account for nearly 40% of the total population.
“If the outbreak takes a turn for the worse, voters are likely to ask, “Why are so many foreigners taking our hospital beds?”“
https://finance.yahoo.com/news/singapore-virus-budget-challenge-hong-230012177.html
“In Hong Kong, most of HSBC’s staff are working from home this week: insiders say the headquarters in central is an eerie place, where the few hardy souls willing to make it in – plus those unable to dodge critical meetings – rattle around like frozen peas in a can.”
https://www.euromoney.com/article/b1k97tc5fj2yrn/asian-banks-buffeted-by-coronavirus-ramp-up-continuity-plans
Demand was already falling drastically in 2019 so perhaps curtailed supply is no bad thing!
“Fitch Solutions on Wednesday said it expects vehicle production in India to contract by 8.3 per cent in 2020 as the auto industry faces increasing risk of supply shortage due to China”s coronavirus outbreak, possibly hitting domestic output if the virus spreads in the country.”
https://www.outlookindia.com/newsscroll/india-auto-production-to-shrink-by-83-pc-in-2020-coronavirus-spread-may-hit-supply-chain-fitch/1732116
“Australian exporters heavily dependent on China are braced for the full impact of the coronavirus on Australian exports, from iron ore and LNG, to lobster and lamb, and bionic ear technology…
“There are concerns Chinese importers of copper and gas could use force majeure clauses in their contracts that will allow them to suspend deliveries of the key commodities.”
https://www.theguardian.com/world/2020/feb/12/australian-iron-ore-gas-and-lamb-exports-to-be-hit-hard-as-coronavirus-crisis-continues
“Lebanon’s foreign minister has warned that his country faces becoming a failed state if the population doesn’t accept painful structural economic reforms…
“Nassif Hitti said that he understood the frustrations of the people after months of protests across the country.”
https://news.sky.com/story/lebanon-could-become-a-failed-state-if-protests-continue-warns-foreign-minister-11931297
“The investors behind Air Italy, Qatar Airways and the Aga Khan, have announced the end of the airline, a two-year venture that was launched with much fanfare, colorful rebranding, and high hopes, but was unable to overcome the harsh realities of a complex market.
“In Italy, it seems, only Alitalia can afford to fly bankrupt.”
https://www.forbes.com/sites/marisagarcia/2020/02/11/air-italy-goes-into-liquidation-and-ceases-operations-as-perpetually-bankrupt-alitalia-keeps-on-keeping-on/#40714e11357d
“The British economy failed to grow in the final three months of 2019 amid political uncertainty over Brexit and the snap general election.
“The Office for National Statistics said growth in gross domestic product (GDP) flatlined between October and the end of December, as consumer spending slumped over the Christmas shopping period and manufacturing output nosedived…”
https://www.theguardian.com/business/2020/feb/11/uk-gdp-british-economy-zero-growth
“With world output fragile, the risk of further slowdown in the first quarter is looking very real… if the coronavirus shows no signs of abating we should not discount the possibility of the kind of co-ordinated interest rate cut reserved for crisis.”
https://www.thisismoney.co.uk/money/comment/article-7993293/ALEX-BRUMMER-ready-crisis-rate-cut.html
“Investor money ensnared in alleged Ponzi schemes has hit its highest level in a decade, leading to concern that a booming stock market and de-regulatory agenda are pushing more fraudsters to bilk unsuspecting investors.
“State and federal authorities uncovered 60 alleged Ponzi schemes last year with a total of $3.25 billion in investor funds…”
https://www.cnbc.com/2020/02/11/ponzi-schemes-hit-the-highest-level-in-10-years.html
“[US] Household debt surged in 2019, marking the biggest annual increase since just before the financial crisis, according to the New York Federal Reserve…
““The data also show that transitions into delinquency among credit card borrowers have steadily risen since 2016, notably among younger borrowers,” Wilbert Van Der Klaauw, senior vice president at the New York Fed, said in a statement.”
https://www.cnbc.com/2020/02/11/household-debt-jumps-the-most-in-12-years-federal-reserve-report-says.html
“Auto loan and lease balances have surged to a new record of $1.33 trillion…
“…subprime loans (borrowers with a credit score below 620) are exploding at a breath-taking rate, and they’re driving up the overall delinquency rates to Financial Crisis levels.”
https://wolfstreet.com/2020/02/11/subprime-auto-loans-explode-serious-delinquencies-spike-to-record-but-theres-no-jobs-crisis-these-are-the-good-times/
“Central banks are experiencing a soul-searching moment as they look to strengthen their popularity after the global financial crisis — an exercise that could ultimately change how they operate…
“Different analysts argue that central banks are conducting these public exercises to receive reassurances on what they do, at a time when many have doubts about the effectiveness of their policy tools.”
https://www.cnbc.com/2020/02/12/the-ecb-and-fed-are-hoping-the-public-will-give-them-a-new-direction-central-banks.html
Read the previous ‘Economic’ thread here and visit my Patreon page here.
by Panopticon | Feb 11, 2020 | Economy
“When the financial system was about to collapse in 2007-08, central banks were quick to step in and to buy falling assets. This avoided a complete economic meltdown. However, at present on world financial markets, monetary policy is not combating risk but adding to it. Central banks have become major creators of possible economic shocks.
“Highly accommodative monetary policy can contribute to crisis through excessive debt. This happened in 2007-08. Inordinately easy monetary policy, with long-running negative interest rates in real terms, allowed too much leverage. Eventually, asset bubbles started to burst. We are facing a similar problem today. Global non-financial debt has grown 40% since the crisis, and debt quality has deteriorated.”
https://www.omfif.org/2020/02/central-banks-cant-bury-risk-with-more-money/
“Consider that the four big U.S. bank holding company swaps dealers:
“Citibank, JPMorgan Chase, Goldman Sachs and Bank of America handle close to 90% of U.S. swaps trades, representing a combined notional value of $300 trillion, while consumers stagger under debt and defaults mount higher than pre-2008.”
https://www.rawstory.com/2020/02/a-ticking-time-bomb-from-the-big-banks-could-cause-the-next-recession-and-king-of-debt-trump-doesnt-care/
“Personal insolvencies in Canada increased last year to the highest level and at the fastest rate since the financial crisis while business insolvencies rose for the first time in nearly two decades, government figures show.
“The Office of the Superintendent of Bankruptcy reported Monday 137,178 Canadians filed for bankruptcy or modified repayment terms with creditors last year, a 9.5 per cent increase over 2018.”
https://business.financialpost.com/personal-finance/debt/375-canadians-a-day-went-insolvent-last-year-the-most-since-the-financial-crisis
“Puerto Rico’s fragile economy is facing an uncertain future after the island’s governor rejected a settlement announced late Sunday with bondholders that would reduce the U.S. territory’s public debt by 70%.
“The settlement is the biggest one to date since the island’s government announced in 2015 that it was unable to pay its more than $70 billion public debt load and filed for the largest U.S. municipal bankruptcy in May 2017.”
https://www.wctv.tv/content/news/Puerto-Ricos-economy-in-limbo-as-governor-rejects-debt-deal-567722751.html
“It’s becoming ever clearer that eurozone manufacturing is in recession even if the eurozone economy as a whole is just about managing to keep growing.
“This isn’t a problem that really has any solution. There are no policy levers to pull here to solve it.”
https://seekingalpha.com/article/4322916-eurozone-manufacturing-recession-although-not-eurozone-whole
“Even before the coronavirus outbreak, troubles have been coming to the European economy not as single spies but in battalions.
“Worse yet, these troubles have come at a time that the European Central Bank is running out of monetary policy ammunition… All of this does not bode well for either the European or the global economies…”
https://www.insidesources.com/europes-dark-cloud-over-the-world-economy/
This issue [dwindling auto sales globally] pre-dates the Coronavirus:
“Sale of passenger cars, a key barometer of vehicles sales, continued to decline in November despite significant discounts by automakers.
“This indicates that the sector is yet to recover from the worst auto slowdown in India in more than a decade.”
https://www.business-standard.com/article/companies/auto-slowdown-continues-as-jan-sales-dip-6-coronavirus-to-delay-recovery-120021001519_1.html
“”Even if we open, there won’t be any business,” said Li Yinping, a cocktail bar owner in Beijing, who says staff from outside the capital are holding off on returning.
“Across Beijing and in cities around the nation, many small shops run by out-of-towners remain locked up — transport restrictions and official advice to stay home dissuading them from travelling back to work.”
https://www.abc.net.au/news/2020-02-11/virus-fears-halt-china-going-back-to-work/11952650
“Nissan is the latest car maker to temporarily shut one of its factories as it can’t get parts from China.
“The firm will halt production for two days at a plant in Japan which makes the Serena and X-Trail models. Global car brands are facing similar disruptions…”
https://www.bbc.co.uk/news/business-51441344
“The Australian dollar tumbled to its weakest level since the financial crisis as investors continued to weigh the impact of the coronavirus on economic growth in China, Australia’s biggest trading partner.
“The currency, typically regarded as a proxy for Chinese economic growth, fell to the lowest level against the greenback since March 2009.”
https://www.fxstreet.com/analysis/aussie-dollar-becomes-the-victim-due-to-coronavirus-202002100927
“The ongoing coronavirus outbreak could cause the biggest slowdown in global economic growth since the 2008 financial crisis, according to analysts at UBS… The bank’s analysts are expecting a “sharp drop” in global growth to around 0.6% for the first quarter…”
[Bear in mind that although 0.6% is a positive reading, the global economy is in recession when growth falls below 3%].
https://www.proactiveinvestors.co.uk/companies/news/912556/coronavirus-could-cause-biggest-economic-growth-slowdown-since-financial-crisis-warns-ubs-912556.html
“The coronavirus epidemic could spread to about two-thirds of the world’s population if it cannot be controlled, according to Hong Kong’s leading public health epidemiologist…
“Even if the general fatality rate is as low as 1%, which Leung thinks is possible once milder cases are taken into account, the death toll would be massive.
https://www.theguardian.com/world/2020/feb/11/coronavirus-expert-warns-infection-could-reach-60-of-worlds-population
Read the previous ‘Economic’ thread here and visit my Patreon page here.
