“The last time major central banks shifted gears together, it was a cooperative move to keep the financial crisis of a decade ago from becoming a full-bore, worldwide depression.
“Now, a new round of global ratecutting risks taking on a competitive edge as policymakers try to stay ahead of rising trade tensions, a volatile investment climate, and a shift in the political mood from shared support for globalisation to a more zero-sum battle over a slower-growing world economy.
“It’s a situation that has created deep internal divisions at the European Central Bank, the Bank of Japan and the U.S. Federal Reserve as officials debate how to confront a global slowdown with limited room to cut interest rates, and with elected officials pursuing policies that may be doing harm, at least in the short run…
““The worst thing that could happen is a global race to the bottom,” among central bankers in Tokyo, Frankfurt and Washington, said one official familiar with the BOJ’s thinking, who spoke on condition of anonymity.”
“Increasing signs of a slowdown in global demand have made Japanese central bankers less confident about an early pickup in global growth…
“Deepening negative interest rates will be among key options if the BOJ were to ease, although the central bank may need to accompany that with measures to mitigate the pain any such move could inflict on financial institutions, the sources said.”
“The European Central Bank is about to turn the screws again on financial institutions by diving even deeper into negative interest rates.”
“”In the current circumstances, it’s no [to a Brexit extension],” said Foreign Minister Jean-Yves Le Drian over the weekend, speaking with France’s Europe 1 radio broadcaster. “We are not going to go through this every three months.” And that is still the government’s stance today, the Foreign Ministry has confirmed to DW.
“Prime Minister Edouard Philippe has said the country is prepared for the UK to leave the European Union at the end of October.”
“Fears are rising of a recession in Germany, Europe’s biggest economy and long-time powerhouse of the eurozone.
“The latest data does not look good – the following eight charts show why a recession looks likely and why Germany must act to avoid a prolonged downturn.”
“Historically, once the U.S. yield curve (10-year minus three-month) inverts, the ISM enters contraction an average of seven months later. The “10-year minus three-month curve went negative on March 22, and here we are (almost right on time) five months later watching the ISM contract…
“The Federal Reserve can go sell the idea that the economy expanded at a modest pace through the end of August to the perma-bulls, but I ain’t buying.”
“Fannie and Freddie are less equipped for a downturn now than they were before the crisis, Senate Banking Chairman Mike Crapo (R-Idaho) said.
“Before 2008, he said, the companies held 45 cents in capital for every $100 in mortgages; today that figure is 19 cents.”
“Indexes and data show that the US-China trade war is hurting both sides. Additionally, US economic growth is cooling off due to lower corporate spending, among other factors. Businesses are holding back on capex amid trade war uncertainty.”
“The South Korean economy is closely watched because its exports are said to be a lead indicator of global economic activity…
“Now, according to data released last week, the Consumer Price Index (CPI) in South Korea decreased by 0.04% in August from a year earlier. It is the first time that South Korea has experienced consumer price deflation since statistics began to be compiled in 1965.”
“…existing predictive models and monetary policy tool kits are turning increasingly ineffective in either understanding or addressing the actual reasons for the slowing down of productivity growth…
“It is entirely plausible that we are now entering an era of low economic growth and a higher rate of deflation being the norm, especially within spaces where capital is very cheap and interest rates extremely low.”
“After months of denial, India’s Narendra Modi government is finally conceding that the economy is in trouble. The country’s GDP in the April-June quarter of this financial year grew at a meagre 5%—the lowest in six years…
“What is alarming, though, is that even this 5% growth may be an overestimation given the many infirmities in India’s revised GDP estimation methodology introduced four years ago.”
“South African factory output contracted for the second consecutive month in July as the output of petroleum and chemical products and basic iron and steel continued to shrink.
“Manufacturing production declined 1.1% from a year earlier.”
“Argentina has fallen back into crisis for the simple reason that not enough has changed since the last debacle.
“As such, the country’s economic and financial foundations have remained vulnerable to both internal and external shocks.”
“Debt was the medium that sucked the world into the vortex of the global financial crisis in 2008.
“And more debt was the mechanism used to get out of it.
“No one knows when the music will stop.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“The Organisation for Economic Co-operation and Development (OECD) has warned almost $200 trillion in public and private debt could be the catalyst for another global economic crisis if trust in government and financial institutions deteriorates…
“A decade after “excessive debt” in the housing market brought the global economy to its knees, the OECD said even more debt today could precipitate a loss of trust in financial and political institutions.
“”Should global economic growth and credit conditions continue to deteriorate, a new bout of financial stress could erupt, the financial markets could become more vulnerable to episodes of contagion,” it said.”
“China’s producer price index fell further into contraction, signaling a worsening economic slowdown that threatens to add deflationary pressures to the global economy.
“Factory prices fell 0.8% in August from a year earlier, compared with a decline of 0.9% in the median estimate of economists in a Bloomberg survey.”
“Pork prices in China soared 46.7% year-on-year in August, as the country faced rising shortage of the meat amid a swine fever outbreak which has killed millions of hogs.
“That was a far bigger increase than July’s pork prices which jumped 27% from a year ago.”
“The rapid escalation of the China-US trade war in recent weeks has left Beijing’s policymakers with the choice of two evils: either enlarge the obvious “grey rhino” risk of rising debt or face the unpredictable “black swan” threat of a further economic slowdown, analysts said…
“But Beijing’s policy balancing act might have come to an end last week when the People’s Bank of China announced that it would pump an estimated US$126 billion in additional liquidity into the banking system to boost credit.”
“Ongoing Hong Kong protests have been blamed for a 40-per-cent slump in inbound visitors to the territory in August.
“Given travellers account for about 50 per cent of Hong Kong retail turnover, that figure does not bode well for official retail sales figures for the month, due to be released in early October. A predicted double-digit decline now seems inevitable, especially as the luxury sector is hardest hit by a drop in visitors.”
“Australian business sentiment tumbled in August, suggesting interest-rate cuts and tax relief are failing to rejuvenate the slowing economy.
“A gauge of business confidence slid to 1 from 4, while the conditions index — which measures hiring, sales and profits — slumped to an almost five-year low of 1, the National Australia Bank Ltd. survey showed Tuesday.”
“Some of the stocks worst hit by Brexit uncertainty aren’t in the U.K. They are Irish banks. The Republic of Ireland’s two largest lenders are among the worst-performing European banks this year, according to FactSet data.
“Shares in AIB Group PLC and Bank of Ireland Group PLC began a sharp decline when Boris Johnson took over as the U.K.’s prime minister at the end of July. His determination to pull out of the European Union by Oct. 31 fueled investors’ concerns that he would engineer the exit even without a trade deal…”
“The American middle class is falling deeper into debt to maintain a middle-class lifestyle.
“Cars, college, houses and medical care have become steadily more costly, but incomes have been largely stagnant for two decades, despite a recent uptick. Filling the gap between earning and spending is an explosion of finance into nearly every corner of the consumer economy.”
“Federal prosecutors in Manhattan have opened an investigation into possible lending fraud in the New York City taxi industry, the most significant action taken so far in response to widespread practices that trapped thousands of cabdrivers under crushing debt, according to people with knowledge of the inquiry.”
“Global manufacturing is experiencing its sharpest and most geographically widespread downturn in at least six years…The manufacturing slowdown is the main factor dragging on the global economy, fuelling fears that growth is stalling and ramping up pressure on governments and central banks to ready fresh stimulus efforts.
“The gloom is centred on the car industry. Activity across car producers globally reached a near-record low in August…”
“Ford Motor Co. was dealt a blow by Moody’s Investors Service, which cut the carmaker’s credit rating to junk on doubts that a turnaround plan by Chief Executive Officer Jim Hackett will generate earnings and cash quickly enough.
“Moody’s downgraded Ford to the highest junk rating, Ba1, saying the automaker’s cash flow and profit margins are below expectations…”
“The crisis at Japanese automotive giant Nissan deepened today, after chief executive Hiroto Saikawa was asked to quit by the company’s board…
“In July, Nissan reported a 98.5 per cent plunge in operating profit in the first quarter of 2019, and announced it was slashing 12,000 jobs across the globe.”
“Hedge funds are becoming more pessimistic about the outlook for oil prices as trade tensions between the United States and China remain unresolved and global economic growth grinds to a halt…
“Hedge funds and other money managers were net sellers of petroleum futures and options last week for the fifth time in seven weeks, according to an analysis of data published by regulators and exchanges.”
“Insiders at U.S. corporations are selling shares at a pace not seen since before the financial crisis a decade ago. Insiders are people who work as directors or senior officers of companies, whose compensation often includes things like stock options and common shares so they have a vested financial interest in the companies for which they play key roles.
“Because they are so fully invested and have access to data about how their companies are performing before the general public does, some investors believe valuable insights can be gleaned by watching whether insiders are putting more or less of their own money into them.
“If that theory holds water, one message has been coming in loud and clear of late: sell.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“The global bull run that started in 1985 is now one of the most intense in the debt market’s 700-year history, comparable with a deleveraging and economic growth spurt that followed the Napoleonic wars.
“Despite longstanding predictions of the end of the bond bull market that started after former Federal Reserve chair Paul Volcker quashed inflation in the 1980s, government debt has kept rallying this year, taking the average annual fall in yields to 17.4 basis points (0.174 percentage points) over the past 34 years.
“That puts it on the cusp of surpassing the 1873-1909 bull run in length, and makes it the strongest decline in long-term interest rates since 1817-1854, when bond yields declined by 22 bps a year, according to research by Paul Schmelzing, a visiting scholar at the Bank of England.”
“Global interest rates are low and may head lower, driven by slowing economies and the U.S.-China trade war.
“A less appreciated reason for lower rates is a mountain of debt built up during the past decade.
“Debt owed by governments, businesses and households around the globe is up nearly 50% since before the financial crisis to $246.6 trillion at the beginning of March, according to the Institute of International Finance, an association of global financial firms.”
“U.K. Warned It Lacks Policy Tools to Avert ‘Painful’ Recession. Rate cuts, QE would provide limited support, think tank says. Fiscal policy needs to play more active role in any downturn.”
“This week’s European Central Bank meeting is shaping up as one of the most anticipated in years as the central bank gears up to boost a frail economy with a series of stimulus measures.
“A global trade war threatens to push the powerhouse German economy into recession and headwinds from Brexit are becoming stronger.”
“Turkey’s gross domestic product shrank 1.5% year-on-year in the second quarter, according to official figures released this week, with a dramatic decrease in investments standing out as a major driver of the contraction.
“The decline in investments — both in the private and public sector — has been going on for 12 months, bearing heavily on joblessness.”
“Dubai is closer to emerging from a prolonged bout of deflation even as business conditions turn worse.
“Prices were “broadly unchanged” in August after output charges declined in each of the past 15 months, according to IHS Markit.”
“India’s industry leaders are eyeing for a government decision on possible GST rate cut to boost sales. The automobile sales shrunk further during the month of August, a prolonged timeframe as consumer sentiments are still weak when it comes to purchasing a new vehicle.
“The passenger car sales declined by 41 per cent year-on-year (YoY) in August…”
“More than 2.4% of total loans in India’s banking system may be under stress on top of the 9.6% bad debt ratio as of June, the highest among major economies, Credit Suisse estimates shows. …
“The failure to slash stressed assets is undermining India’s efforts to revive economic growth that has cooled to a six-year low.”
“China’s exports fell unexpectedly in August as the trade war with the United States continued to hit the world’s second-largest economy.
“Shipments fell by 1 per cent in the month after growing 3.3 per cent in July in dollar terms, and below the 2.1 per cent growth expected by analysts in a Bloomberg poll.”
“Nissan Motor Co is considering pulling out of South Korea, the Financial Times reported on Friday, as political and trade tensions between Japan and South Korea have caused sales of Japanese products in the neighbouring country to plummet.
“Nissan and other Japanese firms have been a casualty of consumer boycotts of products ranging from cars to beer in South Korea…”
“Weakness in the global economy and worsening trade protectionism have emerged as risks to growth and added some pressure for the Bank of Japan (BOJ) to expand stimulus when it meets next week.
“The economy grew an annualised 1.3% in April-June, revised Cabinet Office data showed Monday, weaker than the preliminary reading for 1.8% annualised growth and in line with economists’ median forecast…”
“Regulators are surveying Japan’s financial firms to determine their exposure to foreign assets, including risky credit products, as the global economy slows, according to sources.
“The Bank of Japan and Financial Services Agency want to get a more detailed picture of domestic banks’ and insurers’ investments in collateralized loan obligations (CLOs) and leveraged loans to assess how they will fare if the borrowers run into difficulties, the sources said.”
“Indonesia’s economy, which has been growing steadily at around 5.3 percent per year on average since the start of the millennium, could be dragged down as it faces downside risks associated with the increasingly clouded outlook for the global environment, the World Bank has said…”
“Parlous consumption [in Australia] was one of the big drags on the economy, which is not surprising, considering what’s been happening with wages growth. It’s been woeful…
“”The last six years has been the worst period for wages growth since the Second World War,” says Jim Stanford, chief economist and director of The Australia Institute’s Centre for Future Work.”
“Our current economic success [NZ] is a debt-fuelled Ponzi scheme where everyone has a stake in the fictional statements issued each month.
“The party is going to end and it will not be pretty. Since the Great Depression, Western economies have run a predictable course.”
“Numerous indicators in the U.S. and around the world are signaling a slowing economy at best and a near-term recession at worst.
“The slowing global economy, along with low interest rates, ongoing trade tensions, and intensifying Brexit uncertainty will weigh on banks’ profitability for the foreseeable future. In the US, whatever benefits banks derived from Trump’s tax reform, if any, are long gone.”
“In the United States, corporate and residential property investments have ceased to contribute to growth… “In the eurozone, the low level of the IFO business climate index in Germany reflects the lack of any improvement in the manufacturing sector, which continues to be affected by weak global trade”, explains Guy Wagner, Chief Investment Officer and managing director of the asset management company BLI – Banque de Luxembourg Investments.
“”The global economic slowdown seems to be intensifying.””
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“How much money would have to disappear from your bank account each month before you scrapped the whole thing?
“A penny a year? That is not much to lose. Or 1pc of your savings? It might still be worth using the bank for the sake of security and for electronic payments.
“But what if 10pc of your cash was swiped? At some point you would say “stuff this”, march down to the nearest cash point or branch and take home every penny. This is the sort of problem the European Central Bank may soon have to consider.
“Mario Draghi, the ECB’s outgoing president, is expected to cut interest rates again next week, taking its deposit rate from minus 0.4pc to minus 0.5pc or 0.6pc.”
“Globally, rates are too negative… The effect that an artificially low interest rate has on an economy is pernicious. Asset markets are supported, and it raises the point at which they clear, but it also reduces the need for companies to improve internal efficiency.
“The next step in the central bank experiment may be to embrace really negative rates, not just a handful of basis points but several percentage points.”
“Nearly a dozen years later, we may be facing the next big economic crisis, only this time everyone can see it coming. If the anticipated collapse of 2020 does occur, it’ll be the crisis with the most advance warning ever. A recession foretold. A slow, deliberate descent into chaos.
“It’s easy to imagine, therefore, that the world’s leading economic powers are better prepared than in 2008. But in fact, the opposite is true.”
“Koç Holding, Turkey’s biggest industrial group, will halt steel production at its Iskenderun plant unless the market situation in the country improves, Argus reported…
“Koç Çelik has been unable to offset a slump in domestic demand for steel billet with overseas sales, Argus said. Demand in Turkey sharply decreased in August last year, when a currency crisis sparked an economic recession.”
“Besides adding stimulus packages, the government also needs to keep monitoring the situation… In case, the global economy is hit by a recession in 2020 or 2021, European countries would be worst hit due to political uncertainty over Brexit.
“But considering India’s increased global exposure and present economic status, strengthening the fences by striking a balance between growth and reserves would not be a bad idea.”
“Concerns about economic recession are spreading across Southeast Asia. gross domestic product (GDP) growth, financial markets and trade in ASEAN have begun to mirror economic slowdowns in the US and China…
“Economic slowdowns push lower-income groups into poverty and expose structural flaws in the economic models prevalent in the region.”
“Australian economic growth has slowed to the weakest since the GFC. Talk of recession remains all the rage.
“And economists don’t have a great track record in predicting recessions globally – with an IMF study finding that of 153 recessions seen in 63 countries around the world between 1992 and 2014, economic forecasters only predicted five in April of the year before they started – so why should they pick one this time? “
“Andreina Pirrone left Venezuela for Argentina six years ago as her country was spiraling toward the worst humanitarian crisis in its history. She did not know what the future would hold, but she was certain it would be brighter… She said she had talked to her friends about leaving Argentina, but could not imagine rebuilding her life again.
““Where would I go? To suffer again, where?” she said.”
“Add the hedge fund Autonomy Capital to the list of casualties from Argentina’s recent market turmoil. Founder Robert Gibbins began making bullish wagers on the country last year, betting that the country would not default on its debt. His investments included Argentina’s 100-year government bond, according to The Wall Street Journal, which cited a person familiar with Gibbins’ thinking. But these wagers went south in August…”
“A recession is already here in US corporate profits. The US recession has arrived. No, not that one, but a recession in US company profits.”
“The lack of trading in the corporate bond market has been particularly eyed by financial regulators amid increased questions of how investors will be able to buy and sell debt the next time the market seizes up.”
“The world has seldom been worse-equipped to fight a recession…
“With interest rates trapped at zero or close to it across much of the industrialised world, central banks have little room to respond. Any slump in economic activity is a frightening prospect.”
“We can probably go around in circles pointing the finger at what the main driver [for deflation] is, but it’s fair to say the headline shock and uncertainty aspect, along with tariff hikes and renegotiations have only compounded and added to the headwinds of monetary policy tightening last year.”
“The current state of the global economy is sending out alarming signals throughout the shipping industry, which is dependant of solid trade growth, in order to continue growing as well.
“Should this current course is maintained, as is widely expected, shipping fundamentals could very well take a turn for the worse. “
“Peter Berezin of BCA Research concedes that “a sudden drop in confidence can generate a self-fulfilling cycle where rising pessimism leads to less private-sector spending, higher unemployment, lower corporate profits, weaker stock prices, and ultimately, even deeper pessimism”.
“It’s the end of the world as we know it. The world is disintegrating, and much of the highly visible noise and chaos is a symptom of a much deeper problem…
“The postwar economic order was built on ever-increasing integration, and there is no precedent in modern history for how — or even whether — the global economy can cope with its opposite.”
Read the previous ‘Economic’ thread econo and visit my Patreon page here.
“Britain’s constitutional crisis has hit before the next great spasm of Europe’s intractable monetary crisis. But they are in close competition.
“The eurozone faces a category five economic storm. It is structurally defenceless as the world slides into recession. This will not be an ordinary downturn because central banks no longer have the instruments to fight it.
“If there is an October election in the UK – and if it delivers a bigger Tory majority as polls suggest – EU leaders will have to decide whether to risk adding the shock of a no-deal Brexit to all the other shocks hitting their industries.
“The US economy has been the last pillar holding up the global edifice. It is now crumbling too. The yield curve is deeply inverted. Consumer sentiment has dropped to a seven-year low. The ISM manufacturing index has tipped into contraction. Export orders are the lowest since April 2009.
“In my view, the recessionary door has already closed. Even if the Federal Reserve were to slash rates by 50 basis points this month, it would be too late.
“Donald Trump’s fiscal cliff has arrived and the Democrats in Congress are in no mood to offer the White House a lifeline. Net stimulus from state and federal governments will swing from plus 0.75pc of GDP last quarter to negative levels by early next year, according to the fiscal gauge of the Hutchins Centre.
“World trade is contracting. The eurozone has in turned stalled. It is paying the price for its chronic reliance on global demand to keep afloat.
“It is also the chief casualty of Donald Trump’s trade wars. Chinese goods that are shut out of the US market are being diverted into Europe. The more that Beijing devalues the yuan, the worse it gets.
“The European Central Bank cannot do much to counter the Chinese deflationary wave. The policy rate is still stuck at minus 0.4pc after decade of global expansion.
“There is much talk of an imminent ECB rescue package. But Frankfurt has already reached the ‘reversal’ threshold where further rate cuts turn contractionary. They hurt banks. They lead to a rise in ‘precautionary’ savings as household puts aside more money…
“…we may all go over the cliff together, Europe and Britain lashed together in mutual destruction into the storm waters of global recession… The currency bloc would disintegrate.
“We might then be having a very different political discussion in the early 2020s.”
“Britain’s economy looks to be heading for its first recession since the financial crisis, as growth in the important services sector slows. The closely watched IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) fell to 50.6 in August…
“…a drop from July’s 51.4. The survey also revealed that business optimism is at its lowest level for more than three years. The services sector is the largest part of the UK economy, forming about 80% of GDP.”
“German industrial orders fell more than expected in July on weak demand from abroad, data showed on Thursday, suggesting that struggling manufacturers could tip Europe’s biggest economy into a recession in the third quarter…
“Germany’s gross domestic product contracted by 0.1% quarter-on-quarter in the second quarter on weaker exports…”
“The US economy is contracting. I am glad my indicators have done a good job predicting a slowing growth trend back in 2018.
“Unfortunately, it means that the economy is suffering. I expect hard economic data to come in very weak in the months ahead. I also expect the pressure on the stock market to rise as I discussed in a previous article.”
“Conditions are favorable for another steep fall in the U.S. Treasury bond yield curve, says UBS, Switzerland’s largest financial institution. In revised projections published Wednesday, the bank identified U.S.-China trade tensions and their impact on economic growth as the chief catalyst for the continued drop off in yields.”
“Jay Powell, the Fed chief, hasn’t had much chance to take a vacation this summer.
“Amid headlines that point to a global slowdown, he is under pressure to cut rates – the market is currently pricing 100 basis points of cuts within a year. Unfortunately, Powell has few levers to pull when it comes to staving off the next recession.”
“Passive investments such as index funds and exchange-traded funds are inflating stock and bond prices in a similar way that collateralized debt obligations did for subprime mortgages more than 10 years ago, Burry told Bloomberg News in an email. When the massive inflows into passive vehicles reverse, “it will be ugly,” he said.
““Like most bubbles, the longer it goes on, the worse the crash will be,” Burry said.”
“Argentina’s main stock index Merval fell on Tuesday over 14 percent amid a continuing economic crisis in the country, Trend reports citing Sputnik.
“As of 17.48 GMT, Merval was down 14.07 percent to 22,510 after rising 6.45 percent to 26,195.41 on Monday.”
“Inflation in Argentina this calendar year will soar to 55 percent, while the troubled nation’s gross domestic product (GDP) will contract by 2.5 percent, according to new survey from the Central Bank.
“Those are significant rises. Prices were originally expected to rise by 40 percent this year…”
“South Africa’s cash-strapped power utility Eskom could be forced to shut some plants if it fails to reduce emissions, its chief operating officer warned on Wednesday, raising the specter of further blackouts.
“The potential closures, which Jan Oberholzer said could cut a tenth of the state firm’s 45,000 MW production capacity, piles pressure on the government which has had to bail out the debt-ridden company to keep it afloat.”
“More Chinese companies are defaulting on private bonds this year as the slowing economy weighs on weaker companies and firms seek to repay publicly traded debt first.
“The nation’s issuers have missed repayments on a record 31.8 billion yuan ($4.4 billion) of private bonds this year through August, compared with 26.7 billion yuan for all of 2017 and 2018 combined…”
“Provincial auditors across China are sounding the alarm on a wave of fast-approaching local government debt maturities that analysts think could amount to at least Rmb3.8tn ($560bn) within the next two and half years, presenting a risk to China’s financial system.”
“What it means is that an investor is paying £159 today to receive £150 in future cash flows – a £9 loss. The price of £159 for the bond is effectively saying that the £5 of future cash flow is effectively worth more than £5 today.
“This can only happen if the buying power of £5 will increase because the prices of goods and services fall – deflation in other words.”
“Falling expectations for consumer-price growth, plunging bond rates and flatter yield curves all point to mounting doubts in financial markets over whether monetary policy makers have what it takes to reflate their economies and avert a global recession…
““What markets are telling us is that they don’t expect central banks to be able to raise inflation now,” said Naoya Oshikubo, senior economist at Tokyo-based Sumitomo Mitsui Trust Asset Management Co., Asia’s largest asset manager. “Central banks need to regain credibility.””
“Economists doubt there’s much that can be done in terms of monetary policy to stave off a downturn. With short-term interest rates so low already, central banks don’t have the firepower they once possessed to get economies back on track.
“As the economic challenges pile up — from the U.S.-China trade war to the seemingly never-ending Brexit saga — business confidence and investment is falling off.”
“Monetary policy – both conventional and unconventional – works through lower interest rates. Lowering rates across the yield curve helps stimulate demand by lowering the cost of financing consumption or investment.
“It also gives investors incentives to re-balance into riskier assets, in principle reducing the cost of capital for companies.
“If policy rates are near their effective lower bound and the scope for longer-term rates to fall is limited, monetary policy cannot provide much more stimulus through this channel – a liquidity trap situation.”
““A few people became rich beyond the wildest dreams of Croesus,” Appelbaum observes, “but the middle class now has reason to expect that their children will lead less prosperous lives.”
“The financial crisis and the Great Recession bared and exacerbated those consequences in ways that 10 years of recovery have not erased. The rise of angry populism suggests “the economists’ hour” has passed.”
“Revenues at the world’s top investment banks plunged to a 13-year low in the first half of 2019 as geopolitical tensions, slowing growth and low interest rates compounded a structural decline that set in after the financial crisis.”
Read the previous ‘Economic’ thread here and visit my Patreon page here.
“The parallels to today’s fiat money system operated in the US by the Federal Reserve are stark. Just as the first world war cut Britain and Germany off from their classical gold standard, America’s spending spree of the 1960s, particularly in respect of financing the Vietnam war led the US to print more dollars than could be redeemed for gold at the rate of $35 per ounce. Thus, in 1971 Nixon closed the gold window and ever since then, the dollar has been based on fiat rather than on sound money.
“Today, whenever policy makers desire economic growth and high employment, their solution is simply to print money. This of course was ultimately Hitler’s economic solution.
“This printed money however does little else in the long term aside from creating the kind of economic bubble which ultimately lead to Germany invading other countries for their resources.
“Debt is dangerous because inevitably, the market will call the bluff of the money printers. It happened with Germany’s MEFO scam and it will eventually happen to the United States.”
“The U.S. Federal Reserve’s balance sheet could end up between $3.8 trillion (3.1 trillion pounds) and $4.7 trillion by 2025, according to projections collected by the New York Fed…
“To keep control of rates, officials will eventually have to start buying bonds again and building up bank reserves. The latest estimates are based on multiple scenarios of how quickly parts of the Fed’s liabilities will grow…”
US manufacturing PMI was 49.1 for August, weaker than all the forecasts. And the new orders index was down at 47.2:
“The stress for the beleaguered oil firms keeps growing, as they struggle to cushion debt, find new ways to earn and refinance existing financial burdens.
“The once-thriving shale industry has been under strict monitoring by Wall Street observers in the last 18 months, adding more pressure for the companies as investor interest continues to fade following years of dismal profits due to failure to meet the cost of capital with oil prices dropping to $60 per barrel.”
“The Chinese people think President Donald Trump’s comments on the trade war between the world’s two largest economies are “perplexing and exhausting,” a state-run television anchor said Tuesday…
“Additional duties on products, such as smartphones and laptops, are set to go into place Dec. 15.”
“HNA Group’s cash pile shrank 20 times faster than its debts, indicating that pressure is building for one of China’s most indebted conglomerates to speed up asset sales.
“Cash, equivalents and short-term investments as of the end of June tumbled 61 per cent from a year earlier…”
“Hong Kong is on the verge of a recession as its private sector activity plunged to a decade-low in August amid an escalating trade war and its worst political crisis in decades.
“The business survey, released on Wednesday, noted “the steepest deterioration in the health of the private sector since February 2009”, adding that spreading pessimism had seen business confidence slump to its lowest on record.”
“India’s shadow banks are getting increasingly squeezed by a crisis of confidence at home, forcing them to cough up more for funds overseas. And that’s just for the lucky ones.
“The non-bank financing companies have struggled to raise as much abroad this year, as defaults in India’s credit market spread after a shock failure by major shadow lender IL&FS Group last year.”
“[India]s] BSE benchmark Sensex crashed nearly 770 points and the NSE Nifty tumbled over 225 points on September 3 due to panic sell-offs across the board as investors fretted over deepening economic crisis and ever-lasting global trade tussle.
“A slew of recent macroeconomic data on GDP, core sectors and auto sales are pointing towards a deepening economic rout in the country.”
“Lebanon’s political leaders declared what they called an economic state of emergency Monday following a meeting aimed at finding a solution to the country’s economic crisis, raising concerns that more taxes will be imposed. Lebanon has one of the world’s highest public debts in the world…”
“Zimbabwean public sector doctors went on strike on Tuesday for the second time in less than a year to demand a further salary increase amid soaring living costs, as President Emmerson Mnangagwa’s government struggles with a deteriorating economy… Zimbabwe is mired in its worst economic crisis in a decade, with triple-digit inflation, rolling power cuts and shortages of U.S. dollars, basic goods, medicines and fuel.”
“Chile’s central bank cut its benchmark interest rate to a nine-year low, and hinted on more reductions, in a bid to stimulate an economy that has been caught between a global trade war and weakening domestic demand.”
“Australia’s economy grew at its slowest annual pace since the financial crisis in the second quarter, dragged down by weak consumer spending and a sharp contraction in housing construction to a pace well below that needed to put a dent in unemployment.”
“The contraction in the U.K. construction industry gathered pace in August as increased political uncertainty saw new orders fall at fastest pace in more than ten years.”
“Copper is often looked to as an indicator of global economic health, due to its wide-spread use across most homes and economic sectors. Its ability to signal economic growth and downturns alike led to the term Doctor Copper.”
““The current downturn in the global manufacturing sector was extended to a fourth month in August. New orders contracted at the joint-fastest rate in nearly seven years, led by the steepest reduction in international trade volumes since late-2012.
“The outlook also darkened, with business optimism dropping to its lowest level since it was first tracked by the survey in July 2012…
“Over half of the nations covered by the survey had a PMI reading below the 50.0 mark… Manufacturing employment declined for the fourth successive month in August.”
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