Daily updates on climate change and the global economy.

25th October 2022 Today’s Round-Up of Economic News

Hard choices on global growth, fiscal austerity needed now to avoid a new debt crisis… The 40-year bull market for global debt has collapsed

There is no magic formula to undo the long-lasting damage from the 2008 crash, the 2010 European debt crisis and the pandemic, and there is no fairy-tale cure from suboptimal growth in the world economy during the past 14 years. Global policymakers have been asleep at the wheel for too long…

“But delaying fiscal correction too long exposes the world to a potential doom loop of rising bond yields, a spiral into recession and rising risks of a major debt default. The world is between a rock and a hard place, and it won’t take much to spark another extreme credit event like the 2008 global financial crisis.

“If the major nations persist with tighter money to combat inflation and double up the pain with a shot of fiscal austerity, global growth prospects will be relegated to less than 2 per cent in the next two years. Policymakers have tough choices to make and time is running out.”


The era of negative-yielding global bonds looks tantalizingly close to an end with Japan’s two-year yield on the cusp of breaking above zero for the first time since 2015…

The Bank of Japan is the last holdout among developed central banks sticking to rock-bottom interest rates to boost the economy and its short-term policy rate remains at minus 0.1%.”


Decade of central bank largesse haunts taxpayers as losses loom.

“For more than a decade since the global financial crisis, central bankers pumped trillions of dollars of cheap money into the financial system to keep the economy afloat. Now that largesse is coming back to haunt them – and taxpayers.”


A political backlash against monetary policy is looming.

“…unless we have a lucky escape from a sharp downturn this winter, a political backlash is surely coming… The alternative to openly debating these issues in a democratic space is to let that backlash fester until it breaks out in the more radical and dangerous form of a populist assault on institutions. Central banks’ credibility would not be worth much then.”


Danger of defaults looms larger for private credit funds. Whether known as private debt, non-bank lending, alternative lending, shadow lending, or private credit, the investment class has witnessed eye-popping growth in the space of two decades.

“After a long-running period of success, however, concerns are mounting that the twin threats of rising inflation and a global recession pose problems for an asset class that… has yet to be properly tested.”


When finance and oil collide; Central banks are being pulled in opposing directions by energy inflation and market instability…

“For all the turmoil after 2008… The international financial system and oil markets were largely parallel worlds: profoundly connected in the deep plumbing of the global economy but separate on the surface. For the last few years, however, they have been colliding. As a result, the Fed has been pulled in two opposing directions, between responding to oil-generated inflation on the one hand, and needing to calm financial markets on the other.”


Big Oil’s Profits Just Keep Rolling in as World Economy Sputters…

“Big Oil’s run of record profit will suffer only a minor dent for the third quarter, even as the global economy shows signs of cracking under the pressure of rising inflation and interest rates… companies are showing restraint, preferring to pay down debt rather than spend their cash on new supplies.”


Oil investors on defensive as recession forces intensify.

“Portfolio investors abruptly reversed course last week as the optimism caused by OPEC+ production cuts at the start of October crumpled to be replaced by pessimism stemming from the worsening economic outlook… Investors are bracing for a severe downturn in the global business cycle…”


Flash US PMI falls sharply into contraction territory in October as optimism and demand slumps.

“The October S&P Global flash PMI surveys present a picture of the economy at increased risk of contracting in the fourth quarter at the same time that inflationary pressures remain stubbornly high. Forward-looking indicators have also deteriorated.”


Would a championship win for the Philadelphia Phillies be a good thing for the nation’s economy?

“The only times the team has won has been in the midst of economic chaos: the financial crisis of 2008 and the recession in the early 1980s. Prior to that, the Athletics, a former Philadelphia baseball team, won during the stock-market crash of 1929 and the Great Depression of 1930.”


Inflation: Why Canada grocers are accused of ‘greedflation’.

“…large corporations – including grocers – are reporting record earnings. Loblaw’s first-quarter profit this year was up nearly 40% from that of last year, and its net earnings after adjustments were up 17%. In Canada, where distrust in grocery magnates runs deep from a recent bread price-fixing scandal, this dilemma has turned political.”


Surging inflation triggers biggest wave of profit warnings since financial crisis [UK]…

“New figures from EY-Parthenon show there were 86 profit warnings at UK-listed companies in the three months to the end of September, up more than two thirds from last summer and the highest level for the period since 2008. The data suggests that 28 listed companies are in the “danger zone”…”


Flash UK PMI data signal increasing economic stress as downturn intensifies…

“GDP therefore looks certain to fall in the fourth quarter after a likely third quarter contraction, meaning the UK is in recession. Business confidence has meanwhile collapsed, sliding to a level rarely seen before in 25 years of survey history, meaning companies are becoming increasingly nervous about the outlook. As night follows day, investment and employment will suffer in the months ahead…”


University lecturers, librarians and admin staff across the UK will strike over pay and pensions, the University and College Union (UCU) has announced.

“A total of 70,000 UCU members at 150 universities were asked to vote in two separate ballots – one on pay and working conditions, and another on pensions. Strike dates are yet to be decided.”


Fears of a severe recession deepen as European business activity slows on surging energy costs.

“European business activity took another hit in the month of October, reporting the steepest output loss since April 2013 excluding pandemic lockdowns. Firms have been under pressure due to higher inflation, particularly coming from energy costs and wage pressures.”


ECB Heads Back to 2008 Territory with Hike Planned This Week.

“The European Central Bank is set to enter territory last visited in the run-up to the global financial crisis as it raises interest rates during what looks likely to be a recession. It was July of 2008, just as the euro area began four quarters of contraction, when the Governing Council raised borrowing costs for the first time in more than a year…”


France’s Nuclear Reactors Malfunction as Energy Crisis Bites.

“The linchpin of the country’s energy security faces maintenance and pipe-corrosion problems plus labor unrest… . Fixing the corrosion is taking longer than expected at several reactors… Labor unrest is another obstacle. Strikes at 18 reactors owned by EDF SA have delayed their restart by several weeks…”


3,000 protesters take to streets in central Madrid calling for solution to soaring inflation.

“The center of Madrid on Saturday was filled with noise, whistles, chants and union flags as some 3,000 people took to the street calling for increased wages and pensions amid the soaring inflation… Food, fuel, rent and home heating prices have all spiraled upwards…”


Thousands protest energy costs in German cities…

“Protesters gathered in six German cities on Saturday under a motto roughly translating as “together through the crisis — ensure social security and end fossil fuel dependence,” demanding more social justice and sustainability as inflation and rising gas prices start to bite in Germany.”


Thousands protest against PM Orban’s government, “runaway inflation”…

“Walking across a bridge over the Danube, protesters held up banners like “Orban get lost” and “No teachers, no future,” a few hours after nationalist Prime Minister Viktor Orban pledged to preserve economic stability and maintain a cap on household energy bills even as the EU slides into an “economic crisis”.”


Thousands in new Moldova anti-government protest.

“Several thousand protesters denouncing Moldova’s pro-Western leaders marched through ex-Soviet state’s capital for the sixth consecutive Sunday and set up a new tent camp days after police cleared a similar encampment.”


China’s zero-Covid strategy risks derailing a global economy already battered by inflation and an energy price crunch unleashed by the war in Ukraine.

“Concerns intensified this week after China’s GDP fell well short of official targets, suggesting the measures are slamming the brakes on growth. GDP grew by just 3.9 per cent in the third quarter of the year, figures revealed yesterday – well below the target of 5.5 per cent.”


Xi Jinping’s party purge prompts fears of greater Taiwan invasion risk.

“Xi Jinping’s purging of political rivals and elevation of loyalists to the top ranks of the Chinese Communist party has raised fears that his now unfettered and unquestionable power could increase the risk of an attack on Taiwan.”


China chip imports down 12.4% as tech trade war with US intensifies… That’s 6.7 billion fewer chips than was delivered in September 2021…

“The chip wars appear to be biting in China, as the country’s semiconductor imports dropped 12.4 percent in the month of September, according to official customs data published by the country.”


The Justice Department has charged 13 people who tried to “unlawfully exert influence in the United States” for the People’s Republic of China, U.S. officials allege.

“Attorney General Merrick Garland rolled out three different cases alleging separate schemes at a news conference Monday.”


U.S.-Saudi Relations Buckle, Driven by Animosity Between Biden and Mohammed bin Salman.

“An unwritten pact binding the U.S. and Saudi Arabia has survived 15 presidents and seven kings through an Arab oil embargo, two Persian Gulf wars and the Sept. 11 terrorist attacks. Now, it is fracturing under two leaders who don’t like or trust each other.”


Lebanon deputy PM says state cannot “save all depositors” who lost funds in crisis.

“Lebanon’s deputy prime minister Saade Chami said Monday that the government’s plan to revive an economy crushed by a three-year financial crisis would not be able to pay back all depositors in full.”


Moroccans Protest Against Cost of Living Crisis…

“The rally, outside parliament and witnessed by AFP journalists, came after several protests already this week in Rabat and other Moroccan cities. It was organised by the country’s main trade union, the UNTM, which is close to the Justice and Development Party (PJD).”


Political unrest causing supply chain problems – SAP survey…

“Business leaders told SAP that current supply chain issues primarily stem from global political unrest (58%), lack of raw materials (44%) and rising fuel and energy costs (40%). Only 31% cited inflation as a major contributor.”


Greening global economy brings dependence on critical minerals.

“Global demand for these critical metals may quadruple by 2040 if the world is to meet its pledges under the Paris climate pact, according to estimates by the International Energy Agency (IEA). French researcher Olivier Vidal has calculated that more of the metals will need to be manufactured by 2050 than humanity has produced throughout history.”


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

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22nd October 2022 Today’s Round-Up of Economic News

As recession fears rise, Washington begins to weigh how to respond

“…with Wall Street trembling, and many private forecasters warning that recession is likely, preliminary talks about policy options are underway around town…

On Capitol Hill, congressional officials have begun discussing the challenge of intervening to alleviate the pain of a recession in ways that do not exacerbate inflation. At the White House, aides have informally begun weighing hypothetical options, such as unemployment benefits and food stamp assistance…

“…Washington’s options for providing relief could be constrained by the effort to fight inflation. During the pandemic and the Great Recession, Washington flooded the economy with aid to the unemployed and other cash supports. If enacted now, such policies would risk pushing inflation higher.

“Meanwhile, with the Fed hiking interest rates faster than it has in decades as part of its battle against inflation, the new federal spending would require additional borrowing at a time when debt is becoming increasingly expensive.”


Wall Street’s ‘Dr. Doom’ says central banks are screwed and we can’t avoid a financial crisis. ‘Damned if you do, damned if you don’t’…

“Unfortunately, at this point, damned if you do, damned if you don’t. There is no easy way out of this,” Roubini said. “If you fight inflation, you’re going to have a recession and a financial crisis. And if you don’t fight inflation, you’re going to have de-anchoring of inflation and you get stagflation and still a financial crisis.”


US Treasuries have entered the longest sustained slump in 38 years, as policy makers signal their determination to keep raising rates until they are sure inflation is under control.

“The yield on benchmark 10-year notes jumped 23 basis points this week to 4.26% on Friday, heading for a 12-week streak of increases that would match the duration of the 1984 episode when then-Federal Reserve Chairman Paul Volcker was carrying out a series of rapid interest rate hikes.”


Existing US home sales fall to a 10-year low in September, as mortgage rates soar…

“Sharply higher mortgage rates are causing an abrupt slowdown in the housing market. The average rate on the 30-year fixed home loan is now just over 7%, after starting this year around 3%. That is making an already pricey housing market even less affordable.”


Global Housing Market Pain Has Echoes of a Crash 30 Years Ago…

“…interest rates are rising rapidly, bringing to a close the era of easy money that’s defined the years since the 2008 global financial crisis. There are also implications for household wealth and economic growth at a time when recession risks already hang over many countries.”


The World’s Oil Buyers Are Being Crushed by a Surging Dollar.

“Brent oil has dropped more than 30% from this year’s high, but you wouldn’t know it if you live in Paris, Mumbai or Accra… fuel prices remain a significant factor driving up the cost of living across most of the world.”


New York, New England Ration Heating Oil Even Before Peak Winter…

“Some wholesalers in Connecticut are putting retailers on allocation… The measure, designed to prevent panic buying, highlights the extreme fuel tightness across the New York Harbor and New England regions that has attracted the attention of the White House.”


Canada recession may be ‘necessary evil’ as central bank queues big hike.

“Even as recession worries intensify in Canada, the central bank is likely to go ahead with another supersized interest rate hike next week after data showed underlying inflation was stubbornly persistent despite aggressive tightening, analysts said.”


Sweden’s Home Price Slump Worsens to Reach Double Digits.

“The plunge in the Swedish housing market deepened last month to most since the financial crisis… The largest Nordic property market that was one of the hottest during the pandemic is now among the bellwethers for the global housing cooldown amid central banks’ aggressive interest rate-increases seeking to tackle soaring consumer prices.”


UK housing sales fall but real ‘horror story’ yet to come… Experts say mini-budget has fed ‘sense of mounting dread’ into market with sales likely to plunge…

“The number of homes sold in September fell by nearly 40% as transaction levels returned to normal following the big spike caused by the Covid stamp duty holiday, with experts suggesting the real “house sales horror story” is still to come.”


Falling retail sales fuel concerns of looming UK recession…

“Emma Mogford, manager of the Premier Miton Monthly Income Fund, said Friday’s “troubling” retail sales figure added to the view that the “UK is headed for recession”. “I expect retail sales to get worse in 2023 as consumers face higher mortgage costs, higher rental costs and possibly higher energy bills too,” she said.”


Sales of Spam and fish heads have risen a third as people seek out cheaper meals amid the cost of living crisis.

“The famously unfashionable canned meat, made of ground-up pork shoulder and ham, is up 36%, according to Waitrose’s annual food and drink report… And while fish heads may not be to everyone’s taste, sales are up 34% this year as people increasingly use them in curries, soups, stews and stocks.”


‘Tsunami of need’ – UK’s biggest food bank network launches emergency appeal.

“Britain’s biggest food bank network on Thursday launched an emergency appeal, warning it faces its most difficult winter ever as more people risk going hungry in a worsening cost-of-living crunch. The Trussell Trust, which supports a network of 1,300 food bank centres across the United Kingdom, said it had experienced a dramatic increase in levels of need.”


Macron Lashes Out at United States Over Double Standard Energy Policies…

“To compensate for its declining nuclear fleet and Russia’s complete halt of natural gas shipments into the country, France has turned to the United States for LNG—only Macron is unhappy with the price it’s paying.


U.S. Oil Exports to France Fall to Zero Amid Refinery Strikes.

…returning to normal will take time: Exxon has said that the restart of its refineries in France after industrial action there ended earlier this month will take between two and three weeks. The strikes shut down some 70 percent of France’s refining capacity and led to fuel shortages in different parts of the country.”


Uniper in need of another cash boost as Germany scraps gas levy.

“The German government had expect to raise funds to support the nationalised firm through a gas levy on consumers, which has subsequently been ditched following public pressure. It is now considering whether to pump tens of billions of euros of additional funding into Uniper to weather the European gas crisis amid an elevated threat of blackouts this winter…


A new debt crisis could be looming as European countries throw huge sums of money at the energy crisis.

“Europe is facing a macroeconomic storm. Amid an energy crisis, sky-high inflation, and a possible recession, some experts think a new debt crisis could be looming for some European nations as governments ramp up spending to shield consumers from soaring energy costs.”


Energy crisis tests resilience of Italian businesses…

“Italian business lobby Confindustria has warned of an “economic earthquake”, saying the new government will struggle to offset the hit from energy prices on firms like Draghi managed to do without hurting Italy’s fragile public finances.”


Giorgia Meloni has formed Italy’s new ruling coalition, giving the country its first far right-led government since the end of the second world war.

“A presidential palace official announced that Meloni, set to become the first woman to serve as the country’s prime minister, and her cabinet would be sworn in on Saturday. Meloni’s Brothers of Italy, a party with neo-fascist roots, was the top vote-winner in Italy’s national election last month.”


Inflation protests across Europe threaten political turmoil… [picture from Thursday’s protests in Romania]

“Energy prices have driven inflation in the 19 countries that use the euro currency to a record 9.9%, making it harder for people to buy what they need. Some see little choice but to hit the streets… “There’s no quick fix to the energy crisis,” said Torbjorn Soltvedt, an analyst at Verisk Maplecroft. “And if anything, inflation looks like it might be worse next year than it has been this year.”


South Australia will not provide gas to New South Wales in a supply crunch, the state’s energy minister has warned in an extraordinary speech to industry.

“The mining and energy minister, Tom Koutsantonis, made the comments on Thursday during a candid address at an oil and gas industry event in Adelaide, where he warned public sentiment was turning against them.”


Bank of Japan, battling rising yields, will conduct emergency bond buying for 2nd day.

“The Bank of Japan said on Friday it would conduct emergency bond buying operations for a second day, as the 20-year government bond yield rose to a new high in a further challenge to the central bank’s resolve to defend its easy policy stance.”


Japanese Finance Minister Shunichi Suzuki said on Friday that authorities were dealing with currency speculators “strictly”, as an extended sell-off of the yen kept markets on heightened alert for further dollar-selling intervention by Tokyo.

“Suzuki’s comments came after the yen weakened beyond the key psychological level of 150 per dollar on Thursday for the first time since August 1990.”


China’s yuan fell on Friday to its weakest level against the dollar since the global financial crisis of 2008, despite attempts by major state-owned banks to stabilise the market.

“Sources told Reuters that state banks sold dollars in the onshore foreign exchange market to prevent the spot price from weakening past the 7.25 per dollar level.”


Hong Kong stocks hit 13-year low as Chinese growth slows.

“Shares in Hong Kong dropped to their lowest level since the end of the global financial crisis as investors reacted to the city’s economic recovery plans and the 20th Chinese Communist party congress in Beijing, where President Xi Jinping is expected to secure a third term.”


China’s former president Hu Jintao unexpectedly escorted out of party congress.

“Mr Hu, President Xi Jinping’s immediate predecessor, appeared confused and slightly disoriented as the assistants escorted him out. He appeared to resist leaving, turning back to his seat at one point.”


‘A clash of two Brazils’: presidential election divides voters – even gangsters.

“The stark choice between Lula and Bolsonaro has fractured families, friendship circles, workplaces and church congregations, with Lulistas convinced Bolsonaro is a hate-filled authoritarian extremist and Bolsonaristas calling Lula a corrupt communist thief.”


Indigenous protest in Bogotá descends into clashes with police.

“At least 24 people were injured, including 11 law enforcement officers who were attacked with sticks and stones by demonstrators protesting their living conditions and the government’s lack of help… Bogotá Mayor Claudia López has demanded assistance from the central government in managing the crisis.”


Colombia is on the Brink of an Energy Crisis.

“The risks posed by Petro’s goal of ending contracting for oil exploration are exacerbated by the Andean country’s meager proven natural gas reserves and weak production volumes… there is growing apprehension Petro’s plans will endanger Colombia’s energy security triggering a crisis that could roil the economy…”


At least five injured in Guinea anti-government protest…

“At least four people were shot dead and several wounded during anti-government demonstrations in July. Another protester was shot dead in June during demonstrations over fuel price hikes. A police officer was charged with his murder.”


Dozens dead in Chad capital as security forces fire on protesters…

“Palls of black smoke could be seen in some areas in N’Djamena and the crack of teargas grenades could be heard throughout much of the day. Several roads had been blocked with barricades and burning tyres and most shops closed their doors to avoid looting.”


Protests against ‘oppression’ in Tunisia expand for the sixth day.

“From the north to the south of the country, dozens poured out to the streets Wednesday night, protesting once again the death of Malek Sellimi, a 24-year-old Tunisian who was severely injured in a police chase before dying of his wounds.”


Lebanon fails to elect president for third time amid financial meltdown.

“Outgoing President Michel Aoun’s term ends on Oct. 31 and divisions remain among political blocs over the makeup of a new cabinet. Lebanon has been without a fully functioning government since May.


Turkish central bank makes huge rate cut amid 83% inflation.

“Turkey’s central bank has slashed interest rates for the third month in a row, making its biggest drop this year despite sky-high inflation that is squeezing people’s finances as it follows President Recep Tayyip Erdogan’s unorthodox economic views.”


Sri Lanka consumer inflation hits record 73.7% in September.

“Sri Lanka’s National Consumer Price Index (NCPI) rose to a new high of 73.7% in September from a year earlier, quickening from 70.2% in August, the statistics department said. Annual food price inflation picked up to 85.8% from 84.6% in August…”


Iranian teachers call for nationwide ​​strike in protest over deaths and ​​detention of students.

“A teachers’ union in Iran called for a nationwide teacher strike in protest over the recent deaths and detention of students in the country, the Coordinating Council of Iranian Teachers’ Trade Associations (CCITTA) said in a statement on Telegram on Thursday.”


Indonesian women join Iran’s hijab protests amid fears own rights under threat.

“Activist Ririn Sefsani, the head of the NGO “Commitment for Change” and one of the organisers of the Jakarta rally, called on the Indonesian government to speak up and urge Iran to stop all forms of violence against citizens fighting for human rights.”


Economic woes, shifting ties complicate Pakistan’s flood recovery.

“…many analysts believe that a globally faltering economy, a rising energy crisis and Western questions over Pakistan’s geopolitical alliances mean providing much-needed funding will remain a stark challenge.”


The energy crisis is distracting us from the real emergency…

Amid rampant inflation, war and a deepening energy crisis, it seems that the world’s climate problem is being overshadowed. But it isn’t going away — and nor are the young activists who care. The next protest might involve something stronger than tinned soup and a target less protected than a Van Gogh.” [Unfortunately, it is starting to become clear how limited and unpalatable our options are, and how all-encompassing our predicament.]


You can read the previous “Economic” thread here. I’ll be back on Monday 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. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.

20th October 2022 Today’s Round-Up of Economic News

[US] Freight Operators’ Peak Shipping Season Is Crumbling… “Typically in the last quarter of the year, cargo carriers from container lines to parcel operators bulk up their profits on strong demand.

“But a range of measures of shipping demand across the U.S. are sliding, freight rates are falling as a result, leading carriers to pull back capacity amid concerns a deeper downturn is coming.”


You have to go back to the Great Financial Crisis (09) to find a September with fewer loaded import containers at the Port of Los Angeles. They haven’t just fallen off a cliff, they’ve jumped.”


Alcoa Surprise Loss Spells More Woes for World Economy.

A surprise quarterly loss by US economic bellwether and aluminum giant Alcoa Inc. added to jitters over the world economy as the metal used in everything from iPhones to Pepsi cans hits headwinds.”


World Steel Use to Fall in Another Bleak Sign for Global Economy.

“Global steel demand is set to contract this year as Europe’s energy crisis and China’s economic slowdown undercut consumption, according to the World Steel Association. Demand for the metal — which is widely viewed as an economic barometer — will drop 2.3% in 2022…”


Biden says oil companies should ramp up production and cut prices at the pump instead of buying back stock, paying dividends.

““Invest in America for the American people. Bring down the price you charge at the pump, to reflect what you pay for the product,” Biden said… Biden also officially announced the release of 15 million barrels of crude oil from the Strategic Petroleum Reserve.”


$200 Diesel Puts Biden in an Ugly Corner…

“Currently, the US has just 106 million barrels of diesel and heating oil in commercial stocks; the last time inventories were that low in mid-October was in 1951… Such low levels are alarming because diesel is the workhorse of the global economy. It powers trucks and vans, excavators, freight trains and ships. A shortage would mean higher costs for everything from trucking to farming to construction.”


[US] Housing Market Recession: Home Builders Warn Collapse Is ‘Unsustainable’—And Prices Could Tumble Another 20%.

Home builder confidence plunged for a tenth straight month in October as rising interest rates continued to weaken housing demand—prompting economists to warn an unexpected rise in new home sales last month may be short-lived and prices may be on the brink of collapse…”


Liquidity Is Reaching Very Dangerous Levels… The Fed isn’t likely to stop raising rates anytime soon…

“The US Ten-Year Note Yield crossed the 4% point, a sign that investors are not interested in owning US debt at these levels and that the Fed keeps selling bonds to reduce the amount of money in circulation.”


[UK’s] Mini Budget-induced LDI crisis was ‘full scale liquidation event’.

“The unprecedented collateral calls pension funds had to meet for their liability-driven investment portfolios in the wake of last month’s Mini Budget represented a “full scale liquidation event”, the Bank of England has stated… “For the long end of the curve, this is outside of historical experience,” said John Cunliffe.


[UK] Banks face surge in bad debt as mortgage costs jump £52bn…

“Ed Firth, a banking analyst at Keefe, Bruyette & Woods, said higher rates will push many borrowers into “dangerous territory” …While higher borrowing costs boost banks as they can charge more for lending, they also threaten to drive up defaults as loans become more expensive to pay back and economic activity slows.”


Britain is hurtling towards a three-day week – and our economy is suffering…

“Rather than stay open, in the impossible economic environment of 2022, Britain’s businesses are increasingly deciding to close: cutting hours, reducing services, or going into winter hibernation. Growth, growth, growth? No, the country’s shrinking.”


Pharmacists warn of ‘critical’ medicine supply shortages in Northern Ireland amid rising costs.

“Community pharmacists have warned that they need an immediate “cash injection” to stop supplies of some prescription medicines from running out in a matter of weeks. They say commonly prescribed drugs used to treat osteoporosis, high blood pressure, insomnia, mental health and coronary conditions are among those impacted.”


One in seven people in the UK are skipping meals or going without food, according to new polling data released by the Trades Union Congress

With inflation running at 10.1%, the polling found that one in seven people are skipping meals but that rises to one in five people in nearly 50 constituencies across the country… The TUC says the findings on the cost of living are a “stark reminder” of the pressures facing households throughout the UK.”


The BBC has prepared secret scripts that could be read on air if energy shortages cause blackouts or the loss of gas supplies this winter.

“The scripts, seen by the Guardian, set out how the corporation would reassure the public in the event that a “major loss of power” causes mobile phone networks, internet access, banking systems or traffic lights to fail across England, Wales and Scotland.”


Estonia turns back to shale oil as it cuts off Russian power.

“When Baltic states switched off Russian power and halted other imports in response to Moscow’s invasion of Ukraine, Estonia restarted its shale oil power plants and set back its efforts to phase out heavily polluting fuels.”


As Germany faces a growing energy crisis, Aldi Nord, one of the country’s leading retailers, has announced it will start closing its stores earlier in the evenings.

“Operating hours of “numerous stores” would be adjusted, the company said on Twitter… Aldi Nord is not the only company in Germany to impose restrictions in the wake of the energy crisis.”


Strikes at French nuclear plants – what’s at stake?

“…France’s nuclear output was already expected to hit a 30-year low in 2022 due to a record number of reactor outages for corrosion issues and planned maintenance, at a time when Europe is facing an energy crisis because of the war in Ukraine. Rolling strikes over wages by the FNME-CGT union at some plants have added to the problem.”


France braces for more fuel shortages as union votes to extend strikes.

“The French president, Emmanuel Macron, is facing the biggest challenge of his second term as long-running oil depot and refinery blockades create fuel shortages, transport workers join the strike for higher wages and the government prepares to force its budget through parliament without a vote, unable to find a compromise with the opposition.”


Europe’s Diesel Stockpiles Set to Hit Record Low Without Russia…

“Yet while Europe’s diesel supply faces major disruption through the loss of Russian barrels, demand too could soon be pressured. Last month, the World Bank warned of a looming global recession, something that would likely take a big bite out of the world’s diesel consumption, potentially easing strained stockpiles.”


Will the energy crisis crush European industry? While companies are digging in for a long winter, executives and politicians fear a wave of deindustrialisation…

“Europe’s industrial base employs some 35mn people or roughly 15 per cent of the working population. The bloc’s leading industrialists warned earlier this month about the potentially devastating economic impact of the energy crisis.”


Chinese Steel Manufacturers on the Brink of Bankruptcy… High energy costs and falling steel prices are eroding manufacturers’ profitability…

“China finds itself in a precarious place financially. What’s more, a sizable section of global financial and stock analysts have predicted the crises will only get worse as the country prepares to face its toughest winter yet.”


Beijing steps up Covid measures as cases quadruple during key CCP congress meeting.

“China’s capital, Beijing, has dialled up measures to stop Covid, strengthening public checks and locking down some residential compounds after a quadrupling of its cases in recent weeks, just as a key Communist party congress entered full swing.”


China’s Junk Debt Is Sliding Deeper into Unprecedented Distress.

“A worsening crisis in China’s property market is dragging junk dollar bonds from the nation’s borrowers deeper into distress, as the implosion of what was once one of the world’s most-profitable bond trades sends ripples across trading floors.”


South Africa’s Likely in Technical Recession, Citi Says.

“South Africa’s economy is likely in a technical recession as intensified power cuts and heightened uncertainty caused by Russia’s war with Ukraine rippled through global financial markets.”


Clashes in Chile mark third anniversary of 2019 protests.

“In the capital Santiago on Tuesday, peaceful protesters gathered around the city to remember the victims. In other parts, police responded with tear gas and water cannon when hooded protesters lit fires and threw rocks, including in the area surrounding Plaza Baquedano, the epicentre of the 2019 protests.”


Protests paralyse Tunisian town after migrant deaths…

“”Today the state continues to ignore us and does not even search for those drowned,” said Salim Zreidat, whose 15-year-old son Walid was among the missing. “What has the state done for us to stop our children running? Is there employment? Nothing,” he said, adding that Walid felt he had no future in Tunisia despite being an excellent student.”


Lebanon has warned that a deadly cholera outbreak is “spreading rapidly”, with cases rising after the virulent disease spread from neighbouring Syria.

“The outbreak in the economically devastated country, which has left at least five dead, is the first since 1993. Health officials have blamed the country’s financial and political struggles, which have left citizens with poor and crumbling sanitation infrastructure.”


Countries battling deadly cholera outbreaks have been told to ration vaccines amid a global shortage of jabs.

“The World Health Organization called the deviation from the approved two-dose vaccine regime an “exceptional decision” which “reflects the grave state of the cholera vaccine stockpile”. It is the first time this advice has been issued by the International Coordinating Group, which manages emergency supplies of cholera shots.”


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. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.

18th October 2022 Today’s Round-Up of Economic News

Fuel protests gripping more than 90 countries…

“By analysing data on demonstrations worldwide, collected by the Armed Conflict Location and Event Data Project, the BBC has established that between January and September this year people in more than 90 countries and territories took to the streets over the price or availability of fuel [and, of course, plenty protesting because they want it left in the ground; these are confused times].”


The global economy is sinking. No one’s sending lifeboats…

“While a “sense of dread” surrounded last week’s IMF-World Bank meetings in Washington, our Kate Davidson and Victoria Guida report that the U.S. is struggling to mount a coordinated response. The problem is that the U.S., like other nations, is largely focused on trying to contain domestic crises.”


Global economic warning lights are flashing red…

“Last week the International Monetary Fund underscored how multiple clouds — including the European energy crisis, rapid interest rate rises and China’s slowdown — have been gathering over the global economy. What has seemed like separate crises emerging from many different regions and markets are now coalescing: we may be facing a polycrisis on a global scale.”


Are we heading for the next global financial crisis? All signs point that way. China real estate and global debt woes show problems that led to 2008 financial crisis remain [and, obviously, they are far worse now as we are more leveraged, and at the same time more energy and resource-constrained].

“History shows that easy money inflates asset values but everything eventually comes crashing down in a reversion to the mean.”


Economic & financial risk insights: financial stability risks rising as liquidity tide goes out…

“Financial markets are under stress, triggered by a feedback loop of monetary tightening, inconsistent fiscal policies and the excessive debt legacy of past crises. Heightened volatility and uncertainty are pushing more economies into severe recessions.”


Tug of War That Markets Fear Is Central Banks Versus Governments…

“When monetary authorities look at soaring prices, they see inflation that must be stamped out — by driving economies into recession if needs be. But politicians in charge of budgets see something different, because voters hit by a cost-of-living squeeze expect their governments to help out, which typically means spending more or taxing less.”


The largest US banks reported relatively solid third-quarter earnings on Friday. But within those reports, investors found ominous clues about the future of the housing market, underscoring fears of an upcoming crisis.

“What’s happening: JPMorgan (JPM) reported that third-quarter home lending revenue plunged 34% from a year ago, and Wells Fargo logged a drop of 52% over the same period.”


Hedge Fund Titan Warns UK Pension Crisis Is Just the Start…

“The UK LDI industry is the first casualty of the end of the ‘money for nothing’ era — the first dead fish to float to the surface as rising central bank interest rates act like dynamite fishing in global asset markets,” Paul Marshall said in a letter sent to clients this month.”


Over 50,000 small businesses in London collapse as SME bloodbath rages…

“The figures illustrate how roaring inflation and higher costs are forcing small firms to the wall… Turmoil on UK financial markets sparked by prime minister’s Liz Truss’s botched mini budget in which she and her former chancellor Kwasi Kwarteng launched £45bn of unfunded tax cuts will heap even more pressure on businesses.”


[UK] Trade unions threaten winter of mass strikes in most militant showdown since 1970s…

“Opening the delayed TUC conference in Brighton, outgoing general secretary Frances O’Grady… [claimed] Liz Truss’s proposals for new anti-strike laws – to combat disruption of vital services like trains, schools, post and the NHS – would break international law and trade deals, she says defiantly: “See you in court.””


Blackouts may be imposed on cold weekday evenings, [UK] National Grid chief warns.

“The head of Britain’s electricity and gas systems’ operator has told households to prepare for blackouts between 4pm and 7pm on weekdays during “really, really cold” days in January and February if gas imports are reduced.”


Dozens of LNG-laden ships queue off Europe’s coasts unable to unload… If the backlog is not cleared soon those ships may start looking for alternative ports outside Europe to offload their cargo.

“There are more than 35 LNG-laden vessels drifting off Spain and around the Mediterranean, with at least eight vessels anchored off the Bay of Cadiz alone…”


Gazprom chief threatens total halt in EU gas supply if price cap is imposed.

“Gazprom CEO Alexei Miller, speaking on state television and cited by news agency Tass, said Gazprom was guided by contractual terms in its supply arrangements with EU buyers and that a price cap would be a breach of contract.”


Truckers grow anxious as AdBlue shortage applies brake to German industry…

“AdBlue, a mixture of urea and deionised water, is the lifeblood of logistics. But stocks are drying up after SKW Piesteritz, a company in the east German town of Wittenberg, which is one of Germany’s biggest sources of the solution, halted production to cope with the soaring price of gas.”


Tens of thousands of passengers affected by first day of Eurowings strike.

“Pilots at Lufthansa’s Eurowings began a three-day strike over working hours, their union said, affecting tens of thousands of the budget airline’s passengers on Monday. “It’s begun. And so far there is no new offer,” said a spokesperson for the Vereinigung Cockpit (VC) pilots’ union.”


Hundreds of people affected by Germany’s cost-of-living crisis gathered outside the Federal Chancellery in Berlin over the weekend to protest what they say is the increasingly worsening situation in people’s lives.

“Some demonstrators held signs calling for “immediate help for the poor” while other placards read, “We need healthy food. Abolish poverty!”


French government in crisis talks as fuel shortages worsen.

“…commuters could be facing days of travel chaos if planned strikes in the Paris public transport network and parts of the national rail network go ahead. Beaune said that in the worst affected regions, only one in two trains will be running on Tuesday. The industrial action takes place against a backdrop of rising living costs in France…”


Massive protest in Paris against inflation and climate crisis…

“Organisers say 140,000 people attended the march against the rising cost of living and alleged government inaction against climate change… It was a show of anger against the bite of rising prices and to crank up the pressure on the government of President Emmanuel Macron.”


Italians take to streets for anti-government protests.

“As the energy crisis continues to bite in Italy, people from all walks of life have been staging protests across the country… Italy is in the process of installing a new government as the Mario Draghi government collapsed in July leading to snap elections.”


Australia’s economic outlook to be downgraded in budget amid global ‘deterioration’.

“Increasingly dire forecasts for the global economy will see last-minute downgrades to Australia’s economic figures in next week’s federal budget, with the treasurer, Jim Chalmers, warning of “an increasingly perilous path” for world markets and key trading partners.”


Japan repeats warnings on yen as market watches for intervention.

“Finance Minister Shunichi Suzuki warned on Tuesday that Japan would take appropriate and decisive action against excessive, speculator-driven currency moves, keeping alive the possibility of more market intervention after the yen hit a new 32-year low.”


China has unexpectedly delayed key economic data scheduled to be published just as President Xi Jinping bids for another five years in power.

“Third quarter economic data, including GDP figures, were due to be published on Tuesday but have been delayed without explanation. It comes as the country’s leadership gathers in Beijing for the Communist Party’s twentieth congress this week.”


China Halts LNG Sales to Foreign Buyers to Ensure Own Supply.

“…a move by China to secure its own supply could drain shipments to Europe and exacerbate the region’s energy crunch in the case of a cold winter. China holds large contracts to purchase LNG from exporters like the US, with the Asian nation’s traders diverting some of that supply to Europe this year amid lackluster demand at home.”


Sri Lanka struggles to recover economically… further economic hardship could send protesters back to the streets [picture is of QR code for rationed fuel].

“The nation appears to have settled into an uncomfortable status quo. The IMF’s recent bailout package of $2.9 billion, along with $4 billion that India has already provided, will temporarily sustain the Wickremesinghe government. However, the IMF loan is contingent on the government enacting strict economic measures that will be challenging.”


Lebanese Pound Hits New Record Low…

“The pound’s market value fell to over 40,000 to the greenback, according to money exchangers who spoke to AFP, after it had stabilised at around 38,000 for weeks… The crisis has pushed most Lebanese into poverty, while talks with the International Monetary Fund to unlock billions of dollars in loans have stalled…”


More and more Egyptians online are calling for anti-government protests on 11 November to coincide with COP27 as human rights abuses in the country continue…

“In September 2020, dozens of anti-government protesters took to the streets holding banners calling on Egyptian President Abdel Fattah Al-Sisi to stand down. One year earlier Egyptians took to the streets as discontent over human rights abuses and strict austerity measures plunged hundreds of people into poverty.”


Tunisia: Thousands Protest Demand President Kais Saied’s Resignation.

“Tunisia’s commemoration of the 59th anniversary of the Evacuation Day was marked by a massive protest against President Kais Saied, calling for him to take responsibility for the country’s deteriorating economy which has resulted in fuel and food shortages.”


Zimbabwe, Rwanda and Ghana are the three African countries among 10 nations with the highest food price inflation in the latest World Bank assessment.

“Zimbabwe, Lebanon, Venezuela and Turkey ranked first four countries in the assessment while Iran, Sri Lanka, Argentina, Moldova, Rwanda and Ghana were the remaining countries in the list published by the World Bank on Sunday.”


Kenya may need pre-emptive debt restructuring to avoid default, economists say…

“The country’s “constrained access” to capital markets, and inability to diversify to alternative financing sources, may challenge successful eurobond rollover, with a visible trade deficit forecast at 11% of GDP from 2022 to 2024 further clouding the outlook, Erasmus writes.”


Ghana’s Cedi Slumps to World’s Worst Performer Amid IMF Talks…

“The currency of the world’s second-biggest cocoa producer depreciated as much as 3.3% Monday, before paring the loss to 11.2750 per dollar at 3:30 p.m. in the capital Accra. That took its losses this year to more than 45%, the most among 148 currencies tracked by Bloomberg.”


Nigeria LNG declares force majeure as flooding disrupts gas supply.

The declaration could worsen Nigeria’s cash crunch and will curtail global gas supply as Europe and others struggle to replace Russian exports due to the invasion of Ukraine in February. NLNG said all of its upstream gas suppliers had declared force majeure, forcing it to make the declaration as well.”


Miners’ Losses Mount as Ports Strike Drags on for Twelfth Day in South Africa.

“Negotiations to reach a pay deal have been unsuccessful, even after the government and an arbitration body joined the discussions between Transnet and its biggest labor unions. The virtual shutdown of South Africa’s monopolistic logistics company has taken a broad toll on not only mining and agricultural exports, but service businesses and others involved in supply chains.”


Cuba replaces energy minister as hours-long blackouts stir unrest.

“Cuba´s communist-run government replaced its energy and mines minister with Vicente de la O Levy, head of the state-run electronics company, official media reported on Monday, as the country struggles to contain hours-long blackouts that have stirred rare protests across the island.”


Venezuela crisis: 7.1m leave country since 2015.

“More than half of them face challenges accessing food, housing, and stable employment, the UN says. But despite the difficulties facing them abroad, the flow of Venezuelans escaping turmoil in their homeland has not let up. Aid agencies warn that these migrants risk being forgotten amid other crises.


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. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.

15th October 2022 Today’s Round-Up of Economic News

Pessimism mounts over a global economy facing multiple shocks.

“In one of the bleakest meetings of the IMF and World Bank since the financial crisis, Sri Mulyani Indrawati, Indonesia’s finance minister and chair of the Group of 20 leading economies, summed up the mood.

“The global economic situation has become more and more challenging,” she said in her closing remarks to the gathering of finance ministers and central bank governors in Washington, DC on Thursday. “The world is in a dangerous situation.”

“Kristalina Georgieva, managing director of the IMF, said the world was witnessing a transition from predictability, where interest rates and inflation were low, to instability.

““Shock upon shock upon shock,” she said, characterising the situation facing participants. “We have to really work on changing our mindset to be much more precautionary and be prepared for much more uncertainty.””


Things Are Breaking In Global Financial Markets.

“The rising dollar is a sign of tightening financial conditions and increased stress in the global financial system. Investors have been feeling the stress as the drawdown in market cap of U.S. equity and bond markets has declined by a staggering $57.8 trillion in less than one year… Global government bonds are having their worst year of performance since the 1940s.


“Post-bubble contraction” as coined by Bob Hoye, may finally be at hand…

“For decades, the sustaining constant has been periodic deflationary/disinflationary episodes routinely met by a dovish Fed. Today, the Fed is forced by its own excess to try to recapture something that has gotten out of its bottle. But the spike above the green moving averages look like a broken lid, and the Genie is not going to willingly go back in.”


Deflation Will Become the Problem When “Something Breaks”… [FWIW, this is how I see it.]

“…high inflationary periods also correspond with higher interest rates. In highly indebted economies, as in the U.S. today, such creates faster demand destruction as prices and debt servicing costs rise, thereby consuming more of available disposable income… Not surprisingly, each period of high inflation is followed by very low or negative inflationary (deflation) periods.”


“The US housing market’s big chill. As soaring mortgage rates push home ownership beyond reach for many, demand is cooling and prices are falling…

“Mortgage rates have risen quickly this year as the Federal Reserve halted its pandemic-era programme of purchasing mortgage-backed securities and also raised interest rates to counter inflation.”


A complete US ban on Russian aluminium threatens to upend a global market already reeling from multiple disruptions, throwing a spotlight on how China could fill any supply gap.

“The Biden administration is considering options including sanctions on Russia’s top producer of the metal as the White House looks to punish Moscow for its military escalations in Ukraine, according to people familiar with the deliberations.”


US Vulnerable To Future Copper Supply Squeeze – Analysis.

“… ongoing geopolitical turmoil and recent trade wars highlight the need to mitigate this shortfall’s repercussions on the US economy in terms of domestic consumption, financial volatility, and leverage for geopolitical blackmail.”


The world’s diesel market is once again flashing signs of chaos, undermining the global economy with a fresh bout of inflationary pressure.

“Powering trucks, trains and ships that drive industry, the fuel is commanding huge buy-it-now premiums in Europe… The US has the lowest seasonal inventories in data that began in 1982 going into winter.”


Traders are diverting Europe-bound tankers carrying diesel to the U.S. East Coast as the two regions battle for supplies amid an acute shortage and soaring prices

“Such diversions are rare as Europe, where refineries do not produce enough diesel to meet domestic demand, typically imports diesel from the United States as well as Asia and the Middle East.”


Gap between average petrol and diesel tops 20p for the first time [UK]…

“RAC Fuel Watch data has shown that as of Wednesday (October 12), drivers were paying an average of 163.13p for a litre of unleaded, whereas diesel had climbed to 183.94p a litre – a difference of 20.35p a litre.”


U.K. Markets Still Troubled Despite Finance Minister’s Ouster.

“Although Prime Minister Liz Truss of Britain on Friday fired the country’s top economic official in an effort to end the market turmoil that has raged for weeks, the move failed to fully soothe investors: The British pound fell, and recent gains made by government bonds were reversed.”


France fuel crisis: Nationwide strike planned for Tuesday.

“France’s CGT union, at the core of a weeks-long strike at oil major TotalEnergies , walked away from wage talks on Thursday night, dashing hopes for an end to a standoff that has disrupted everyday life as petrol stations run dry. Union branches in other sectors including in the railway and automotive sectors announced they would take part in a wider strike planned for next Tuesday.”


Europe’s energy crisis: Wood industry booms before winter of discontent…

In July, the EU also banned the import of Russian wood and pellets, and campaigners are warning that spiking prices will be felt the most by the poorest, especially those in Central and Eastern Europe where low-income households tend to be more reliant on firewood than gas.”


Eurozone posts record high trade deficit in August.

“Eurozone trade balance saw a record high deficit of €50.9 billion ($49.6 billion) in August due to soaring costs of imported energy, the EU’s statistical office said on Friday. The trade gap widened from a €33.9 billion in July, while it worsened from a trade surplus of €2.8 billion in August 2021, Eurostat data showed.”


Japan Voices Concern on Currency Swings After 32-Year Yen Low.

“Japan is “deeply concerned” about the rapidly increasing volatility in the foreign-exchange market, the latest in a string of recent warnings over the yen’s decline… A finance ministry official declined to comment on whether the country had stepped into markets again.”


World’s top chip equipment suppliers halt business with China.

“Leading chip equipment suppliers have suspended sales and services to semiconductor manufacturers in China, as new US export controls disrupt the Chinese tech industry and global companies’ operations… The new controls are hitting the industry in a downturn.”


US sanctions on Chinese semiconductors ‘decapitate’ industry, experts say.

“…rules announced by the US Department of Commerce last week restricting “US persons” from involvement in manufacturing chips in China have led to mass resignations of American executives from Chinese firms. This had the effect of “paralyzing Chinese manufacturing overnight”, adding that the industry was in “complete collapse” with “no chance of survival”.”


Cifi defaults on bond, triggering sell-off of developers, fears Chinese property debt crisis is spreading.

“Chinese property developer Cifi Holdings has failed to make a bond payment, marking its first offshore default as the debt crisis gripping the property sector spread to companies previously deemed financially sound.”


Anti-CCP protest and lockdown fears fuel China tensions before congress.

“A rare protest against the Communist party in Beijing and fears over renewed Covid restrictions across Shanghai are stoking political tensions just days before President Xi Jinping is expected to secure a third term in power in a key meeting on Sunday.”


Syria winter is a “nightmare” although oil tanks are full…

“Citizens are looking for alternative solutions for heating during the winter, such as olive waste, firewood, waste, and plastic materials in some cases, especially with the government’s subsidized diesel allocations being barely enough for one family for one month (50 liters), in addition to the high prices on the black market.”


Lebanon’s currency crisis: New exchange rate policy to cause massive hardship…

“Over the past three years, Lebanon’s local currency has lost more than 95% of its value; the inflation rate has exceeded 200%, and the United Nations Economic and Social Commission for Western Asia (UNESCWA) estimates that multidimensional poverty rate in Lebanon had nearly doubled from 42% in 2019 to 82% in 2021.”


Bread Joins Fuel as Flashpoint in Tunisia’s Economic Crisis.

Tunisian bakers called a one-day strike amid growing discontent in the cash-strapped North African country that’s trying to secure an International Monetary Fund deal and saw major fuel shortages this month. The bakers’ guild’s call for the protest comes on the heels of an unprecedented fuel shortage earlier this month…”


Morocco’s Fuel Prices to Experience New Increases Amid Global Crisis.

“…citizens across Morocco have been taking to social networks to protest price increases of commodities, including fuel. Some citizens continue to share posts under hashtags calling for fuel price decreases. A viral online campaign also demands the resignation of Head of Government Aziz Akhannouch.”


Senegal on the verge of fuel crisis as gov’t owes 375B CFA.

“L’Observateur, a daily Senegalese independent newspaper reports the “red alert for oil tankers” due to the State’s debt of 375 billion CFA francs, risking creating a “sector shutdown” and therefore a “shortage” of hydrocarbons.”


Global inflation causing ‘horrifying’ food insecurity, says IMF Africa head.

“Africa’s central banks are walking a tightrope trying to curb inflation that is mostly out of their control and causing “horrifying” food insecurity, the International Monetary Fund’s Africa head warned… Ethiopia, Somalia and parts of Kenya are also on track for a fifth failed rainy season, with famine looming in Somalia.”


20 Nations at High Risk from Global Warming Might Halt Debt Payments…

“Mohamad Nasheed, the former president of the Maldives, said poor nations were locked in a Sisyphean trap: they must borrow money to ward off rising seas and storms — only to see disasters made worse by climate change destroy the improvements they make. But the debt remains, and often countries are left to borrow once again.”


Emerging markets face risk of ‘flight to safety’, IMF official warns.

““It could be the case that what we saw in the UK . . . could become a more generalised vulnerability so that markets become more disorderly,” Ilan Goldfajn said in an interview during this week’s IMF meetings in Washington. “In this world something very important will happen for emerging markets . . . the flight to safety.””


How Nuclear Conflict Could Halt Global Air Traffic…

“Russia’s cancellation of overflight rights for Western airlines has added several hours to the already long flying time between Europe and the Far East. Other flights are likely to join Virgin Atlantic’s London-Hong Kong route in biting the dust. But the suddenly real prospect of a Russian nuclear attack on Ukraine is adding a new and far more devastating risk: a complete standstill in global air travel.”


You can read the previous “Economic” thread here. I’ll be back on Monday 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. And if you are already a subscriber or have donated – thank you! It is an enormous help as the cost-of-living crisis ratchets up here in the UK.

13th October 2022 Today’s Round-Up of Economic News

IMF forecasts ‘very painful’ outlook for global economy. The IMF has said there is a growing risk that the global economy will slide into recession next year as households and businesses in most countries face “stormy waters”…

“In an interview with the Financial Times, Pierre Olivier Gourinchas, the IMF’s chief economist, said, “We are not in a crisis yet, but things are really not looking good,” he said, adding that 2023 would be the “darkest hour” for the global economy…

“Although the sharp rises in interest rates around the world were weighing on growth, the IMF said they were necessary to ensure inflation came back under control and restored the global economy to a more stable footing.”


Megathreats by Nouriel Roubini — an avalanche of coming catastrophes…

“Roubini warns in Megathreats that the debt crisis of our lifetimes lies ahead. The entire world resembles the financial delinquent that is Argentina that has defaulted on its debt nine times since its independence in 1816. By the end of 2021, global debt, both public and private, exceeded 350 per cent of the planet’s gross domestic product.


World set for first ‘significant destruction’ of wealth since 2008 financial crisis, says Allianz [really this is not the destruction of wealth but the mirage of financial pseudo-wealth evaporating].

“Global financial assets are set to fall by more than two per cent this year in the “first significant destruction” of wealth since the 2008 financial crisis, a new report by financial services giant Allianz SE said. In real terms, households could lose a tenth of their wealth…”


‘The world should be worried’: Saudi Aramco — the world’s largest oil producer — just issued a dire warning over ‘extremely low’ capacity…

“Saudi Aramco CEO Amin Nasser… warns that oil prices could quickly spike — again. “When you erode that spare capacity the world should be worried. There will be no space for any hiccup — any interruption, any unforeseen events anywhere around the world.””


Biden vows ‘consequences’ for Saudi Arabia after oil output cuts…

“His remarks on Tuesday come a day after influential Democratic Senator Bob Menendez, the chairman of the Senate Foreign Relations Committee, said the US must immediately freeze all cooperation with Saudi Arabia, including arms sales.”


Houston, We Have an Oil Problem… A decline in drilling across the Permian Basin suggests US production forecasts are way too high…

“The vast shale basin is the engine of America’s oil industry, pumping 4.6 million barrels a day… Other shale basins, such as the Bakken in North Dakota, haven’t yet returned to pre-pandemic levels of activity. And output from the country’s legacy — or non-shale — wells is below pre-Covid rates… That’s why the deceleration in Permian drilling is so concerning.”


Yellen Worries Over Loss of ‘Adequate Liquidity’ in Treasuries…

“Treasury debt outstanding has climbed by about $7 trillion since the end of 2019. But big financial institutions haven’t been as willing to serve as market-makers, burdened by the so-called supplementary leverage ratio, or SLR, which requires that capital be put against such activity, as well as against reserve holdings.”


U.S. corporate bond ETFs plunge in global debt market rout.

“”There appears to be a self-reinforcing trend at work, of higher and more volatile yields prompting liquidity to dry up, prompting yet more volatility. This dynamic also seems at work elsewhere,” Capital Economics said in a research note on Tuesday.”


Strikes, possible blackouts and a plunging currency: Brits are being hit by a wave of bad news…

The U.K. economy shrank by 0.3% in August, the Office for National Statistics estimated Wednesday, potentially beginning what economists expect will be a lengthy recession through the winter… Economists expect further volatility in the bond market, and peril for pension funds, in the coming weeks.”


Columbia Threadneedle has suspended dealing on its CT UK Property Authorised Investment fund, in an attempt to shore up its liquidity.

“In a statement, Colombia Threadneedle said this decision was taken “due the amount of cash in the Fund reducing to a level where future redemption requests would not be able to be met until an orderly sale of assets has completed”… This comes the same week that Schroders and BlackRock, along with Threadneedle, also imposed redemption limits…”


UK pension funds are dumping assets to meet margin calls as the BOE confirmed it will end emergency bond buying [Friday], and the reverberations are being felt everywhere from Sydney to Frankfurt and New York…

“The market simply doesn’t have the confidence, for now, that the LDI crisis won’t return and has increased concerns that other pockets of leverage may cause issues,” Janusz Nelson, head of WEI Grade Corporate Syndicate at Citigroup Inc. said.”


The Bank of England has warned that some UK households may face a strain over debt repayments that is as great as before the 2008 financial crisis, if economic conditions continue to be difficult.

““It will be challenging for some households to manage the projected rises in the cost of essentials alongside higher interest rates,” the central bank’s Financial Policy Committee said in its quarterly Financial Policy Summary report released Wednesday.”


Desperate parents reusing filthy nappies as they struggle through cost of living crisis.

“A baby left with pressure sores because their family had to ration nappies; a child sleeping in a drawer because their family didn’t have the money to buy a bed; and a parent forced to re-use dirty nappies because they couldn’t afford fresh ones. These are some of the desperate measures families in the UK are taking…”


LNG carrier rates hit an all-time high on Tuesday, driven by growing prompt demand for gas in Europe as the continent tries to procure supply ahead of the winter.

“The freight rate to charter an LNG carrier in the Atlantic basin surged to $397,500 per day on Tuesday, according to Spark Commodities estimates cited by Bloomberg. The price to hire an LNG ship has now surged by 500% this year.”


EU Ban On Russian Oil Could Spark Worst Energy Crisis In Decades.

“A European ban on most crude imports from Russia will come into effect in December. For EU leaders, the next task at hand has been finding new sources of crude oil ahead of what could be a very dark and cold winter… the world is moving into a much tighter oil market for the remainder of the year after OPEC+ cuts.”


Leak detected in Druzhba pipeline carrying Russian oil to Germany.

“The leak is probably accidental rather than sabotage, Poland’s infrastructure official said, but the incident may stoke fears about the security of Europe’s energy supplies as it seeks to boycott Russian fossil fuels.”


The trials and tribulations of European carmakers are unlikely to end anytime soon, as the industry prepares for the latest crisis: high energy costs.

“Europe’s auto manufacturing industry has barely picked itself up from a crippling semiconductor shortage during the pandemic… Now, a global auto industry forecaster is saying that the energy crisis could curtail new car production by the millions.”


Germany and Italy will slip into recession next year, becoming the first advanced economies to contract in the wake of the Russia-Ukraine conflict [these forecasts still look crazily optimistic to me].

“The German economy is now expected to shrink by 0.3 percent in 2023… Italy, whose industries are also dependent on gas imports, will see its gross domestic product contract by 0.2 percent – also a sharp downgrade from 0.9 percent growth July.”


Germans should stop whining and be prepared with sweaters and candles this winter in case of blackouts amid the energy crisis, according to politician Wolfgang Schäuble.

“In an interview on Tuesday with Bild-TV, the former finance minister and president of the German government said, “You don’t have to whine about it, you have to recognize that a lot of things can’t be taken for granted,” he told the news channel.”


Fears French fuel crisis could spread amid plans to order strikers to work…

“The government is facing a deepening crisis after weeks of stoppages led by the leftwing CGT trade union, which is seeking large pay rises for workers at two oil firms, the French TotalEnergies and the US ExxonMobil. Strikers want better pay amid the cost-of-living crisis and a share of companies’ high profits.”


Democrat Blasts Police for Blocking Anti-Price-Hike Protestors [Elbasan, Albania]…

“Vice Chair of the Democratic Party (DP), Luciano Boçi has criticized Tuesday the State Police for choosing to block citizens who gathered to protest in Elbasan city against the record fuel price hike… No one will forgive Edi Rama for putting his hand in their pocket, to take their sweat and children’s money”, stated Boçi.”


Trading Drought Worsens in Japan’s Broken Bond Market.

“In a fresh sign of Japan’s dysfunctional bond market, the 10-year benchmark failed to trade for a third consecutive session Tuesday, the longest such streak since 1999. The Bank of Japan’s overwhelming presence in the JGB market where it’s the biggest buyer under its curve control policy has exacerbated liquidity issues and led to a deterioration in market functioning.”


The yen has hit a new 24-year low against the US dollar, moving past the ¥145.90 level that prompted Japanese authorities to intervene last month to strengthen the currency for the first time since the late 1990s.

“The Japanese government spent $20bn to prop up the yen but analysts warned that such interventions would have little effect…”


Shanghai and other big Chinese cities, including Shenzhen, have ramped up testing for COVID-19 as infections rise, with some local authorities hastily closing schools, entertainment venues and tourist spots…

“As of Monday, 36 Chinese cities were under various degrees of lockdown or control, affecting around 196.9 million people, versus 179.7 million in the previous week, according to Nomura.”


Ho Chi Minh City residents’ lives turned upside down by gasoline shortages.

“From Saturday, people in many of Vietnam’s southern provinces started struggling to buy fuel for their vehicles. As of Monday evening, Ho Chi Minh City alone had more than 100 closed petrol stations bearing “out of gas” signs, while others rationed their meager supplies.”


No hope for the future: Economic struggles add fuel to Iran’s protests…

““Expect anti-government protests to remain a feature of [Iran’s] political landscape and to increase in frequency, scale and violence as economic conditions worsen and social restrictions are tightened,” said Pat Thaker, Economist Intelligence Unit’s editorial director of Middle East and Africa.”


Syrian pound drops to historic low as economy continues to deteriorate…

“The depreciation of the pound has caused imports to skyrocket in price and shortages of key goods, such as gas and foodstuffs. With the continued decline in the value of the pound, the cost of imports and overall cost of living is expected to increase…”


Tunisians have been hit with soaring food prices and shortages of basic staples in recent weeks [fuel shortages, too] threatening to turn simmering discontent in the North African country — the cradle of the Arab Spring protests — into larger turmoil.

“Sugar, vegetable oil, rice and even bottled water periodically disappear from supermarkets and grocery stores. People stand in line for hours for these food essentials.”


The Democratic Republic of Congo is in talks with oil companies over around $160 million in back payments in a bid to avoid nation-wide fuel shortages that hit the country in September, the government said on Monday.

“Long queues formed at gas stations in major cities earlier this year as stocks dwindled – a situation company and government sources have blamed on delayed payments to suppliers…”


Nigeria Exploring Debt Restructuring, Finance Minister Says.

“Nigeria is considering restructuring its debt and extending the repayment period of its credit obligations, and appointed consultants to advise the government as it faces a rising debt-service burden, Finance Minister Zainab Ahmed said.”


‘Time may be running out’: chronicle of a debt crisis foretold.

“Kristalina Georgieva, the managing director of the International Monetary Fund knows it. David Malpass, the World Bank president knows it too. An increasing number of countries are having problems paying their debts, and the crunch point is fast arriving.”


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

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