Faber News Flow

https://scenarieconomici.it/germania-i-verdi-dal-freno-allacceleratore-del-debito/ Fabrizio

Following on these are just a few of last month's stories.  Danske Bank of Denmark introduces the first negative 10-year fixed-rate mortgage. The German Finance Ministry voices disappointment at the lack of demand for 30-year zero-coupon bonds. The U.S. and Sweden contemplate issuing 50-year and 100-year bonds. These are all cause for concern. Excessively low interest rates support assets, favor the rich over the poor, favor the rentier over the business investor, encourage leverage and stock buybacks over capital expenditure and equity-capital formation. Income inequality grows, and social instability follows. Corporations that, under a more normal interest rate regime, would have been placed into receivership are able to continue to operate. New, more innovative enterprises, which should thrive as inefficient incumbent corporations exit the gene pool, are stifled at birth by a dearth of investment and lack of opportunity. Trend economic growth suffers.  In an excessively low–inte...

The  global growth outlook is the lowest since the last financial crisis,  and central banks, especially ones in emerging markets, have already started to cut interest rates to make sure growth doesn't collapse. Manufacturing across large parts of South America, Europe, Asia, and the Middle East are reeling from a  global structural slowdown , amplified by the US and China trade war, have  triggered emerging central banks to cut rates by the most in a decade ,  reported Reuters . Emerging central banks took notice when major central banks including the US Federal Reserve and the European Central Bank  started  to cut interest rates this summer, all in an attempt to lessen the impact of a global synchronized slowdown. Central banks across 37 emerging market economies recorded a net fourteen rate cuts in August,  the most since policymakers dropped rates to zero after the global financial crash in 2008/09. August marked the seventh straight month of net rate cuts followed by a tighte...

With the drumbeat of a looming recession growing louder by the day - whether due to ongoing trade war or the late-cycle slowdown which finally pushed the all-important US mfg ISM into contraction today - and prompting banks such as UBS to drastically slash their GDP forecast to a whisker above recession in H1 2020, it's just a matter of time before the chorus turns universally pessimistic. Taking a bold step in that general direction, was SocGen which today reported that after another sharp drop-off in August, the bank's proprietary newsflow indicator (a "big data" approach to a variety of key market themes such as economic momentum, monetary and fiscal policy, inflation and risk,  and which regularly leads the financial market by a few months ) has collapsed signaling "severe damage to global growth momentum." As the bank explains, looking at this ominous indicator, for most developed and emerging markets that it follows (42 in total), levels are well below...

Now that trade war with China has escalated substantially yet again following a weekend in which both the US and China hiked the tariff rate on billions of imports, Deutsche Bank is revisiting how China's stance towards the trade war has evolved over the past 1½ years, and how it may change in the future.  As a reminder, while China first sought to prevent a trade war, and then tried to quickly reach a trade deal with the US, DB economist Yi Xiong notes that China's strategy has changed again since early May, and he describes China's current strategy as "endurance":  the main goal is to preserve China's economic resilience, while taking the higher US tariffs as a given fact. The premise for China's new strategy is two-fold: frictions between the US and China have gone far beyond trade, reducing China's potential gains in a trade deal; and damage from the higher US tariffs to China's economy has been manageable. Under this strategy, we think China w...