Home » Posts tagged 'international monetary fund' (Page 6)

Tag Archives: international monetary fund

China’s stock market fell sharply on Thursday, dragged down by a range of concerns that should offer a warning to the broader global economy.

The Shanghai Composite Index fell nearly 3 percent on Thursday, falling to its lowest point in nearly four years. The problems in China are dragging down markets across Asia, including in Japan and South Korea.

The Shanghai Composite is now down more than 25 percent since the start of the year, and is down more than 10 percent in the last three weeks alone. Viewed another way, the Chinese stock market has lost more than $3 trillion in the last six months.

(Click to enlarge)

Shanghai Composite Index, last 12 months

The troubling thing about the recent declines is that the factors driving the losses are multiple. The trade war with the United States, mountains of debt held by local governments within China, a broader slowdown in growth, a weakening yuan and high oil prices are all creating headwinds for the Chinese economy.

China’s central bank said that it still has plenty of tools that it could use defend against the trade war. Looser reserve requirements took effect a few days ago, a move the central bank made to inject money into the economy.

The IMF says that China’s GDP growth could slow from 6.6 percent this year to just 6.2 percent in 2019, although the risks are skewed to the downside because of the trade war. The Fund said that a worst-case scenario in which the U.S. slaps stiff tariffs on nearly all imports from China would shave off 1.6 percentage points from Chinese growth.

China won’t see any relief from the U.S. Federal Reserve. Minutes of the Fed’s last meeting in late September were released on Wednesday, and they reveal a determination on the part of the central bank to continue to tighten interest rates.

…click on the above link to read the rest of the article…

IMF Issues Dire Warning – ‘Great Depression’ Ahead?

October 17, 2018

IMF Issues Dire Warning – ‘Great Depression’ Ahead?

– “Large challenges loom for the global economy to prevent a second Great Depression” warn IMF
– Massive government debts and eroded fiscal buffers since 2008 suggest global dominos await a single market crash
– 2008 crisis measures cast long, dark “terrifying” shadow

Is another “Great Depression” on the horizon?

It would be easier to dismiss these words from Nouriel Roubini, Marc Faber or other doom-and-gloom prognosticators. Coming from Christine Lagarde’s team, though, they take on a new dimension of scary.

The International Monetary Fund head isn’t known for breathlessness on the world stage. And yet the IMF sounded downright alarmist in its latest Global Financial Stability report, stating that “large challenges loom for the global economy to prevent a second Great Depression.”

Even some market bears were taken aback. “Why,” asks Michael Snyder of The Economic Collapse Blog would the IMF use this phrase “in a report that they know the entire world will read?”

Perhaps because, unfortunately, the findings of other referees of global risks – including the Bank for International Settlements – hint at similar dislocations.

Ten years after the Lehman Brothers crisis, these worrisome warnings that will be explored in depth at this week’s annual IMF meeting in Bali. The tranquil setting, though, will offer few respites from cracks appearing in markets everywhere – from Italy to China to Southeast Asia, where currencies are cratering like it’s 1998 again.

Source: Wikipedia

Potential flashpoints and a long line of dominos

Italy is the current flashpoint – and the latest target of “domino effect” chatter in frothy world markets. China’s shadow-banking bubble, and the extreme opacity and regulations that enable it, also came in for criticism. And, of course, the 800-pound beast in any room where global investors gather these days: Donald Trump’s assault on world trade.

…click on the above link to read the rest of the article…

Lies, Damn Lies & Statistics: How the US Weaponizes Them to Accuse China of Debt Trap Diplomacy

October 16, 2018

Lies, Damn Lies & Statistics: How the US Weaponizes Them to Accuse China of Debt Trap Diplomacy

With China and Russia named as the two greatest threats to continuing American hegemony end of last year, the velvet gloves have come off the Washington establishment, baring their knuckles against the Middle Kingdom in plain view of the entire world. In recent weeks, anti-China rhetorics and vitriol emanating from the Oval Office and Capitol Hill have reached feverish, even hysterical, proportions.

The total warfare on all fronts is being waged against Beijing, assisted and amplified by the corporate media. The empire’s propaganda machine is in overdrive, churning out fake news and lies on a 24/7 basis to smear and demonize China. One of such lies is the alleged neo-colonization of developing countries through debt traps sprung by China.

This article puts together all the numbers in four countries – Sri Lanka, Pakistan, Maldives and Malaysia – which are misrepresented by the western press as victims of China’s “debt trap diplomacy”.

SRI LANKA

Lie : Western media have spun tall tales that Sri Lanka, with Chinese loans up to its eyeballs, used 90% of government revenue to service Chinese debts and was forced to “cough up a port” to Beijing.

Fact : China accounted for only ONE-EIGHTH of Sri Lanka’s $65 billion debts. Beijing didn’t demand immediate payment of loans falling due from Colombo. Instead, China acceded to Sri Lanka’s request to restructure the loans. Colombo OFFERED to settle the loans past due by giving a 70% equity in the LOSS-MAKING Hambantota port to a Chinese company. To bring the port up to the operational level, the Chinese company has to spend another $700 million. No competing offer from other parties to take over the port was received before and after the restructuring proposal was completed.

…click on the above link to read the rest of the article…

World Finance Leaders Scramble For A Solution To Escalating Trade War, Rising Rates

October 16, 2018

World Finance Leaders Scramble For A Solution To Escalating Trade War, Rising Rates

The main takeaway from the IMF and World Bank Group annual meeting in Bali, which hosted financial ministers and central bank governors from around the world this weekend, was that global trade tensions were having a profound effect on global growth and need to be solved.

Most of the participants – save for China and Mexico – seemed united and in agreement that trade talks have to continue. Bank of Japan Governor Haruhiko Kuroda stated that it was essential to have dialogue on trade while at the same time, the president of Brazil’s central bank, Ilan Goldfajn, noted that the trade wars were one of the biggest threats to emerging markets. Indonesia’s president Jokowi Widodo said starkly that “winter is coming” for the global economy if there is no solution on trade.

However, not everybody was prepared to find a solution at any cost. Bank of China governor Yi Gang stated that he was preparing for the worst, despite still seeking a constructive resolution to the problem. Gang stated at the meeting: “You see a lot of people in China now preparing for this trade tension to be a prolonged situation. The downside risks from trade tensions are significant.”

Mexico also stepped in to voice its support for China. Former Mexican president Ernesto Zedillo told China that they should follow the example set by Mexico and Canada during their negotiations with the United States, because they both were able to secure the terms that they wanted, even though some may disagree violently with this hot take.

Zedillo said, “Mexico and Canada made clear that they’d rather not have Nafta than having the deal that the U.S. wanted. In the end, Mexico and Canada got their way in every single issue that had been drawn as a red line. So I hope China doesn’t blink.”

…click on the above link to read the rest of the article…

Stock Market Chaos Sparks Oil Selloff

October 12, 2018

Stock Market Chaos Sparks Oil Selloff

The plunge in global equities on Wednesday and Thursday dragged down crude oil, with even concerns about falling Iranian supply not enough to keep crude from a steep selloff.

Brent fell more than 1.2 percent on Wednesday and was down another 1.5 percent in early trading on Thursday, falling back to the low-$80s per barrel, down from over $86 last week.

The same supply concerns are still there – Iran’s oil exports are dwindling, and it is unclear if OPEC can fill the gap. But the sudden cracks in the global economy took on a higher priority.

The conditions for an equity selloff have been building for quite some time. On October 9, the International Monetary Fund cut its forecast for global growth to 3.7 percent for 2018 and 2019, down from a previous estimate of 3.9 percent. The Fund said that “growth has proven to be less balanced than hoped,” and that the “likelihood of further negative shocks to our growth forecast has risen.” Also, the ongoing trade war between the U.S. and China, combined with the strength of the dollar and the turmoil and emerging markets could also lead to an economic slowdown.

China’s economy is already showing some signs of strain, and China’s central bank just slashed the amount of cash that banks have to hold in reserve, the so-called reserve ratio, by one percentage point. The move is seen is an attempt to keep growth aloft amid worrying signs of trouble.

In the U.S., the Federal Reserve has been going in the opposite direction, tightening interest rates in an effort to avoid inflation.

These various red flags for the global economy have been known for a while and are the background context for the sudden and painful selloff in global equities that began mid-week.

…click on the above link to read the rest of the article…

IMF Warns About Emerging Markets: Hello “Always Late” IMF, Global Crisis Coming

October 11, 2018

IMF Warns About Emerging Markets: Hello “Always Late” IMF, Global Crisis Coming

The IMF is finally warning that there may be an emerging market crisis. Hello IMF, it’s already here. Look ahead.

The IMF is perpetually late in its forecasts. Here’s the latest hoot: IMF Warns of Possible Emerging-Markets Crisis.

A new study by the International Monetary Fund projects emerging economies will muddle through recent market turbulence without a severe shock to their financial systems, but flags an outside chance of a crisis.

In a “severely adverse” scenario, the IMF says capital could flood out of countries at a pace not seen since the 2008 global financial crisis.

Outside Chance of a Crisis? What the Hell?

Argentina and Turkey are both in a full-blown crisis. So is Pakistan which last week went to the IMF for help.

Here’s a hint: It’s a certifiable crisis to go to the IMF for a bailout.

And what about Venezuela deep in hyperinflation.

Wake-Up Call

“This should serve as a wake-up call,” Ms. Lagarde said of the mounting debts and risks of capital outflows.

Wake-up call to do what? Please tell us Ms Lagarde.

The emerging market crisis is already underway.

When the global junk bond and equity bubbles pop, we will not just be talking about emerging markets that are in trouble.

Hello IMF, please wake up.

Severe US Recession Would Slash Public Wealth By $5 Trillion: IMF

October 10, 2018

Severe US Recession Would Slash Public Wealth By $5 Trillion: IMF

As part of the IMF’s latest global economic forecast, which for the first time since 2016 saw the D.C.-based organization cut its global growth forecasts, the IMF warned that a severe recession would slash US public wealth by about $5 trillion, causing vastly more damage to Washington’s finances than just an increase in debt and deficits.

At the same time, governments around the world, many of which face similar dangers, do not clearly publicize their overall net worths, the International Monetary Fund said in its new report, noting that “Few governments know how much they own” or how they use those assets for the public’s well-being, the IMF explained.

This creates a potential blind spot for policymakers who could use this knowledge to head off economic risks; Knowing what a government owns and how they can put their assets to better use matters because they can earn about 3% of GDP more in revenues each year and reduce risks, all at once according to France24. That’s as much revenue as governments make from corporate income tax receipts in advanced economies. Governments can put this money toward better schools, hospitals, or other priority spending.

Public assets consist of public infrastructure such as roads, bridges, and sewer pipes, as well as the money governments have in the bank, their financial investments, and payments owed to them by individuals and businesses. According to the IMF, “natural resource reserves in the ground are also part of assets, something that is particularly important for natural resource-rich countries. But assets also include state-owned enterprises such as public banks and, in many countries, utilities such as public electricity and water companies.”

…click on the above link to read the rest of the article…

IMF Slashes US Growth Outlook, Blames Rates & Trade; Sees Venezuelan Inflation 10-Million-Percent

October 9, 2018

IMF Slashes US Growth Outlook, Blames Rates & Trade; Sees Venezuelan Inflation 10-Million-Percent

Confirming Director Lagarde’s warning that “clouds on the horizon have materialized,” The International Monetary Fund is downgrading its outlook for the world economy, citing rising interest rates and growing tensions over trade.

The IMF said Monday that the global economy will grow 3.7 percent this year, the same as in 2017 but down from the 3.9 percent it was forecasting for 2018 in July.

It slashed its outlook for the 19 countries that use the euro currency and for Central and Eastern Europe, Latin America, the Middle East and Sub-Saharan Africa.

Given the actual global data, The IMF and consensus have a long way to go…

Furthermore, The IMF expects the U.S. economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast.

But it predicts that U.S. growth will slow to 2.5 percent next year as the effect of recent tax cuts wears off and as President Donald Trump’s trade war with China takes a toll.

As The IMF blog details, there are clouds on the horizon. Growth has proven to be less balanced than hoped. Not only have some downside risks that the last WEO identified been realized, the likelihood of further negative shocks to our growth forecast has risen. In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term. These concerns raise the urgency for policymakers to act.

Growth in the United States, buoyed by a procyclical fiscal package, continues at a robust pace and is driving US interest rates higher. But US growth will decline once parts of its fiscal stimulus go into reverse. Notwithstanding the present demand momentum, we have downgraded our 2019 US growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China’s retaliation. China’s expected 2019 growth is also marked down.

…click on the above link to read the rest of the article…

Spain: IMF Highlights Rising Risks

October 8, 2018

Spain: IMF Highlights Rising Risks

The International Monetary Fund can be criticized for many things, but its analysis of countries’ debt risk tends to be worth a read.

In this case, the International Monetary Fund has once again warned Spain of the risk of reversing reforms and increasing imbalances.

It asks to deepen in the labor reform to end structural unemployment and credible measures for the 2019 budget.

The IMF is often criticized on many sides. It is often accused of being “neoliberal” despite the fact that in almost all its recommendations aim to prevent spending cuts. It is wrongly criticized, on many occasions, for being negative on countries. It is exactly the opposite. The IMF is often too diplomatic and, above all, undemanding with governments.

A clearly diplomatic IMF has verified in its last report the important risks facing the Spanish economy. As growth slows down more quickly than expected, the risks that threaten the recovery have increased and many of the socialist government’s announcements could be counterproductive and accelerate a relapse.

In a very diplomatic but forceful way, the IMF warns about the governments’ optimistic and inflated estimates of tax revenues. No wonder, because the average error in revenue estimates for new taxes in Spain is very important, an average of 5.8 billion euro annually.

Inflated estimates are an easy trick to square budgets. Making impossible estimates of tax revenue while spending increases are very real. Then, when deficits soar, blame an external enemy.

The graph below shows the historical overestimation of tax revenues (5.8 billion euro per annum more tax revenues estimated than actually collected).

Spain: IMF Highlights Rising Risks

The Spanish Treasury Inspectors themselves have warned: “It would also be very interesting that those who speak again and again of these striking figures will provide the studies on which they are based to compare them. From previous unsubstantiated studies, inadequate and impossible proposals arise”(Tax Inspectors, January 2015).

…click on the above link to read the rest of the article…

World economy at risk of another financial crash, says IMF

October 4, 2018

World economy at risk of another financial crash, says IMF

Debt is above 2008 level and failure to reform banking system could trigger crisis

The floor of the New York stock exchange in September 2008. Photograph: Richard Drew/AP

The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reformsneeded to protect the system from reckless behaviour, the International Monetary Fund has warned.

With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said.

Much has been done to shore up the reserves of banks in the last 10 years and to put in place more rigorous oversight of the financial sector, but “risks tend to rise during good times, such as the current period of low interest rates and subdued volatility, and those risks can always migrate to new areas”, the IMF said, adding, “supervisors must remain vigilant to these unfolding events”.

A dramatic rise in lending by the so-called shadow banks in China and the failure to impose tough restrictions on insurance companies and asset managers, which handle trillions of dollars of funds, are highlighted by the IMF as causes for concern.

The growth of global banks such as JP Morgan and the Industrial and Commercial Bank of China to a scale beyond that seen in 2008, leading to fears that they remain “too big fail”, also registers on the IMF’s radar.

The warning from the IMF Global Financial Stability report echoes similar concerns that complacency among regulators and a backlash against international agreements, especially from Donald Trump’s US administration, has undermined efforts to prepare for another downturn.

…click on the above link to read the rest of the article…

Argentina Hikes Rates To 65% As Peso Plunges To New Record Low

September 28, 2018

Argentina Hikes Rates To 65% As Peso Plunges To New Record Low

It appears the market is willing to test BCRA’s mettle as it pukes pesos down to a new record low against the greenback and pushes towards the bottom of its new “no intervention” band.

The new record low is now 41.54/USD…

While not ‘allowed’ to intervene directly until 44/USD, Bloomberg reports that Argentina just hiked its Leliq rate to 65%.

The sharp drop follows Thursday’s 2.8% decline and comes despite the IMF agreeing on Wednesday to increase its bailout package to the Latin American country by an extra $7.1bn.

Paging Christine Lagarde…

Argentina Gets Record $57 Billion As IMF Boosts Bailout, Creates “No Intervention” Zone For The Peso

September 26, 2018

Argentina Gets Record $57 Billion As IMF Boosts Bailout, Creates “No Intervention” Zone For The Peso

Just a few months after the IMF announced in June what was a record-setting $50 billion, 36-month bailout agreement with Argentina, the International Monetary Fund said it would expand the credit line to $57 billion in an attempt to halt the economic and financial crisis that has sent the country’s currency plunging over 50% this year, and pummeled the third-largest Latin American economy. In exchange, Argentina will set a “no intervention” zone for the peso from 34 to 44, meaning the exchange rate will be flexible but not floating.

The revised standby agreement is “aimed at bolstering confidence and stabilizing the economy,” IMF chief Christine Lagarde said Wednesday in a joint statement with Argentine Economy Minister Nicolas Dujovne.

The agreement, which is subject to IMF Executive Board approval, “front loads IMF financing, increasing available resources by US$19 billion through the end of 2019, and brings the total amount available under the program to US$57.1 billion through 2021,” according to statement.

Argentina had started renegotiating the terms of the bailout deal last month when it became obvious that the original funds would be insufficient, and when President Mauricio Macri asked to speed up payments in the original agreement. Meanwhile, as part of the deal, Argentina would be required to fulfill certain stipulations under the agreement, which would need congressional approval by way of the 2019 budget. In exchange, the IMF would cover a significant portion of Argentina’s financing through next year, according to Moody’s.

As part of the government’s efforts to cut its debt, which is projected to reach 70% of GDP next year. Macri and finance minister, Nicolas Dujovne unveiled economic reforms earlier this month, including highly unpopular spending cuts and export tax increases demanded by the IMF.

…click on the above link to read the rest of the article…

Russell Napier: “The IMF Is About To Send A Profound Shudder Through A Generation Of Investors”

September 3, 2018

Russell Napier: “The IMF Is About To Send A Profound Shudder Through A Generation Of Investors”

Bringing Up The Bodies in Emerging Markets

‘The order goes to The Tower, “Bring up the bodies.”’

— Bring Up The Bodies, Hilary Mantell (The Forth Estate, Jan 2015)

For many investors the meltdown in emerging market exchange rates is just some temporary contagion from Turkey; it will go away. The reasoning goes that it is a myopic liquidation of perfectly good assets, just because Turkey happens to be classified as an emerging market. Your analyst has long disagreed with that and late last year outlined the consequences for emerging markets from the bankruptcy of Turkey.

Of course the greatest surprise for investors is not that this is a problem for emerging markets but that it is, much more importantly, the beginning of a European crisis. However, it is not just the negative impacts from the broad financial forces outlined in these reports that are depressing emerging market exchange rates. There is something much more important and insidious undermining these exchange rates: the rise of the rule of man and the decline of the rule of law.

Professional investors have become entirely distracted from the structural decline in the rule of law in emerging markets, as they beat themselves up about Brexit and the Trump Presidency. Given the backgrounds of the average investment manager, it is not surprising that their attention should be diverted to these local issues that challenge not just their portfolio values, but also their personal values. Whatever these two political shifts represent, however, they do not represent a decline in the rule of law. If the US does have a President, whether Republican or Democrat, who breaches the law then it is highly likely that they will be held to account by the legal process.

…click on the above link to read the rest of the article…

Argentine President Admits “More Poverty” To Come, Announces Price Controls, Higher Taxes, Smaller Govt

September 3, 2018

Argentine President Admits “More Poverty” To Come, Announces Price Controls, Higher Taxes, Smaller Govt

Things have not worked out so well since The IMF “bailed them out”…

In his address, there was good news, bad news, and ugly news.

“Everyone has to make sacrifices,” Macri implored of his nation’s citizens – who have lost 50% of their wealth year-to-date due to the collapse of the peso, which he also attributes to being “exaggerated by Turkey and Brazil weakness.”

Having blamed “mostly external factors” for the collapse of the economy (not bingeing on too much dollar-denominated debt in order to manufacture a smoke-and-mirrors-based boom), Macri notes that investors “have started doubting” Argentina’s ability to function.

The Good News

Macri has promised to dramatically shrink the size of the government, eliminating several ministries entirely, adding that Argentina must “set a goal not to spend more than we have.”

The Bad News

In an effort to close its budget gap, Macri will raise taxes on its one positive economic attribute – its exporters.

The Ugly News

Amid the hyperinflationary regime shift that is occurring, Macri will resort to price controls of some essential foods. When has that ever ended well.

All of which, as Bloomberg notes, is intended to signal a shift in the government’s strategy as it heads into talks on Tuesday with the International Monetary Fund to speed up the disbursement of cash from a $50 billion credit line.

Macri is now caught between the ‘rock’ of pleasing investors by cutting spending, and the ‘hard place’ of ensuring that the belt-tightening of austerity doesn’t cause social upheaval ahead of next year’s election.

These measures, Macri warned “will lead to more poverty.”

For now, the peso is stable (modestly weaker)…

Peso Set To Disintegrate After IMF Tells Argentina To Stop Supporting Currency

September 2, 2018

Peso Set To Disintegrate After IMF Tells Argentina To Stop Supporting Currency

On May 11, three days after Argentina secured a $50 Billion IMF bailout – the largest in the fund’s history – we jokingly noted that with the peso resuming its slide, an indication the market did not view the IMF backstop as credible, the ECB would need to get involved.

ARGENTINE PESO EXTENDS LOSS, HITS NEW ALL-TIME LOW AT 23.16/USD
Time to add ECB to IMF bailout

10:22 AM – May 11, 2018

In retrospect, it now appears that this may not have been a joke, because with the Peso plummeting, and surpassing the Turkish Lira as the worst performing currency of 2018 having lost half its value YTD…

… with the bulk of the collapse taking place in August…

… Christone Lagarde had some very bad news for Buenos Aires and Argentina president Mauricio Macri: the IMF now insists that after burning through billions in central bank reserves, Argentina should stop using funds to support the peso, and float it freely.

According to Infobae, the Argentine foreign currency reserves have declined below the level demanded by the IMF, with Argentine authorities selling $2.5BN to support the peso in August; meanwhile the overall level of reserves has slumped even more, approaching the levels before the IMF bailout and failing to prop up the peso which, as shown below, has collapsed in a move reminiscent of what is taking place in hyperinflating Venezuela.

Worse, the Argentine Peso suffered its latest sharp drop in the days after the central bank unexpectedly hiked rates to 60% – the highest in the world – and another indication that the market is firmly convinced that not even the IMF backstop will force Argentina into a painful, and politically destabilizing structural program.

…click on the above link to read the rest of the article…

Tag Archives: international monetary fund

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Argentina Hikes Rates To 65% As Peso Plunges To New Record Low

Post navigation

Latest Posts