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Chinese Debt Could Cause Emerging Markets to Implode

CHINESE DEBT COULD CAUSE EMERGING MARKETS TO IMPLODE

The novel coronavirus has brought the world economy to a grinding halt. Global growth is set to fall from 2.9 percent last year into deep negative territory in 2020—the only year besides 2009 that this has happened since World War II. Recovery will likely be slow and painful. Government restrictions to prevent the virus from resurging will inhibit production and consumption, as will defaults, bankruptcies, and staffing cuts that have already produced record jobless claims in the United States.

But not all countries will bear the pain of the global recession equally. Low-income countries suffer from poor health infrastructure, which inhibits their ability to fight off the coronavirus, and many of them had dangerously high debt levels even before the pandemic necessitated massive emergency spending. Foreign investors are now withdrawing capital from emerging markets and returning it to the rich world in search of a safe haven. As a result, countries such as South Africa, Kenya, and Nigeria are seeing their currencies plummet in value—making it difficult, if not impossible, for them to service foreign loans.

Faced with the threat of financial ruin, poor countries have turned to multilateral financial institutions such as the International Monetary Fund and World Bank. The IMF has already released emergency funds to at least 39 countries, and by the end of March more than 40 more had approached it for help. The World Bank has fast-tracked $14 billion for crisis relief efforts. Yet even as they offer extraordinary amounts of aid, the IMF and World Bank know that these sums won’t be nearly enough. For that reason, they called on Group of 20 creditor nations to suspend collecting interest payments on loans they have made to low-income countries. On April 15, the G-20 obliged: all of its members agreed to suspend these repayment obligations through the end of the year—all members except one, that is.

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

When Economic Depression Follows Pandemic, No Time to Waste

When Economic Depression Follows Pandemic, No Time to Waste

What the Bank of Canada and IMF see coming will demand bold stimulus.

ClubMonacoRobsonBoardedUp.jpg
On Vancouver’s Robson Street, the Club Monaco outlet is boarded up to prevent looting. Photo by Joshua Berson.

It is still sinking in that the end of the pandemic will not be the end of our troubles. On the contrary — we will likely see the end of the pandemic overlap with a full-scale economic depression, with COVID-19 waiting to make recurrent comebacks. Amid a global economic collapse, Canada will have to postpone hopes of recovery; for the foreseeable future, we will be in damage-control mode.

The IMF’s best-case scenario assumes that the pandemic “fades” in the second half of 2020, and “containment efforts can be gradually unwound,” permitting some economic rebuilding. Even so, “the global economy is projected to contract sharply by -3 per cent in 2020, much worse than during the 2008-09 financial crisis.” 

Strikingly, the IMF implicitly endorses a program that is socialist in all but name:

“The immediate priority is to contain the fallout from the COVID-19 outbreak, especially by increasing health-care expenditures to strengthen the capacity and resources of the health-care sector while adopting measures that reduce contagion. Economic policies will also need to cushion the impact of the decline in activity on people, firms and the financial systems reduce persistent scarring effects from the unavoidable severe slowdown; and ensure that the economic recovery can begin quickly once the pandemic fades.”

The IMF approves such policies in many of the advanced countries as well as in China, Indonesia and South Africa. It argues that “Broad-based fiscal stimulus can preempt a steeper decline in confidence, lift aggregate demand, and avert an even deeper downturn. But it would most likely be more effective once the outbreak fades and people are able to move about freely.”

The best-case scenario?

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

Worst Recession in 150 Years

Worst Recession in 150 Years

Worst Recession in 150 Years

The stock market had another big day today, spurred by the Fed’s massive recent liquidity injections.

But you really shouldn’t be terribly surprised by the rally. Even the worst bear markets see substantial bouncebacks. And you can expect the market to give back all of its recent gains in the months ahead as the economic fallout of the lockdowns becomes apparent.

This bear market has a long way to run. And we could actually be looking at the worst recession in 150 years if one economist is correct. Let’s unpack this…

My regular readers know I have a low opinion of most academic economists, the ones you find at the Fed, the IMF and in mainstream financial media.

The problem is not that they’re uneducated; they have the Ph.D.s and high IQs to prove otherwise. I’ve met many of them and I can tell you they’re not idiots.

The problem is that they’re miseducated. They learn a lot of theories and models that do not correspond to the reality of how economies and capital markets actually work.

Worse yet, they keep coming up with new ones that muddy the waters even further. For example, concepts such as the Phillips curve (an inverse relationship between inflation and unemployment) are empirically false.

Other ideas such as “comparative advantage” have appeal in the faculty lounge but don’t work in the real world for many reasons, including the fact that nations create comparative advantage out of thin air with government subsidies and mercantilist demands.

Not the Early 19th Century Anymore

It’s not the early 19th century anymore, when the theory first developed. For example, at that time, a nation that specialized in wool products like sweaters (England) might not make the best leather products like shoes (Italy).

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

“Worst. Recession. Ever.”

“Worst. Recession. Ever.”

When Harry Met Comic-Book-Guy

Worst global downturn since the Great Depression” says the IMF. Actually, it’s potentially worse than that.We are seeing credible (initial) claims in the UK and US that millions/tens of millions are going to be unemployed – again taking us back to black & white memories of long queues of the jobless holding signs saying “Will Work For Food.”

We are also seeing calls for GDP to collapse by up to a third in the presumed Q2 trough in the UK and the US, as just two examples, which in the space of months would already take us to the kind of depths plunged back in the 1930s (and actually this will be the worst recession since the 18th century according to one UK report.) Moreover, in a world far more economically-integrated today than it was in the 1930s, what happens in the (smaller) West will rapidly hit the (larger) rest.

As will the virus itself, of course. What is to stop it rampaging through Africa and South Asia, as just two examples? “Heat!” we have been told. Yet besides the fact that Covid-19 is transmitting in Indonesia and Singapore we see a report today that French scientists have found some strains of the virus can survive long exposures to temperatures of up to 60c, and it takes almost boiling point to kill it. Another (non-peer reviewed) study from Australian and Taiwanese researchers based on samples from India has shown Covid-19 is already mutating, shifting its mechanism used to bind to human cells – the paper concludes “This means current vaccine development…is at great risk of becoming futile.” Moreover, a Chinese scientist is warning of a serious risk of a second global wave of Covid in November – exactly the pattern seen in the 1918-19 Spanish Flu.

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

Oil Tumbles After IMF Slashes Global Growth Forecast

Oil Tumbles After IMF Slashes Global Growth Forecast

As if oil prices needed any more help on their downward spiral towards the teens, The IMF just slashed global growth to the worst since the ’30s.

“This crisis is like no other,” Gita Gopinath, the IMF’s chief economist, wrote in a foreword to its semi-annual report.

“Like in a war or a political crisis, there is continued severe uncertainty about the duration and intensity of the shock.”

As Bloomberg notes, The International Monetary Fund predicted the “Great Lockdown” recession would be the steepest in almost a century and warned the world economy’s contraction and recovery would be worse than anticipated if the coronavirus lingers or returns.

In its first World Economic Outlook report since the spread of the coronavirus and subsequent freezing of major economies, the IMF estimated on Tuesday that global gross domestic product will shrink 3% this year.

That compares to a January projection of 3.3% expansion and would likely mark the deepest dive since the Great Depression. It would also dwarf the 0.1% contraction of 2009 amid the financial crisis.

Of course, there is the hockey-stick recovery with IMF anticipating growth of 5.8% next year, which would be the strongest in records dating back to 1980, it cautioned risks lay to the downside. 

The grim projections are a stark reversal from the IMF’s outlook less than two months ago (on Feb. 19, the fund told Group of 20 finance chiefs that “global growth appears to be bottoming out.”)… and now…

“Many countries face a multi-layered crisis comprising a health shock, domestic economic disruptions, plummeting external demand, capital-flow reversals and a collapse in commodity prices,” the IMF said.

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

Calls For Global Debt Jubilee Grow Louder As ‘Anything Goes’ Policy Mania Takes Over

Calls For Global Debt Jubilee Grow Louder As ‘Anything Goes’ Policy Mania Takes Over

About 140 global organizations and charities are calling for a worldwide Debt Jubilee to avoid some of the world’s poorest countries from collapsing into chaos amid the COVID-19 crisis, reported BBC News

The British-based Jubilee Debt Campaign is leading the movement ahead of the G20 meeting this week.

“Developing countries are being hit by an unprecedented economic shock, and at the same time face an urgent health emergency,” said Sarah-Jayne Clifton, director of the Jubilee Debt Campaign.

“The suspension on debt payments called for by the IMF and World Bank saves money now, but kicks the can down the road and avoids actually dealing with the problem of spiraling debts.

Clifton is urging for the immediate cancellation of 69 of the world’s poorest countries’ debt payments this year, which would free up at least $25 billion for the countries in 2020, and up to $50 billion if the jubilee was extended to the end of 2021.

“This is the fastest way to keep money in countries to use in responding to Covid-19, and to ensure public money is not wasted bailing out the profits of rich private speculators,” added Clifton.

The latest call for a Debt Jubilee should come as no surprise to ZeroHedge readers.

Over the last several decades, governments across the world have added insurmountable debts, leadingBill Buckler via The Privateer to say back in 2012 that the world has dived down a deep hole and into a trap that has “ensnared Japan more than two decades ago.”

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

IMF Prepares $1 Trillion Bazooka

IMF Prepares $1 Trillion Bazooka

The IMF has just fired off a trillion-dollar “bazooka” of its own Monday morning.

In a blog post published minutes ago, IMF Director Kristalina Georgieva issued three “policy prescriptions” that she said should define a “coordinated response” from the developed economies in Europe and the US. In addition to declaring that the IMF has $1 trillion in loan capacity ready to put to work to salve the economic damage caused by the outbreak, Georgieva encouraged governments to spend more, and asked the Fed to consider bulking up its dollar FX swap lines to emerging-market central banks. She also noted that the $42 billion that investors have pulled from EM markets is one of the biggest outflows in history, and will certainly ratchet up financial stressors.

Read the full post below:

*  *  *

Today, the IMF published a set of policy recommendations that can help guide countries in the difficult days ahead.

What more needs to be done?

Three action areas for the global economy:

First, fiscal. 

Additional fiscal stimulus will be necessary to prevent long-lasting economic damage.
Fiscal measures already announced are being deployed on a range of policies that immediately prioritize health spending and those in need. We know that comprehensive containment measures—combined with early monitoring—will slow the rate of infection and the spread of the virus.

Governments should continue and expand these efforts to reach the most-affected people and businesses—with policies including increased paid sick leave and targeted tax relief.

Beyond these positive individual country actions, as the virus spreads, the case for a coordinated and synchronized global fiscal stimulus is becoming stronger by the hour.

During the Global Financial Crisis (GFC), for example, fiscal stimulus by the G20 amounted to about 2 percent of GDP, or over $900 billion in today’s money, in 2009 alone. So, there is a lot more work to do.

Second, monetary policy. 

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

Are the World Elite Using a Rise in Nationalism to Reassert Globalisation?

Are the World Elite Using a Rise in Nationalism to Reassert Globalisation?

Putting yourself in the mind of someone who commits an act of illegality is perhaps the only way we can begin to understand the motivation behind the transgression. A common reflex reaction to the most heinous of crimes is to simply call for the perpetrator to be removed from society and put in prison. Out of sight, out of mind. Whilst this is not an unreasonable expectation, it does not get to the root of why he or she became a criminal.

We can take a similar stance when it comes to globalism. If a self appointed elite who permeate institutions like the Bank for International Settlements and the IMF share a desire to concentrate world power through a centralised network of global governance, rather than simply rebel against this vision is it not equally as important to try and understand the vision from the perspective of those who created it? I would argue that to comprehend the minds of global planners it is necessary to mentally place yourself into their way of thinking.

A couple of years ago I published an article called, Order Out of Chaos: A Look at the Trilateral Commission, where I examined some of the key motivations behind this particular institution’s goals. I quoted past members of the Commission openly rejecting national sovereignty and championing the interdependence of nations. One of those quotes was from Sadako Ogata, a former member of the Trilateral Commission’s Executive Committee, who at an event to mark 25 years of the institution remarked how ‘international interdependence requires new and more intensive forms of international cooperation to counteract economic and political nationalism‘.

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

IMF Slashes Global GDP Forecast For 6th Consecutive Time, Warns “Climate Change” Will Hit Economy

IMF Slashes Global GDP Forecast For 6th Consecutive Time, Warns “Climate Change” Will Hit Economy

After the IMF cut its global economic outlook for 2019 to 2.9% in October, the lowest since the financial crisis, and warned that global trade growth would be “close to a standstill”, moments ago the IMF once again downgraded its forecast for global GDP for 2020 and 2021, its sixth straight reduction, although in a sliver of optimism, global GDP in 2020 is now expected to post a modest rebound from 2.9% to 3.3%, (down from 3.4% in October) and to 3.4% in 2021 (down from 3.6%) as the IMF says “there are now tentative signs that global growth may be stabilizing, though at subdued levels.”

According to the IMF, the downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, most notably India, where 2020 GDP is now expected to rise just 5.8% down from 7.0%, which means that in 2020 China will regain the title of the world’s fastest growing economy. In a few cases, this reassessment also reflects the impact of increased social unrest.

Emerging market debacle aside, the IMF said that on the positive side, market sentiment “has been boosted by tentative signs that manufacturing activity and global trade are bottoming out, a broad-based shift toward accommodative monetary policy, intermittent favorable news on US-China trade negotiations, and diminished fears of a no-deal Brexit, leading to some retreat from the risk-off environment that had set in at the time of the October WEO.”

However, and this will be of particular interest to traders, even the IMF admitted that “few signs of turning points are yet visible in global macroeconomic data.”

And so, in addition to the collapse in India, the IMF also sees continued slowdown in the US and Europe in 2020, both of which were cut by 0.1% to 2.0% and 1.3%, while China saw a modest increase by 0.2% to 6.0%, which however drops to 5.8% in 2021.

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

IMF Chief Warns Global Economy Faces New “Great Depression”

IMF Chief Warns Global Economy Faces New “Great Depression”

How’s this for some New Years optimism?

The new head of the IMF, who took over from Christine Lagarde in November, warned that the global economy could soon find itself mired in a great depression.

During a speech at the Peterson Institute, IMF Chairwoman Kristalina Georgieva compared the contemporary global to the “roaring 20s” of the 20th century, a decade of cultural and financial excess that culminated in the great market crash of 1929.

According to the Guardian, this research suggests that a similar trend is already under way, and though the collapse might not be around the corner, when it comes, it will be impossible to avoid.

While the inequality gap between countries has closed over the last two decades, the gap within most developed countries has widened, leaving millions more vulnerable to a global downturn than they otherwise would have been.

In particular, she singled out the UK for criticism: “In the UK, for example, the top 10% now control nearly as much wealth as the bottom 50%. This situation is mirrored across much of the OECD (Organisation for Economic Co-operation and Development), where income and wealth inequality have reached, or are near, record highs.”

She also warned about the potential for climate change to become a bigger obstacle for humanity, while increased trade protectionism instills more volatility in markets.

She added: “In some ways, this troubling trend is reminiscent of the early part of the 20th century – when the twin forces of technology and integration led to the first gilded age, the roaring 20s, and, ultimately, financial disaster.”

She warned that fresh issues such as the climate emergency and increased trade protectionism meant the next 10 years were likely to be characterised by social unrest and financial market volatility.

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

Ukraine’s IMF Gold and the Gold Carry Trade

Ukraine’s IMF Gold and the Gold Carry Trade

Important Tools for the Monetary Cartel

Let’s first consider a typical International Monetary Fund (IMF) loan to a sovereign in trouble, and then examine a typical gold carry trade transaction to support a sovereign arms deal. The intent is to demonstrate the importance of physical sovereign gold holdings in all forms of international trade.

Semi-failed and failed states can only exist by dealing in hard assets of real intrinsic value just as Syria, Venezuela, Iran, and Ukraine have done… and the most liquid of those hard assets is their physical gold.

Central Banks always work with the Security State apparatus when dealing with failed states and recall that the US Central Intelligence Agency funded al Qaeda and funded the war in Syria for example. Just about anything can be made to happen with funding when that funding is based on real resources. One of the most important of those resources is physical gold.

IMF Cartel Example: Ukraine

The IMF’s 2014 aid to Ukraine is based on a unique history however all IMF ‘aid’ packages are in some sense unique. Since we are highlighting the largely hitherto concealed importance of real physical gold in geo-political calculations and operations, Ukraine provides a relevant and timely example of how the banking Cartel operates with gold and may highlight that importance.

According to the 2018 Independent Transparency Index, Ukraine ranks as one of the most corrupt nations in the world. Ukraine ranks 120th out of 180 countries where the 180th – Somalia – is the most corrupt.  But all nations need funding whether corrupt or not, and Ukraine defaulted on its IMF debt in 2001 and then again in 2009 when distribution of an existing IMF loan to Ukraine was frozen.

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

The Allure and Limits of Monetized Fiscal Deficits

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The Allure and Limits of Monetized Fiscal Deficits

With the global economy experiencing a synchronized slowdown, any number of tail risks could bring on an outright recession. When that happens, policymakers will almost certainly pursue some form of central-bank-financed stimulus, regardless of whether the situation calls for it.

NEW YORK – A cloud of gloom hovered over the International Monetary Fund’s annual meeting this month. With the global economy experiencing a synchronized slowdown, any number of tail risks could bring on an outright recession. Among other things, investors and economic policymakers must worry about a renewed escalation in the Sino-American trade and technology war. A military conflict between the United States and Iran would be felt globally. The same could be true of “hard” Brexit by the United Kingdom or a collision between the IMF and Argentina’s incoming Peronist government.

Still, some of these risks could become less likely over time. The US and China have reached a tentative agreement on a “phase one” partial trade deal, and the US has suspended tariffs that were due to come into effect on October 15. If the negotiations continue, damaging tariffs on Chinese consumer goods scheduled for December 15 could also be postponed or suspended. The US has also so far refrained from responding directly to Iran’s alleged downing of a US drone and attack on Saudi oil facilities in recent months. US President Donald Trump doubtless is aware that a spike in oil prices stemming from a military conflict would seriously damage his re-election prospects next November.

The United Kingdom and the European Union have reached a tentative agreement for a “soft” Brexit, and the UK Parliament has taken steps at least to prevent a no-deal departure from the EU. But the saga will continue, most likely with another extension of the Brexit deadline and a general election at some point.

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

Innovation BIS 2025: A Stepping Stone Towards an Economic ‘New World Order’

Innovation BIS 2025: A Stepping Stone Towards an Economic ‘New World Order’

The IMF’s annual meetings held in Washington DC last week demonstrated that when the institution issues new economic projections or warnings of a downturn, the mainstream press are not averse to giving them prominent coverage. After the Fund was founded in 1944 (off the back of World War Two), it became part of what internationalists call the ‘rules based global order‘. For 75 years, the IMF has been regarded by the political establishment and banking elites as a lynch pin of the world financial system.

Contrary to what some may believe, the IMF was not the first global monetary institution. That accolade belongs to the Swiss based Bank for International Settlements, which predates the IMF by fourteen years. Its creation in 1930 was, according to the BIS, primarily to settle reparation payments ‘imposed on Germany following the First World War‘. Without WWI – a major crisis event – there would have been no mandate for the BIS to exist. Much as there would have been no mandate for the IMF to exist were it not for the spectre of WWII.

As well as settling German reparation payments, the BIS was also recognised from the outset as a forum for central bankers – the first of its kind – where they could speak candidly and direct the course of global monetary policy.

The board of directors at the BIS is taken up predominantly by the heads of the leading central banks in the world. Right now the governor of the German Bundesbank Jens Weidmann is chairman of the board. As public servants they gather in Basel every eight weeks or so for a series of bimonthly meetings, the discussions from which ordinary citizens are not privy to.

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

“Close To A Standstill”: IMF Warns Global Growth Will Be Cut To Lowest Since Lehman

“Close To A Standstill”: IMF Warns Global Growth Will Be Cut To Lowest Since Lehman

Don’t expect any good news next week when the IMF holds its annual meeting and releases its latest World Economic Outlook report due on October 15.

According to the IMF’s new head, Bulgarian Kristalina Georgieva, the monetary fund will again cut its growth forecast for both 2019 and 2020; as a reminder back in July, the IMF again cut its projection for 2019 GDP growth to 3.2% this year and 3.5% next year, its fourth downgrade since last October, and the lowest since the financial crisis amid ever-escalating trade war. In fact, according to Georgieva, who apparently was brought in to take the blame for Lagarde’s disastrous legacy, global trade growth “is close to a standstill”, which last time we checked was 0%.

It means we are about about to have a new entry in the “worst since Lehman” category.

By now it is no secret to anyone that everyone – global institutions, economists and investors – have blamed the U.S.-China tariff war as the main reason for slowing global growth (and catalyst behind upcoming QE). The trade tensions have partly caused manufacturing to tumble and weakened investment, creating a “serious risk” of spillover to other areas of the economy like services and consumption, Georgieva said on Tuesday according to Bloomberg.

“The global economy is now in a synchronized slowdown,” she said, noting that the fund estimates that 90% of of the world is seeing slower growth. This is a huge change to the global economy from two years ago, when growth was accelerating across three-quarters of the globe in a synchronized upswing.

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

The Club & Why the Majority Must be Always Wrong

The Club & Why the Majority Must be Always Wrong 

QUESTION: Mr. Armstrong; I did my own research on the 1998 Russian collapse. All the big names lost billions. Even the New York Times reported that George Soros lost $2 billion. You were the only one who made money so it made sense that you were named hedge fund manager of the year in 1998. My question is this. Since all the big names were involved in the Russia trade which took down Long-Term Capital Management, is this why you call them the “club” for they all do seem to be involved in the same trade?

DU

ANSWER: Correct. This is also why they try to prevent people from listening to me. They are convinced that the reason they lost was that I was too influential and had too many institutions listening to me. That absurdity is what they ran to the government with, so I was then accused of “manipulating” the world economy. They all lost after I warned them and refused to join in their takeover of Russia I believe I was given the nod by the Clintons. They told me they had the IMF in their back pocket and they would continue to fund Russia. I warned them that the IMF got their funding from governments and they were not going to back it.

The Russian financial crisis hit Russia on the 17th of August 1998. Our World Economic Conference was held in London that June. Our forecast was then published by the London Financial Times on the front page of the second section.

They did not give up. After they got the Federal Reserve to bail them out, they then focused on setting up Yeltsin and got him to divert $7 billion in IMF loans. Even CNN reported the money was stolen from the IMF.

CNN Theft of IMF Money – Sep. 1, 1999

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

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