CENTRAL BANK MULLS MORE STIMULUS. It comes as no surprise. Despite Eurozone governments soon ending stimulus and employment support programs, the European Central Bank (ECB) will inject more monetary methadone into the 19-nation union’s economy as unemployment rises and more companies face bankruptcy.
At their mid-July meeting, bank officials debated whether they would need to exhaust their €1.35-trillion Pandemic Emergency Purchase Program, which the bank is buying government and corporate debt through until June 2021.
The officials agreed they could add more euros to the program if necessary.
There is “no room for complacency,” they warned in a statement.
Data from the last three months indicates that European economies are beginning to recover, but slowly and unevenly. However, the euro’s new strength against other world currencies is, they contend, slowing exports.
Also, tens of millions of workers remain jobless. Moreover, employment is not recovering as quickly as production is, and with new waves of layoffs likely joblessness consumer spending will decline.
Since March, the bank has poured about $3 trillion worth of digital cash – backed by nothing and printed on nothing – into the region’s markets.
TREND FORECAST: With the summer season ending, and tourism, a double-digit GDP revenue generator for many European nations in steep decline, as autumn sets in economies will sink deeper into the “Greatest Depression.” Thus, the ECB will continue to inject more cheap money to artificially inflate failing economies.
POUND AND EURO SINK. The value of the euro and British pound both declined against the dollar last week as Brexit negotiations stalled and data showed an uncertain economic recovery in Europe.
The euro slipped 0.6 percent against the greenback to $1.179, its first decline in nine weeks.
On 18 August, the pound logged its best one-day gain since June, followed the next day by its biggest one-day fall in eight weeks.
Britain’s retail sales have perked up in recent weeks, pacing its’ recovery ahead of Europe’s.
TREND FORECAST: With U.S. interest rates near zero and concerns that the U.S. economy will not rebound as fast as Europe’s, plus growing expectations the Federal Reserve may bring interest rates into negative territory, dollar appeal is fading.
Today, the euro was up 0.33 percent at $1.1826, after reaching $1.1965 on Monday, the highest since May 2018.
It should be noted that the lower the dollar goes, the higher gold prices will rise, since gold is dollar based. Therefore, as other currencies go higher, it will cost less to buy gold.
However, while the dollar has hit two year lows, we forecast the euro will also come under more downward pressure in the coming months as the “Greatest Depressions” spreads across the continent.
We maintain our forecast for gold and silver prices to continue to rise throughout 2020.
XI COMPLAINS ABOUT GLUTTONY, WASTED FOOD. Chinese president Xi Jinping has taken his nation to task for overeating and wasting food.
Xi linked the habits to China’s underlying food insecurity exposed by the COVID-inspired economic shutdown, recent floods that endangered harvests, and the need for the country to be self-reliant amid tensions with the U.S. and an uncertain global economy.
He exhorted citizens to “cultivate thrifty habits and foster a social environment where waste is shameful and thriftiness is applaudable.”
His task is formidable: Chinese custom in restaurants is to order extra dishes and leave food behind as a show of generosity. The custom contributes to an estimated 18 million tons of food being thrown away annually, enough to feed 50 million people for a year, the Chinese Academy of Science said.
Food prices rose 13 percent in July, year-on-year, and the cost of pork, a staple in the Chinese diet, zoomed 85 percent.
Xi’s “Clean Plate” campaign drew skepticism from restaurateurs who hesitate to tell customers to spend less in their eateries. Also, a Chinese internet subculture thrives around bloggers who show videos of themselves eating huge meals, including one woman who downed an entire roasted lamb in one sitting.
One such blogger posted a message to her fans urging them to savor every bite of restaurant fare and take home leftovers, drawing praise from Xi’s campaign.
TREND FORECAST: As economies decline, promoting “thrifty habits and foster[ing] a social environment where waste is shameful and thriftiness is applaudable” will echo as a clarion call among developed nations that urge citizens to embrace both thriftiness and self-responsibility for improving their eating habits.
As we have documented over the months since the COVID War began, those succumbing to the virus, beyond the elderly in nursing homes, are people who are obese, Type 2 diabetics, and suffering from pre-existing chronic conditions. Getting healthy, staying healthy, and not being wasteful will be key platforms of New Age Movement 2.0.
TRENDPOST: While President Xi promotes “thrifty habits,” upper middle-class incomes have remained relatively steady in China, with the well-heeled continuing to spend on premium brands while mass-market products struggle to hold on during the recovery.
While retail sales in China fell 9.9 percent during the first six months of 2020, year-on-year, as previously reported in the Trends Journal, luxury and premium brands sales grew.
Upper-income Chinese workers were able to continue working from home and earning their incomes; a larger number of less well-paid earners were laid off from retail, restaurants, and other personal contact jobs.
As many as 80 million Chinese lost their jobs during the economic shutdown, according to the Chinese Academy of Social Science, a government-controlled agency.
JAPAN’S DISASTROUS SECOND QUARTER. Japan’s economy contracted 7.8 percent during this year’s second quarter, the nation’s worst quarterly performance since 1955, when the country began using GDP to measure its economic output.
The retreat, which would reach -27,8 percent if sustained over a full year, was Japan’s third consecutive quarter showing a shrinking GDP, following a 0.6 percent reduction during 2020’s first three months.
Prior to the COVID War, Japan’s economy already was weakened by the Fukushima nuclear catastrophe, and weakened Chinese demand for its products as China’s economy slowed last year.
And now Japan, as with so many other nations, has had its tourism revenue sharply fall and its export markets decline.
Although Japan was not on strict lockdown, fearful consumers chose to remain at home, dashing retail sales, especially in April and May.
Japan’s economy began to recover in late May and June, when households received government stimulus payments just as stores, offices, and factories began to reopen. Retail sales perked up in June, and the unemployment rate fell to 2.8 percent.
TRENDPOST: Again, Japan was in decline before the COVID War began. While it is believed by The Street that Japanese corporations are cash-rich and banks have significant amounts of money to lend, we forecast that Japans economy will continue to weaken and they will suffer long term economic hardship.
AUSTRALIA CLOSES ATMs. Australia’s four biggest banks withdrew least 2,150 ATMs from use in this year’s second quarter and have closed 175 branches in the last 12 months.
Most of the ATMs were in shopping districts in metro areas, said Tony Richards, head of payments for the Reserve Bank of Australia.
ANZ, one of the “big four” banks, will sell 1,300 ATMs not located at its branches to Armagaurd Group over the next 12 months.
The pandemic and economic shutdown pushed customers away from many of the machines and branch banks, but the closures are part of the country’s transition to a cashless economy.
“The long-term downward trend in the use of cash [will] continue,” Richards said.
TREND FORECAST: As we have long forecast, the world will go from “Dirty Cash to Digital Trash.” It is especially the way of younger generations who have been born into the Digital World. It is their new normal.
Moreover, as the world grows poorer and tax revenues decline, by having a digital track record of who spent money on what, governments will grab every tax dollar they can.
INDIA’S ECONOMY CONTRACTS BY 20 PERCENT. India’s economy contracted by as much as 20 percent in this year’s second quarter compared to the same period in 2019, analysts say.
The country was under one of the most stringent lockdowns mandated by a government during the pandemic.
The company operating McDonald’s franchises in India reported sales down 84 percent for the quarter, while worldwide sales for the burger empire were off only 24 percent. Suzuki Motor Corp.’s sales slid 28 percent in Japan but plunged 83 percent in India.
Common consumer packaged-good sales rose in China and Indonesia during the first five months of the year, fell 1 percent in Malaysia and Vietnam, but sagged by 8 percent in India.
Sales of gold jewelry in India plunged 74 percent during the second quarter, almost 50 percent more than in the rest of the world. The drag on the gold market was so severe that global gold prices could have risen higher if not for India’s loss in sales, according to the World Gold Council.
Damage to India’s economy has been so drastic that 100 million of its people who had climbed out of poverty could fall back in, according to the United Nations University’s Institute for Development Economics Research.
Of the 385 million people who the global depression could cast into extreme poverty, almost half could be in India, the institute noted.
TREND FORECAST: Prior to the COVID War, India was wracked in protests with demonstrators taking to the streets in opposition to a new law that discriminated against Muslims and masses marching against government corruption, lack of basic living standards, unemployment, and poverty.
When the government locked down the nation, as with other nations where citizens were protesting, the demonstrations were locked down as well.
Now they are reigniting, and we forecast they will continue to expand throughout the nation as the dire implications of the “Greatest Depression” worsen.
INDONESIA ADOPTS A FORM OF QUANTITATIVE EASING. Indonesia’s central bank is buying 397.6 trillion rupiah, Indonesia’s currency, or about $27 billion worth, to finance the government’s efforts to quell the COVID pandemic and support the nation’s economy.
The country’s economy shrank 5.3 percent in the second quarter, its first contraction in more than 20 years.
The move, called “debt monetization,” has been likened to quantitative easing, by which a central bank buys government bonds to put extra cash into an economy. The Philippines, South Africa, and some other emerging economies are adopting similar tools to buoy their economies as they attempt to recover from the global shutdown.
When Indonesia unveiled the arrangement last month, the rupiah lost 2 percent of its value against the dollar, in part due to investors’ concerns the move would flood the market with rupiahs and weaken the currency.
The government has said the central bank’s involvement will only happen this once.
If the practice were to “occur repeatedly beyond this year, it would raise the potential for government interference in monetary policy-making and could undermine investor confidence,” said Thomas Rookmaaker, Indonesia analyst at Fitch Ratings.
The central bank could have cut interest rates but decided not to at its’ last meeting for fear of weakening the rupiah further.
So far this year, the rupiah has lost 6 percent against the dollar and has become the worst-performing currency in Asia.
