HALF OF CANADIANS ARE BROKE. Forty-nine percent of Canadians believe they are on the brink of insolvency, according to the latest MNP Consumer Debt Index published earlier this month.
Since December, the number of Canadians worried about their debt level has jumped 10 points to 46 percent, the highest number since 2017 when the data began to be recorded.
Almost half of those surveyed said they have no more than a $200 cushion between themselves and their monthly expenses; among them, 25 percent say they already are unable to pay their monthly debts. Thirty-four percent are worried about losing their jobs.
“Our results underscore how vulnerable Canadian households are to income interruption,” said MNP President Grant Bazian. “Over the next few months, we’ll likely see…the bursting of the Canadian consumer debt bubble.”
HALF OF CANADIAN RESTAURANTS NEAR BANKRUPTCY. Half or more of Canada’s restaurants could be bankrupt by December without financial aid from the national government, said Restaurants Canada (RC), an industry advocacy group representing 30,000 eateries and related businesses.
Twenty-nine percent of the nation’s food service businesses cannot operate under social distancing guidelines, while 31 percent are operating so far below capacity they are unable to survive more than another 90 days, according to a survey released early this month that was sponsored by RC, the Molson Coors Beverage Co, and others.
The problem will become more acute as cold weather closes outdoor dining venues, the group noted.
RC is calling for wage supports, rent relief, and for the government to stop talking solely about health risks and to encourage people to return to their normal lives.
Without aid, “there will be massive bankruptcies across the industry,” warned RC vice-president David Lefebvre.
CANADA’S ECONOMY BEGINS TO RECOVER. After crashing at a record annualized rate of 37.8 percent in this year’s second quarter, Canada’s economy expanded by 6.5 percent in June, adding to a 4.8-percent gain in May, according to Statistics Canada.
Early data indicated a 3-percent expansion in July.
TREND FORECAST: While mainstream economists are predicting a strong third-quarter rebound as pent-up demand sends people back to stores and back to work, we forecast that with “Second Wave” fears building, the uptick will be slight and temporary. Indeed, just today, Canada’s Prime Minister Justin Trudeau has warned of a “massive second wave” of coronavirus infections if people don’t follow the anti-virus rules.
Furthermore, there are scant questions and merely a protest as to why Canada has been locked down and its economy and lives destroyed to fight the COVID War, when, according to Theresa Tam, Canada’s Chief Public Health Officer, nursing homes account for 81 percent of the country’s coronavirus deaths.
IRELAND DESCENDS INTO RECESSION. The Irish economy shrank 6.1 percent in the second quarter, its largest quarterly contraction in history, the country’s Central Statistics Office reported, beating the 4.7-percent drop in 2008’s fourth quarter.
The country’s economy also contracted during this year’s first quarter, marking the two consecutive quarters of negative growth that defines a recession.
Construction dropped 38.3 percent; the sector comprised by distribution, transport, hotels, and restaurants slid 30.3 percent. Agriculture, forestry, and fishing slid 60.6 percent; arts and entertainment more than 65 percent.
Consumer spending, an economic bedrock, was off 19.6 percent for the quarter.
The government has fashioned a €2-billion Credit Guarantee Scheme, which offers businesses low-cost loans. The bailout is the largest state-backed loan guarantee in the country’s history.
TRENDPOST: Since March, 1,781 people, of a population of five million, or the minuscular total of 0.0356 percent, have died of the virus in Ireland. Yet, as with other nations that locked down and devastated economies, facts don’t matter, fear does.
Instead, the media and politicians continue to focus on new “cases” and totally ignore the percentage of COVID deaths per population.
BRITAIN TRIES TO SAVE THE “OFFICE ECONOMY.” After conflicting messages from government ministers about where people should work, the British government is launching a campaign this week to motivate people to return to their traditional office buildings.
The reason: the retailers and service businesses that depend on commuters flooding into cities every weekday are going bust without them.
Without government encouragement, city centers could become “ghost towns,” warned Carolyn Fairbank, Director of the Confederation of British Industry.
About 40 percent of U.K. workers are still working remotely, the country’s Office of National Statistics reported, with 13 percent remaining idle.
Standard Life Aberdeen is among the large employers unwilling to let workers return to their offices this year. Others, such as Schroders Asset Management, are allowing workers to toil at home indefinitely.
The government is struggling to balance encouraging workers back to city centers to support businesses while still insisting that protecting health is a priority and social distances be maintained.
“Businesses and employees have negotiated a balance that works for them,” said Edwin Morgan, Policy Director at The Institute of Directors, “and it’s unlikely that the government telling people to return to their offices will make much difference.”
TREND FORECAST: Today, Prime Minister Boris Johnson imposed new COVID Rules to avoid another lockdown as virus cases rise in England. Among them, “From Monday 14 September, you must not meet with people from other households socially in groups of more than six. This will apply indoors and outdoors, including in private homes.”
They also require people “to stay two meters apart from people you do not live with where possible, or one metre with extra precautions in place.”
Additionally, “Venues such as pubs and restaurants will be legally required to request contact details of everyone visiting, hold it for 21 days and provide it to NHS Test and Trace. They face fines of £1,000 if they fail to comply.”
With these and other restriction is place, there were be no bounce back in commercial real estate, the economy will further decline, crime will rise, and the pound will fall.
EU INTEREST RATES GO DEEPER INTO NEGATIVE NUMBERS. The interest rate that European banks charge each other for short-term loans edged down from -0.539 to -0.555 percent last week.
The European Central Bank’s (ECB) stimulus program, and those from several European countries, have offered such generous loan terms to businesses, and support for individuals, that commercial banks have too much cash on hand – about €2.9 trillion more than they need to meet reserve requirements.
The banks are now paying people to take that excess cash off their hands.
The ECB made stimulus loans at rates as low as -1 percent, meaning banks can be paid more borrowing from it than from each other.
At the end of August, the ECB held about €1.6 trillion in outstanding loans.
The interbank interest rate could drop further if the economic recovery is sluggish, analysts say.
TREND FORECAST: Once again, the lower interest rates fall and the cheaper it is to borrow money, the lower their currencies will fall and the higher gold and siver prices will rise. And, we maintain our forecast for rising Bitcoin and other cryptocurrencies and younger generations to seek alternative currency investments.
JULY RETAIL SALES FALTER. Europe’s retail sales fell 1.3 percent in July compared to June, after three consecutive months of gains.
Sales remained above last year’s levels in France, Germany, and the Netherlands but fell below in Greece, Spain, and Portugal.
Although the region’s July retail sales fell below economists’ consensus expectation of 1.5-percent growth, the figure still topped the previous year’s volume by 0.4 percent.
FRANCE LAUNCHES €100 BILLION RESCUE PLAN. The French government will spend €100 billion on health care, green technologies, and jobs programs designed to restore the country’s economy to its pre-pandemic level by 2022.
About 40 percent of the money will be drawn from Europe’s €750-billion rescue fund.
The plan, which is valued at about 4 percent of France’s pre-crisis GDP, is a response to the economic shutdown that crashed the country’s economy by 13.8 percent in the second quarter, the worst downturn since World War II.
The French economy is expected to contract by about 12.6 percent this year but grow 7 percent in 2021, due in part to government investments, the International Monetary Fund has predicted.
TRENDPOST: These money pumping schemes will temporarily keep the economy from crashing while easing popular dissent as incomes dive and poverty rates increase. It will also add more downward pressure on the euro as there will be more cheap money pumping schemes to artificially prop up failing European economies.
TOURISTS DISAPPEAR FROM SPAIN. The number of tourists visiting Spain in July was only a quarter of the number who came a year earlier, according to government figures.
About 2.5 million came to Spain during the month and spent €2.45 billion. On average, each tourist spent €994, down 18 percent from 12 months earlier.
Before the global shutdown, tourism supported 13 percent of Spain’s jobs and 12 percent of its GDP.
TRENDPOST: As we have been reporting for months, tourism has disappeared across the globe. The tourism depression has inflicted deep hardship and desperation for businesses that provide goods and services and employees throughout the hospitality sector. It has also inflicted deep economic pain on restaurants, entertainment, retail, etc., that benefit from tourism.
CHINA ANNOUNCES “DUAL CIRCULATION” ECONOMIC POLICY. China’s newly announced economic policy of “dual circulation” signals a shift in the country’s economic outlook as it prepares to become the world’s largest economy by 2030.
Since the 1980s, China has relied on exports to grow its GDP. “Dual circulation” formally splits the country’s production between exports and imports, with a growing emphasis on fostering growth at home.
A recent memo from China’s ICBC bank illustrated the concept: the memo showed one chart with the U.S. at the center of global economic demand; a second chart showed demand divided among Asia, Europe, and the U.S., with each meeting more of its own region’s needs.
The shift is already under way.
In 2019, Europe edged out North America as China’s top trading partner, according to Chinese customs data; in 2020, the ten nations of the Association of Southeast Asian Nations took the title.
This “in China, for China” initiative is reflected in the 12.2-percent increase in foreign direct investment in the country from July 2019 through July 2020. During 2020, foreign direct investment worldwide will slide 30 percent, the Organization for Economic Cooperation and Development has forecast.
Still, China will have to overcome the effects of the pandemic and global shutdown to shift its economy. Consumer spending has not yet fully recovered and millions are still unemployed.
Also, the country’s economy remains rooted in exports and government-financed infrastructure projects. State-owned enterprises receive favored financial and regulatory treatment from the government, even though private enterprise creates most of the country’s jobs.
TREND FORECAST: More details about the dual circulation, self-sustaining concept are expected when China releases its new five-year plan early next year. As we noted the article, “CHINA: WE BROUGHT YOU COVID. WE’RE #1” in this week’s Trends Journal, China continues to pave its way on becoming the dominant economic powerhouse of the 21st century.
CHINA’S EXPORT ECONOMY THRIVES. China’s exports rose to a record level in July, surpassing last December’s Christmas season.
The country also has grabbed a larger share of international trade. It emerged from its shutdown earlier than most other exporting countries and, as competitor nations were mired in lockdowns, established a stronger presence in many global markets.
China’s export engine is fueled by a blend of cheap, skilled labor imbued with an ethic of long workdays; a well-oiled infrastructure that includes a 700-city bullet train network; weak environmental regulations; and a state-controlled banking system that can direct money to strategically desirable industries and products.
As the shutdowns fell across the world, China’s central bank contacted companies and wooed them to take cheap loans to keep the country’s factories operating and workers employed.
These advantages and aggressive strategies helped raise China’s share of world trade from 13.1 percent last year to almost 20 percent in 2020’s second quarter.
CHINA’S CONSUMER ECONOMY TICKS UP. The Purchasing Managers Index for China’s service economy rose from 54.2 in July to 55.2 in August, according to the country’s National Bureau of Statistics.
The higher the score above 50, the more the economy is growing.
Analysts interpreted the gain to mean that the Chinese government’s infrastructure and industrial spending is beginning to pervade the consumer economy, supporting small businesses and creating private-sector jobs.
Restaurants and gyms are busy, as are airports with non-business travelers, observers say. School buildings are full of students, who face few of the restrictions that mark U.S. schools.
July’s retail sales were only 1.1 percent below those a year earlier. Marriott, Starbucks, Tesla, and other U.S. companies have reported strong second-quarter growth in China.
JPMorgan Chase now expects China’s economy to grow 2.5 percent this year, no longer the 1.3 percent it had forecast in April.
In contrast, analysts expect the U.S. economy to contract by 8 percent this year and Japan’s to shrink by 5.8 percent. India’s economy has suffered so greatly, its economy will only be one-fifth the size of China’s by 2021, said Homi Kharas, an economist at the Brookings Institution.
China’s output will be valued at about $11.9 trillion this year, about 70 percent of the U.S.’s GDP, according to Nicholas Lardy, an economist and China-watcher at the Peterson Institute for International Economics.
That translates to a seven-point gain for China toward overtaking the U.S. as the world’s largest economy.
The disparity between the two countries’ response to the pandemic will enable China’s economy to grow to the size of the U.S.’s in 2028, two years sooner than expected, said Kharas said.
China’s economy will grow about 24 percent from 2019 through 2023, according to Deutsche Bank, a period during which the U.S. economy will grow 3.9 percent, the bank expects.
China was poised to outperform the European Union by 5.1 percent this year, but now will exceed Europe’s economic output by more than 10 percent, the bank noted.
China’s quick economic recovery also leaves it poised to become an even stronger economic force in the developing world, Kharas noted.
But China’s economic recovery still faces obstacles, including recessions and political instability among its trading partners, a dysfunctional banking system, government debt, and factories that jumped back to work but are producing goods that consumers are not buying.
TRENDPOST: These obstacles to growth lead some experts to worry that China’s recovery cannot be sustained. Indeed, there will be ups and downs, however, with its centralized government in control of the nation and its “dual circulation” concept of self-sustainability in motion, Beijing will use its full power to manipulate markets and the economy to divert the worst of the “Greatest Depression.”
AUSTRALIA ENTERS FIRST RECESSION IN 30 YEARS. Australia ended the longest economic growth streak in the history of the developed world at the end of June, announcing a 7-percent contraction in the year’s second quarter coupled to a 0.3-percent shrinkage in the first.
A recession is defined as two or more consecutive quarters of economic contraction.
Household spending dropped a record 12.1 percent in the second quarter, compared to the previous year’s. Purchases of goods fell 2.8 percent and spending on services slid 17.6 percent.
The savings rate soared to 19.8 percent, the highest since June 1974.
About 10 percent of Australia’s workers were jobless at the end of June; layoffs announced for August and September are expected to spike the rate above 13 percent.
The nation’s economy also was damaged by the global travel shutdown, keeping tourists away, and China’s economic freeze, which slashed Australia’s exports to that country.
The country’s economy began to recover this quarter as China resumed its massive infrastructure projects, which demand a lot of steel. Australia is China’s main supplier of iron ore, the price of which is hovering near six-year highs.
Unemployment will settle at 10 percent by 2021 and 7 percent by 2022, the country’s central bank predicted, with the economy contracting 6 percent this year and making a full recovery to pre-pandemic performance by 2023.
TRENDPOST: Absent in media coverage is the question: Why would politicians lock down a once thriving economy when the nation’s COVID death rate is just 0.00306 percent and well over 50 percent of those who died from the virus were elderly people from nursing homes with pre-existing chronic conditions?
What sense does it make?
Yet, the lockdowns have not only destroyed business and livelihoods, the new draconian measures, as noted in our COVID section, have destroyed personal freedoms and robbed people of their Constitutional Rights.
INDIA’S ECONOMY IMPLODES. India’s economy contracted by 23.9 percent during the first quarter of its new fiscal year, the first time in 40 years that the GDP has shrunk. Unemployment averaged 19.3 percent in the quarter ending 30 June but topped 23 percent in April and May.
Consumer spending dropped approximately 29 percent, investment was down 47 percent, manufacturing output fell 39.3 percent, and construction activity was halved.
The only private sector to show a gain was agriculture, rising 3.4 percent.
India imposed one of the strictest shutdowns of any country in March, but the virus surged when the lockdown began easing in May.
The country has now surpassed Brazil as the world’s COVID epicenter, meaning that any genuine economic recovery will be delayed at least through the end of this year as more businesses close, workers lose jobs, and people hesitate to venture out to public places.
TRENDPOST: India’s economy was failing long before the COVID War began. GDP growth rate over the quarters from 2018 through 2019 had been in continuous decline.
It should also be noted, as we have extensively reported in the Trends Journal, there was massive unrest, riots, and demonstrations raging throughout the nation prior to the lockdowns as a result of rising poverty and a citizens law that discriminated against Muslims.
As Gerald Celente has often noted, “When all else fails, they take you to war.” On Tuesday, tensions along the India-China Himalayan border heated up after Chinese soldiers on both sides exchanged gun fire.
PERSISTENT PROBLEMS HOBBLE DEVELOPMENT. The COVID pandemic has added to the century of political turmoil, low productivity, and fiscal mismanagement that keeps Latin America at the rear of developing economies.
Although it has 8 percent of the world’s population, since June, the region has logged 40 percent of the globe’s COVID cases, inspiring economic shutdowns that have been, in most cases, longer and more stringent than those elsewhere.
This catalog of crises will contract the region’s economies by 8.2 percent this year, the Bank of America predicts, followed by a feeble 3.2-percent growth next year, the bank says, not even recovering half of 2020’s loss.
Argentina, with the region’s third-largest economy, locked down in March but failed to contain the virus’s spread. The economy, which was deep in recession before the virus arrived, has flatlined.
Brazil, which let its economy run during the pandemic, recorded a higher proportion of deaths than many other countries in the region but will see its GDP contract only 5 percent this year, analysts say, with 3-percent growth next year.
“The lockdowns in Latin America were effective enough to kill the economy but not the virus,” said Marcos Casarin, chief Latin American economist at Oxford Economics.
TRENDPOST: The collapse of pleasure travel wrought by the economic shutdown will cost about 100 million jobs worldwide, with most of the damage done in tropical or developing nations.
The Caribbean island of Aruba draws 85 percent of its GDP from tourism. For South Asia’s Maldive Islands, the proportion is 66 percent; in the Bahamas, 59 percent.
About 24 million tourists visited Mexico in 2019, contributing more than 15 percent to the country’s economy. But in June the number of visitors plunged by 87 percent, with spending shrinking from $1.7 billion last year to $148 million now.
In recent years, the global economy grew so quickly that millions more people had money to travel abroad. Since 2000, one in five new jobs around the world was in the tourist trade, which made room for innkeepers, cab drivers, tour guides, and other workers, often as entrepreneurs.
TREND FORECAST: As the Latin American economies continue to decline, violence and protests that were heating up before the COVID War began will intensify. Moreover, as conditions deteriorate and crime intensifies, more people will do what they can to escape to safe-haven nations, such as the United States and Canada. This, in turn, will ramp up anti-immigration movements and calls for closed borders.
NIGERIA FACES SECOND RECESSION IN FOUR YEARS. Nigeria’s economy contracted 6.1 percent in this year’s second quarter, due to a loss of domestic as well as export economic activity worsened by the global shutdown.
Unemployment reached 27.1 percent, the government reported early this month, with 28.6 percent of the country’s workers rated as underemployed during the second quarter.
Crude oil production accounts for almost all of Nigeria’s foreign exchange but only 9 percent of its GDP. Agriculture makes up about a quarter of the country’s economic output.
When the pandemic and global economic shutdown struck, Nigeria had not fully recovered from a 2014-2015 recession sparked by a crash in oil prices.
Nigeria’s central bank devalued the country’s currency in March, at the depths of the shutdown, and again last month.
ShopRite, a South African grocery chain, has announced it will end operations in Nigeria, a sign of the country’s difficult business environment.
TRENDPOST: As we have been reporting in the Trends Journal, from Mali to Zimbabwe from South Africa to Algeria, economic conditions were rapidly deteriorating and protests were escalating throughout much of Africa before the COVID War began.
Now with the lockdowns and the “Greatest Depression” taking its economic toll, demonstrations, riots, protests… and civil wars will intensify, spreading beyond national borders.
As conditions worsen, there be a flood of refugees pouring into to Europe and the Middle East.
This in turn will intensify growth of populist political parties whose platforms will include closing borders to maintain national identities.
DEVELOPING ECONOMIES STAGGERING. Across the developing world, national economies are reeling.
In 2020’s second quarter, Brazil’s GDP shrank by 11 percent, Mexico’s by 18.9, the Philippines’ 16.5, and Turkey’s 9.5. During the period, Peru’s economy contracted by one-third. An estimated 26 million people are jobless from Ecuador to Kenya to Vietnam.
Shutdown have been less effective in controlling the virus in many of these countries because most people lack savings and are forced to keep working, a majority in jobs they are unable to do at home, such as small-shop manufacturing, retail, and tourism.
TREND FORECAST: The road to recovery will be long and dangerous. Going deeper into debt and with no master plans for economic growth, more than 70 nations have applied for aid to the International Monetary Fund.
Indeed, bonds of developing countries that paid solid returns when times were good are not so good now.
The Ashmore SICAV Emerging Markets Short-Duration Fund had been Morningstar’s fastest-growing emerging-markets bond fund when the pandemic struck. Now it has become the worst performer, largely because it put 40 percent of its assets in bonds issued by Argentina, Lebanon, and Ecuador, all of which have defaulted on bond payments since March.
The fund has lost 17 percent in the 12 months through July 2020.
Several other emerging-market funds also have lost ground in recent months.
The bonds of some countries, such as Argentina, are now trading at half or less of their face value.
Money poured into the funds in recent years as investors sought higher returns than those offered by developed economies, where central banks kept interest rates low to prop up weakening economies.
In part, emerging markets do well in a strong global economy because their GDPs depend on exporting commodities such as oil, minerals, and timber. When the economy slows and manufacturing and construction stall, the countries have little else of economic value to sell.
LONG, BUMPY ECONOMIC RECOVERY AHEAD, SAYS OECD. The world’s richest economies suffered their worst economic damage in six decades and new COVID outbreaks signal a slow, bumpy recovery, according to a new report by the Organization for Economic Cooperation and Development (OECD).
The 37 OECD members’ economies collectively contracted 9.8 percent in this year’s second quarter compared to the first, the report said.
It was the largest quarter-to-quarter drop since records began begin kept in 1960, more than four times worse than the previous record of 2.3 percent, set in 2009’s first quarter during the Great Recession.
Finland and South Korea saw the smallest contractions, at 3.2 and 3.3 percent, respectively. The U.K.’s was worst among the group, at -20.4 percent. The U.S. economy shrank 9.5 percent in the second quarter.
Economists have predicted that developed economies will rebound sharply this quarter. However, new virus outbreaks and reimposed shutdowns aimed to contain them could hamper growth.
The global economy will shrink by 6 percent this year, the OECD predicted in June, but could contract by as much as 7.6 percent if the virus resurges widely, it said, and would crimp 2021’s rate of recovery as well.
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HALF OF CANADIANS ARE BROKE. Forty-nine percent of Canadians believe they are on the brink of insolvency, according to the latest MNP Consumer Debt Index published earlier this month.