‘Dr. Doom’ Nouriel Roubini warns of painful stagflation caused by a new cold war with China and the ‘balkanization’ of the global economy | Canada News Media
Connect with us

Economy

‘Dr. Doom’ Nouriel Roubini warns of painful stagflation caused by a new cold war with China and the ‘balkanization’ of the global economy

Published

 on

A new cold war between the United States and China threatens to balkanize the global economy and fuel painful stagflation in the West, warned Nouriel Roubini.

The highly respected economist, nicknamed Dr. Doom for predicting the last global financial crisis, said the two superpowers are in the process of extricating themselves from mutual interdependencies that are increasingly seen as security risks.

On one side, Washington aims to tear apart existing trade routes and build new ones with its closest allies, Roubini argued in an interview on Wednesday. Beijing, for its part, plans to insulate itself from potential Western economic sanctions by gradually decoupling from the U.S. dollar.

“We’ve gone from free trade to secure trade, from offshoring to friend-shoring, from just-in-time supply chains to just-in-case,” the NYU professor emeritus told Yahoo Finance Live. “These things are costly, they reduce global growth and increase cost of production.”

After the collapse of the West’s last systemic rival, the Soviet Union, the resulting Pax Americana ushered in an economic boom based on the primacy of free markets, liberal democracy, and the rule of law. Multinational corporations could arbitrage the best of a country’s competitive advantages, whether that be research and development or cheap and plentiful labor, driving down their manufacturing costs as part of the deflationary trend toward globalization.

In the process, however, these ensuing economic linkages created a web of interdependencies that now means China is the dominant supplier of critical resources like rare earth magnets, refined lithium, and monocrystalline silicon, which are needed for the green and digital transformation.

The West is also reliant on Taiwan as the sole supplier of its most advanced logic chips, forcing it to arm the small island nation to deter a possible invasion by its larger neighbor across the strait.

Commerce to suffer from unwinding efficient global supply chains

As a consequence, last week U.S. trade representative Catherine Tai said Washington sought closer economic ties with its allies to counter the rising threat posed by Beijing’s hegemonic ambitions.

Breaking the economic links with systemic rivals like China and Russia would lead to less efficient commerce through the “balkanization of global supply chain,” he argued.

Meanwhile China is negotiating with pariah state Russia to buy Moscow’s oil and gas without resorting to the dollar as a means of exchange—cutting the U.S. out of the equation in the process.

“Unfortunately, the cold war between the U.S. and China is getting colder by the day,” Roubini said.

Sensing the rising risk of war, Berkshire Hathaway CEO Warren Buffett already offloaded the bulk of his stake in Taiwan Semiconductor Manufacturing Company (TSMC), the largest chipmaker by volume and the only source of bleeding-edge silicon.

Losing reserve currency status exposes U.S. to its twin deficits

Establishing the yuan as the second global reserve currency would give China more protection against economic retaliation should it seek to expand through military means much as Moscow has.

“They’re worried that the kind of sanctions we imposed on Russia—if there was a conflict or escalation over, say, Taiwan—could be imposed on China, and China has over a trillion dollars of reserves that are in dollar,” the economist told Yahoo News. “So they need to have a unit of account, a means of payment, a store of value, that is an alternative to the U.S. dollar.”

The rise of the yuan would be bad news for Americans, who are only able to finance their consumption thanks to the willingness of other countries to constantly buy U.S.-dollar-denominated assets like Treasury bonds—which are effectively nothing more than government-backed IOUs—in return for their goods.

Should it no longer be the issuer of the world’s sole reserve currency, the U.S. would find itself competing with China as a haven for excess foreign capital. Borrowing costs would rise and Americans would no longer be able to enjoy the same lifestyle they do now.

“That means less financing of our own twin fiscal and current account deficits, when we still have very large stocks of private and public debt,” Roubini said. “That can push higher the cost of financing for the United States.”

Worst of the banking crisis still to come

Roubini echoed recent comments that the current crisis of confidence in the lending sector is not over, as too many banks suffered a trifecta: losses on their securities portfolio, a drop in the value of their loan book, and heavy exposure to the ailing commercial real estate market.

Many regional institutes in his view remain unable to offer their clients attractive enough interest rates to prevent a depositor flight to more profitable and ultra-safe money market funds.

“The worst in terms of severe banking stress is still ahead of us,” Roubini told Yahoo Finance.

The resulting credit crunch will tip the U.S. economy into a recession later this year, he predicted, as the Federal Reserve is ill-equipped, in his opinion, to deliver on its dual mandate of low inflation and maximum employment while rescuing banks.

Roubini voiced his concern that with core consumer prices continuing to tick higher, rising one-tenth of one percent to hit an annual rate of 5.6% in March, the U.S. could see the worst of the 1970s in terms of inflation and the worst in terms of insolvency following the 2008 collapse of Lehman Brothers.

“You have only one policy instrument, in this case the fed funds rate, to hit three targets—price stability, growth and financial stability,” he said. “To me that looks like mission impossible.”

 

Source link

Continue Reading

Business

A timeline of events in the bread price-fixing scandal

Published

 on

 

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

 on

 

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

 on

 

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending

Exit mobile version