Global investors are being overly complacent about downside economic risks, aggravated but not limited to the growing impact of coronavirus.
They are underestimating the forces that are changing the very nature of the world economy – a growing degree of “deglobalization” in the face of U.S.-Chinese decoupling. At the same time, they are overestimating the power of monetary and fiscal stimulus to keep the global economic party going.
When G-20 finance ministers meet this weekend in Riyadh, they’ll do so at a time when all of the world’s ten major economies are slowing – and several confront recession. Next week, Beijing is likely to announce a delay in the meeting of its National People’s Congress due to the coronavirus outbreak.
This week, Apple raised fears of more global corporate troubles to come with a coronavirus-caused revenue warning. The full ripple effects of the virus, and of the economic impact of humans scared to be with other humans, will show up in first quarter results, in particular in tourism, travel and on all Chinese and global companies that depend on Chinese supply chains and markets.
Despite all that, investor complacency persists in no small part due to a fundamental misunderstanding of how rapidly the world has changed, economically and politically. We are only in the opening pages of this new era of major power competition and technological change, and there’s no model to “price in” its impact.
Within democracies, the public’s faith has been shaken in capitalism and globalization to produce results that deliver greater prosperity. Most recently, that has driven everything from the recent Irish election victory of Sinn Fein, to the UK’s departure from the European Union, to the erosion of the German political center.
Most dramatic is the growing possibility that U.S. presidential elections this year could produce a showdown between two populists of different stripes but similar decibels, Donald Trump and Bernie Sanders. Both are septuagenarian insurgents who appeal to hard-core, unconventional constituencies, and that’s prompted global concern that the new U.S. normal may be abnormal.
All of that is unfolding against a backdrop of a major power test that at its heart is a systemic struggle between democratic and authoritarian capitalist models. Though traditional security analysts continue to worry about how U.S.-Chinese, U.S.-Russian or U.S.-Iranian tensions could unravel into armed conflict, the more likely outcome is a resource-sapping, continual competition that stops short of kinetics but involves information warfare, cyber assaults, and economic clashes ranging from trade wars to targeted sanctions.
But let’s get back to investors and their complacency, which is as easy to explain as it is increasingly hard to justify.
Every time the global economy approached the brink in the decade since the Great Financial Crisis of 2008-2009, some intervening force pulled us back. The latest came last year when it looked as though the global economy might slow to below 2 percent GDP growth, generally considered a way to measure the onset of a global recession.
Central banks stepped up. As the International Monetary Fund has pointed out, 49 central banks cut interest rates 71 times last year. The result was a 0.5 percent global GDP boost, according to the IMF. Monetary policy saved the day.
Investors understand that coronavirus could be a major 2020 shock, but they are wagering again that something will prevent this from becoming an economic disaster. They realize the U.S. Fed and other central banks may have fewer monetary tools to deploy, so they are counting on increased fiscal stimulus from governments.
For example, Chinese lenders on Thursday cut their one-year loan prime rate, which is used across the financial system, by 0.1 percent to 4.05 percent. The result was a rallying of Chinese stocks that day of 2.2 percent of the benchmark CSI 300 index.
That followed the Chinese central bank’s cut to its medium-term lending rate this week, as well as dozens of other measures Beijing has introduced in recent days to support businesses hit by the epidemic. The Financial Times reports that China’s central bank thus far has made 300 billion RmB available to large lenders and local banks in hard-hit areas, particularly Hubei province.
Wishful thinking Even so, the S&P Global Ratings forecast that China’s 2020 growth could fall to 4.4 percent from its 6 percent level last year, if the coronavirus hit continues through April. Most predictions of that sort probably err on the optimistic side, and it may be wishful thinking that China’s economy will make up most of what is being lost once coronavirus recedes.
At the same time, the eurozone economy barely grew in the fourth quarter of 2019, up only 0.1 percent from the previous quarter, the slowest rate since 2013. Germany had zero growth. Real GDP in the eurozone was up just 0.9 percent in 2019, the slowest rate since 2013. (With the UK now leaving the EU, its leaders failed to agree on their budget on Friday due to insoluble differences.)
Governments across the world see these storm clouds, and a Bloomberg survey of economic forecasts shows that budgets are loosening in more than half of the world’s 20 biggest economies, providing some of the fiscal stimulus that central bankers have been seeking from their government counterparts.
Markets are wagering that the combination of fiscal and monetary measures will again prevent the worst.
However, what if they’re wrong?
Other than the United States, major central banks are tapped out, some of them experimenting with negative interest rates. Some experts argue that our low interest rate environment allows greater borrowing for fiscal stimulus.
That’s risky business.
Near the end Global debt is nearing $244 trillion, the highest level on record, and that’s not a good record to be breaking. Public debt is the highest in advanced economies since WWII. In a recent Atlantic Council report, Global Risks 2035 Update, author Mathew Burrows explores a worst-case scenario he calls “Descent into Chaos.” It starts with growing indebtedness hitting China first and then spreading to the Western world, triggering a worldwide economic meltdown.
Burrows isn’t in the business of predicting the timing of global downturns. Yet it would be unwise to take one’s eye off this ballooning debt at this moment of uncertainty.
Investors are counting on the playbook of the last decade to hold out for a little longer.
That’s a risky bet in this year of coronavirus, slowing growth, growing debt, and rising geopolitical uncertainty. We’re near the end of a bull run that’s in year ten of a seven-year cycle. Source: CNBC
The Canadian government says it will donate up to 200,000 vaccine doses to fight the mpox outbreak in Congo and other African countries.
It says the donated doses of Imvamune will come from Canada’s existing supply and will not affect the country’s preparedness for mpox cases in this country.
Minister of Health Mark Holland says the donation “will help to protect those in the most affected regions of Africa and will help prevent further spread of the virus.”
Dr. Madhukar Pai, Canada research chair in epidemiology and global health, says although the donation is welcome, it is a very small portion of the estimated 10 million vaccine doses needed to control the outbreak.
Vaccine donations from wealthier countries have only recently started arriving in Africa, almost a month after the World Health Organization declared the mpox outbreak a public health emergency of international concern.
A few days after the declaration in August, Global Affairs Canada announced a contribution of $1 million for mpox surveillance, diagnostic tools, research and community awareness in Africa.
On Thursday, the Africa Centres for Disease Control and Prevention said mpox is still on the rise and that testing rates are “insufficient” across the continent.
Jason Kindrachuk, Canada research chair in emerging viruses at the University of Manitoba, said donating vaccines, in addition to supporting surveillance and diagnostic tests, is “massively important.”
But Kindrachuk, who has worked on the ground in Congo during the epidemic, also said that the international response to the mpox outbreak is “better late than never (but) better never late.”
“It would have been fantastic for us globally to not be in this position by having provided doses a much, much longer time prior than when we are,” he said, noting that the outbreak of clade I mpox in Congo started in early 2023.
Clade II mpox, endemic in regions of West Africa, came to the world’s attention even earlier — in 2022 — as that strain of virus spread to other countries, including Canada.
Two doses are recommended for mpox vaccination, so the donation may only benefit 100,000 people, Pai said.
Pai questioned whether Canada is contributing enough, as the federal government hasn’t said what percentage of its mpox vaccine stockpile it is donating.
“Small donations are simply not going to help end this crisis. We need to show greater solidarity and support,” he said in an email.
“That is the biggest lesson from the COVID-19 pandemic — our collective safety is tied with that of other nations.”
This report by The Canadian Press was first published Sept. 13, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
HALIFAX – The Nova Scotia government says it could be months before it reveals how many people are on the wait-list for a family doctor.
The head of the province’s health authority told reporters Wednesday that the government won’t release updated data until the 160,000 people who were on the wait-list in June are contacted to verify whether they still need primary care.
Karen Oldfield said Nova Scotia Health is working on validating the primary care wait-list data before posting new numbers, and that work may take a matter of months. The most recent public wait-list figures are from June 1, when 160,234 people, or about 16 per cent of the population, were on it.
“It’s going to take time to make 160,000 calls,” Oldfield said. “We are not talking weeks, we are talking months.”
The interim CEO and president of Nova Scotia Health said people on the list are being asked where they live, whether they still need a family doctor, and to give an update on their health.
A spokesperson with the province’s Health Department says the government and its health authority are “working hard” to turn the wait-list registry into a useful tool, adding that the data will be shared once it is validated.
Nova Scotia’s NDP are calling on Premier Tim Houston to immediately release statistics on how many people are looking for a family doctor. On Tuesday, the NDP introduced a bill that would require the health minister to make the number public every month.
“It is unacceptable for the list to be more than three months out of date,” NDP Leader Claudia Chender said Tuesday.
Chender said releasing this data regularly is vital so Nova Scotians can track the government’s progress on its main 2021 campaign promise: fixing health care.
The number of people in need of a family doctor has more than doubled between the 2021 summer election campaign and June 2024. Since September 2021 about 300 doctors have been added to the provincial health system, the Health Department said.
“We’ll know if Tim Houston is keeping his 2021 election promise to fix health care when Nova Scotians are attached to primary care,” Chender said.
This report by The Canadian Press was first published Sept. 11, 2024.
ST. JOHN’S, N.L. – Newfoundland and Labrador‘s chief medical officer is monitoring the rise of whooping cough infections across the province as cases of the highly contagious disease continue to grow across Canada.
Dr. Janice Fitzgerald says that so far this year, the province has recorded 230 confirmed cases of the vaccine-preventable respiratory tract infection, also known as pertussis.
Late last month, Quebec reported more than 11,000 cases during the same time period, while Ontario counted 470 cases, well above the five-year average of 98. In Quebec, the majority of patients are between the ages of 10 and 14.
Meanwhile, New Brunswick has declared a whooping cough outbreak across the province. A total of 141 cases were reported by last month, exceeding the five-year average of 34.
The disease can lead to severe complications among vulnerable populations including infants, who are at the highest risk of suffering from complications like pneumonia and seizures. Symptoms may start with a runny nose, mild fever and cough, then progress to severe coughing accompanied by a distinctive “whooping” sound during inhalation.
“The public, especially pregnant people and those in close contact with infants, are encouraged to be aware of symptoms related to pertussis and to ensure vaccinations are up to date,” Newfoundland and Labrador’s Health Department said in a statement.
Whooping cough can be treated with antibiotics, but vaccination is the most effective way to control the spread of the disease. As a result, the province has expanded immunization efforts this school year. While booster doses are already offered in Grade 9, the vaccine is now being offered to Grade 8 students as well.
Public health officials say whooping cough is a cyclical disease that increases every two to five or six years.
Meanwhile, New Brunswick’s acting chief medical officer of health expects the current case count to get worse before tapering off.
A rise in whooping cough cases has also been reported in the United States and elsewhere. The Pan American Health Organization issued an alert in July encouraging countries to ramp up their surveillance and vaccination coverage.
This report by The Canadian Press was first published Sept. 10, 2024.
