Egypt and the IMF prepare for Palestinian Refugees

As Palestinians and their economy continue to suffer from genocide, Egypt is working in collaboration with the International Monetary Fund to ensure Egypt will be prepared for the influx of refugees.  While Israel is committing their bombing campaign of Palestine, international trade and the economic prosperity in the Middle East is negatively impacted.  The IMF has decreased their expected GDP growth in the Middle East and North Africa for 2024 from 3.4 to 2.9 in addition to decreasing Egypt's growth outlook from 3.6% to 3.0%.  

In recent years, the IMF has worked closely with Egypt to make policy changes to promote their economy.  Although still in conversation for new policy, economic reform programs, and loans: Egypt previously received a $3 billion loan that is near completion.  In response to the positive effects of this loan, the IMF intends to assist Egypt further. The IMF is monitoring the recent impacts of Israel's war on Palestine on the Suez Canal trade routes and surrounding economies.  

I believe that the IMF is making the right move.  Rather than allowing an influx of refugees to backtrack the recent progress of the Egyptian economy, they are working proactively to assist Egypt and create a plan to take advantage of their changing economic landscape.

https://www.middleeastmonitor.com/20240223-imf-seeks-to-boost-egypt-ahead-of-possible-entry-of-gaza-refugees//

https://www.reuters.com/world/africa/imf-egypt-agree-main-policy-elements-economic-reform-programme-2024-02-02/

Inflation remains sticky in Europe, with core prices cooling less than expected

The inflation in the 20-nation euro zone was down to 2.6% in February, however this was higher than the expectation of 2.5%. Core inflation (removing energy, food, alcohol, and tobacco) was also reported at 3.1%, that is 0.2% above the expected value of 2.9%. This report comes off a value of 2.8% for inflation in January, indicating further cooling has occurred. In addition to lower inflation, energy prices continue to fall with a deflation rate of -3.7% in February. 

The new expectation is that interest rates will begin to come down in June due to the recent inflation figures, however officials say they need more evidence of stable prices to begin bringing interest rates down. The ECB also has to consider the near recession of the past year where they saw flat GDP growth in the final quarter of 2023. It seems we could see interest rates lowered in the summer as inflation moves towards the 2% goal, even though core inflation is holding over 3%.

Source - https://www.cnbc.com/2024/03/01/euro-zone-inflation-q1-2024.html

Jacob Rothschild, Financier and Philanthropist, Dies at 87

 

Jacob Rothschild, a renowned financier and philanthropist passed away Monday at 87. Jacob was known for breaking with his families fabled banking dynasty at a time of radical change in the world of high finance. 

For most of the 19th century, the House of Rothschild was the largest bank in the world, by a large margin. Most of the Rothschild's wealth trace back to a decision to finance the British military in the Napoleonic Wars, but Jacob had a plan to break away. Jacob long favored merging the London branch of his families financial empire with another merchant bank, S.G Warburg, but the plan was heavily opposed by his cousin and own father. That opposition was the decision to try and break away, with Jacob famously saying "We must try to make ourselves as much a bank of brains as of money."

The dispute was resolved in 1980, when the feuding partners agreed that the family bank (N.M Rothschild & Sons Ltd) would operate separately from Jacob's breakaway entity (J. Rothschild & Company). Jacob would end up retiring in 2019, with an estimated wealth of 2019. 

Jacob leaves behind a legendary scholar career, earning his degree from Oxford University, as well a wide network of international connections. He was a member of the International Advisory Board of the Blackstone Group, a leading private equity group.

Mortgage Rates Edge Closer to 7%, Dampening Start of Spring Homebuying Season

 In October of 2023, mortgage rates reached a 20-year high of 7.79%, and were slowly decreasing until recently. As of February 29th, the 30-year fixed mortgage rate averaged 6.94%, an increase from 6.90% the previous week.  In the past few months, the market has been reacting to the fact that the Federal Reserve will not cut mortgage rates until later in the year, resulting in a trend of upward mortgage rates. The rise in interest rates has hindered the upward momentum of homebuyers and raises concerns as spring is the busiest season for home buying. Higher than anticipated inflation and an insufficient volume of existing homes have caused it difficult for many new homeowners to get into the market. As a result, the average mortgage application has dropped by 5.6% from the week before and in comparison to last year, mortgage applications have dropped by 12%. Although the current job market is solid, consumers are showing extra sensitivity to changes in mortgage rates which are impacting the current rate of homes being sold. 

https://apple.news/A5auBGMyjTgqZYmvMh2DZdQ

Boeing agrees to $51M settlement for US export violations, including in China

Boeing (BA) has reached a settlement with the U.S. State department for $51 million due to multiple export violations, including Chinese employees in China improperly downloading documents related to U.S Defense Department programs. The violations occurred from 2013-2017, involving date of programs like the F-18, F-15, and F-22 fighter jets, the E-3 airborne warning and control system, the AH-64 apache helicopter and the AGM84E cruise missile. Unauthorized downloads also took place in 18 other countries between 2013-2018 at Boeing and partner facilities, including the likes of Australia, Russia, the UK, India, and Hong Kong. 

The settlement resolves 199 violations of the Arms Export Control Act and International Traffic in Arms Regulations. Boeing, which disclosed the violations voluntarily, will have to implement remedial compliance measures and engage an external special compliance officer for at least 2 years. The settlement included a $51M civil penalty with $24M suspended for compliance program improvements. 

The State Department said the settlement "highlights the importance of exporting defense articles only pursuant to appropriate authorization" and followed "an extensive compliance review" by the government.

Source: https://www.reuters.com/business/aerospace-defense/boeing-pay-51-million-settlement-us-export-violations-2024-02-29/

Google hit with $2.3 billion lawsuit by Axel Springer, other media groups

 Link: https://finance.yahoo.com/news/google-hit-2-3-billion-150534366.html

Recently Google has been hit by a 2.1-billion-euro ($2.3 billion) lawsuit started by 32 media groups over Google's digital advertising practices. The timing of the lawsuit comes when European regulators are already engaged in a lawsuit with Google over the same digital advertising practices the private lawsuit aims to end. This timing is convenient as it just piles more on Google's plate in an attempt to get them to change their policy on digital advertising. Google claims their policies are fair, and they participates in both the buy and sell side of the market, but European regulators and private media groups disagree. The public lawsuit is an example of a shifting attitude towards tech giants, as the European Union has already lobbied two big lawsuits against Apple, causing them to change their standard charging port and messaging system. Hopefully, regulators continue this trend and keep big tech firms from overgrowing into sectors they shouldn't have a hand in.

 

Retail sales tumbled 0.8% in January, much more than expected

Consumer spending fell sharply in January, with retail sales dropping 0.8% despite expectations of a 0.3% decrease. Excluding auto sales, the decline was 0.6%, well below the anticipated 0.2% gain. Weakness was seen in building materials, garden stores, and miscellaneous stores, while restaurants and bars saw a 0.7% increase. The report, not adjusted for inflation, showed a 0.6% year-over-year increase in sales, raising concerns about the impact of high inflation on future spending. However, the strong labor market and improving manufacturing sector suggest a resilient economy. The Fed is expected to hold rates, but futures indicate possible rate reductions starting in June, with four cuts expected by the end of 2024.

link - https://www.cnbc.com/2024/02/15/retail-sales-january-2024-.html

housing prices and inflation

Overall inflation is going down, but housing costs are stubbornly high. This is a problem for the Fed because housing is a big expense for most people and affects the overall inflation rate.

Mark Franceski managing director of the housing research company Zelman & Associates, stated that "if you want to know where inflation is going, you need to know where housing inflation is going."

Experts expected housing inflation to slow down based on data from other sources, but that hasn't happened yet. This is surprising because it makes housing less affordable for buyers and even though existing homeowners are somewhat protected by fixed-rate mortgages.

The reason the data is different is because inflation data uses rent prices, not home prices or mortgage rates. While private data shows rent going down, it hasn't shown up in the government's data yet, creating a confusing situation for the Fed. The pandemic may also have muddled the measurement of home prices in inflation data. 

https://www.nytimes.com/2024/02/26/business/economy/housing-inflation-fed.html 

Jeff Bezos, Jamie Dimon, and Mark Zuckerberg have sold stock worth about $9 billion. They might think markets can't go much higher.

         As of recent there has been a mass selling of shares from large corporations namely, Jeff Bezos, Mark Zuckerberg, and Jamie Dimon from JPMorgan. Bezos offloaded over 50 million shares worth 8.5 billion of Amazon in only nine days. Zuckerberg sold almost 1.8 million shares for more than 400 million this last month. And Dimon cashed in 822,000 shares at about 150 million in total.

    This could be pointing to several things including just basic economic standpoints such as just an occasional sale since it was already announced in trading plans, months in advance, that they were going to do this. They could have also lined up shares because their stocks were ballooning in value. It could have also been disposable stock which could have been put in place for tax reasons, etc.

    Conversely, this could also signal a gradual decline in confidence in the economy, though marginal compared to their actual wealth holding. Notably, they hadn't been buying shares which means their shares could be fully valued, and its time to take some off the table.

https://www.businessinsider.com/bezos-dimon-zuckerberg-amazon-jpmorgan-meta-stock-sales-billionaires-wealth-2024-2

DraftKings posts 44% revenue growth and narrowing losses, but falls short of estimates

 DraftKings is a sports betting app that saw huge revenue growth but still fell short of what they were estimated.  The company reported 44% growth and claimed that they fell short to do unfavorable outcomes in some NFL games. The CEO said that is the worst stretch in outcomes that they have seen since becoming a public company. Another positive for the company is that they also saw a 37% increase in unique players. Even with all of this growth, it is interesting that their share price actually fell 10 cents. This being said, it is incredible how high the expectations were for this company, and even though they fell short of expectations, this amount of growth is nothing to shake a stick at 

M2 Supply is Shrinking in the US

    The money supply in the US is measured by two variables. M1, which is all of the dollar notes that are on hand within the US economy and M2 which is M1 plus all of the dollar notes that are held in more long term account types. M1 is usually open to fluctuations that match certain economic conditions while M2 is typically increasing as time goes on. However, M2 has recently been observed to be decreasing. Now, in past economic recessions and the Great depression, the M2 supply had dropped more than 2% points. That is the exact point where the M2 supply is currently. While this shows a strong historical record of predicting a oncoming recession, it is unlikely to insinuate a recession in the modern day. This is because while M2 is shrinking, most people don't rely on M1 type currency which played a heavy role in all of those past recessions.  

Source: https://finance.yahoo.com/news/u-money-supply-shrinking-most-105000864.html

Possible Interest-Rate Cuts in the U.K.

     Interest rates in the United Kingdom have been high for around 15 years. As their inflation held steady last month, which defied the expectations of an increase, there is the hope that the Bank of England would soon begin to cut interest rates. The Consumer Price Index rose 4% on year in January, which was the same rate as in December. Economists were expecting inflation to go up to 4.2%. Core inflation stayed higher than the CPI rate, but was stable at 5.1% last month and in December. Again, it was also lower than the 5.2% expectations. These lower-than-expected rates bring some hope that the Bank of England will cut interest rates soon, as they are currently at 5.25%.

    Still, the rates are above the 2% target of the central bank. Service inflation has been rising, reaching 6.5% in December. The steady rate of inflation does not reflect the forecast of inflation in the United States, in which consumer prices went up 3.1% from the previous year. The pressures on inflation come from household services and housing, because of the regulator OFGEM’s energy price cap, which contributed to an increase in gas prices of 6.8% in January. Food and nonalcoholic beverages’ inflation, on the other hand, decreased 1% in December. One thing that strobe down inflation was the easing in household goods, driven by discounts during post-Christmas sales. After the last numbers were released, Paul Dales, Capital Economics Chief, said that the previous numbers indicate that inflation numbers could fall below 3.5% in February, and even below the target (2.0%) in April. According to him, this would make BOE more likely to cut interest rates starting in June.

Interest costs on US national debt set to exceed defense spending this year

 The drastic and rapid increases in federal interest rates combined with high national debt have people worried about the country’s finances and what’s to come. Interest rates have been on the rise for a while now as the U.S. currently sits about $34 trillion in debt after raising rates 11 times in the last 16 months. The Fed continues to assert that cuts are coming but that doesn’t help consumer worries with rates as high as they’ve been since the 2008 financial crisis. 

Right now interest payments on national debt are the fastest growing part of the federal budget and the number is projected to be bigger than medicare and defense spending by the end of 2024. Total interest on national debt is projected to hit 3.1% of GDP by the end of 2024 which would be its highest number ever. Researchers are especially worried because despite constant comments by the Fed, it seems that it is having little to no effect on the behavior of Congress. 

https://apple.news/AXmZFeMHGRRecqT3w5nBAHw

Cooper Meek

UK Economy Slides into Recession Ahead of Election

     It is a big blow for Prime Minister Rishi Sunak as the UK economy has slipped into a recession in the last two quarters of 2023. The UK saw a 0.3 percent decrease in GDP in quarter four and a 0.1 percent decrease in quarter 3. Although many experts believe this recession will be short-lived, it's a big set back for Sunak as he placed economic growth as a key priority. This is also a time when a new election is coming up and the conservatives badly trail the main opposition Labour party in the polls. 

    Other data shows that the the labour market remains strong and the unemployment rate is close to its historical low. Jeremy Hunt, finance minister, said the reason for such low growth is the inflation rate, which is about 4 percent and double their target rate. The interest rate also sits at a 16 year high of 5.25%, which has caused millions of voters to struggle to pay their mortgages, and has caused them to demand a change in government. 

UK economy slides into recession ahead of election

Japan slips into a recession and loses its spot as the world’s third-largest economy

Japan's economy has fallen to the worlds fourth largest, trailing behind (1)USA (2) China (3) Germany, due to a contraction in Q4 of 2023. The Japanese govt. reported a 0.4% annual rate decline in GDP for Oct-Dec, accompanied with two consecutive quarters of contraction that would be indicative of a technical  recession. Japan's economy was previously the second largest economy in the world until 2010, faced a weaker yen contributing to its fall, alongside challenges like lagging productivity / competitiveness and a declining population. 

Economic outlook appears bleak currently in Japan, and a gap between developed nations like Japan anda emerging economies is narrowing as countries like India are expected to surpass Japan in nominal GDP in the coming years. Faced with a labor shortage, Japan will have to seek solutions to increase production with immigration being a possible fix. Unfortunately, Japan has been reluctant in the past to accept foreign labor which has lead to criticism regarding lack of diversity and discrimination within the workforce.Another solution for the labor shortage could be the implementation of robots. They are being considered as a possibility but have not reached the level that is equivalent of human workers.

Source: https://apnews.com/article/japan-economy-2023-gdp-893d53deba654c4924e4924f0b321cc5

Amazon v US GOV: Private vs Public

Here we see a real-life example of the friction between the private and public sector, and as is often the case, it involves unions. The National Labor Relations Board is an independent federal agency granted with the power to protect workers rights to organize and unionize. Recently The National Labor Relations board has accused Amazon, Space X, and Trader Joes of interfering with unions and preventing employees from forming them. Here, we have the US gov trying to fulfil one of their roles by trying to maintain a sense of justice, and it coming into conflict with these firms goals of maximizing profit. Amazon, Space X, and Trader Joes have all pushed back, with Amazon being the most recent on Thursday, by filing lawsuits against the agency accusing them of being unconstitutional. The firms attorneys in their individual cases maintain that the NLRB violates the separation of powers as specified by the constitution, and their 5th amendment rights, while attorneys for the labor unions have come out and stated it is a frightening attempt to get rid of the unions all together.   

https://apnews.com/article/amazon-nlrb-unconstitutional-union-labor-459331e9b77f5be0e5202c147654993e

         

UK economy fell into recession after people cut spending.

 The UK economy entered a recession at the end of last year due to reduced consumer spending, strikes by doctors, and decreased school attendance, resulting in a larger-than-expected 0.3% contraction between October and December. This marks two consecutive quarters of economic decline, raising doubts about Rishi Sunak's ability to fulfill his pledge to grow the economy. Despite a modest 0.1% growth for the whole of 2023, the weakest annual figure since 2009, Sunak's promise remains unmet. Other economic challenges include the European Union narrowly avoiding recession and Japan experiencing contraction. The Office for National Statistics identified several areas of economic weakness, including decreased December spending after Black Friday sales, doctor strikes, and reduced school attendance. Gross domestic product (GDP) is a critical measure of economic activity, influencing government policies and public perceptions. Jeremy Hunt is considering increased public spending cuts to offset rising interest costs on government borrowing. Hunt emphasizes the importance of tackling inflation before focusing on economic growth, noting resilience in employment and rising real wages. While wage growth has slowed, it still outpaces price rises, although inflation remains above the Bank of England's target. Economists view the recession as mild, with some optimism for a turnaround, particularly in sectors like construction. Despite challenges, there are signs of improvement, with increased inquiries suggesting a potential upturn in economic fortunes.

https://www.bbc.co.uk/news/business-68285833

U.S. Economy Navigates Soft Landing with Robust Job Growth

    The latest employment report from the Bureau of Labor Statistics has provided a positive outlook for the U.S. economy, easing concerns about a looming downturn. In a surprising turn, employers added more than expected workers to their payrolls, with 199,000 jobs created last month. This solid result has calmed fears of a steeper economic slowdown, particularly in the wake of the Federal Reserve's rapid interest rate hikes. 

    The unemployment rate, in an unexpected move, ticked down to 3.7%, marking the first decrease since July. Average hourly pay also showed strength, increasing by 0.4% and reaching a 4% growth for the year, surpassing the projected pace of annual price growth. 

    While these positive indicators suggest a step towards the coveted "soft landing" scenario, where the Fed effectively manages inflation without causing an economic downturn, there are nuances to consider. Last month's job creation, while robust, fell below the average of the preceding 12 months, which saw an average of 240,000 jobs added. Additionally, the November hiring surge was concentrated in specific industries, with healthcare and government accounting for two-thirds of the headcount growth. 

    The manufacturing sector did see a gain of 28,000 workers, but this increase was largely attributed to individuals returning to work after striking against major automakers. Moreover, a recent report from the Labor Department indicates a potential pullback in onboarding new employees, as job openings in late October hit their lowest point since March 2021.

    The overall positive economic performance may pose a dilemma for the Federal Reserve Chairman, Jerome Powell. While the increase in jobs and wages suggests that a severe crash is less likely, it also signals a higher risk of inflation. These upbeat economic numbers make it less probable that the Fed will lower interest rates in early 2024, contrary to the hopes of bond traders and those planning to secure mortgages in the coming year. The delicate balancing act between maintaining economic growth and controlling inflation remains a key challenge for policymakers in the months ahead.

https://www.morningbrew.com/daily/stories/we-might-be-all-clear-for-an-economic-soft-landing

Danish government proposes tight spending to fight inflation

The Danish government has unveiled a proposal aimed at tightening public spending to tackle soaring inflation, anticipating a 3.9% increase in prices this year after reaching a 40-year high of 7.7% in the previous year. Finance Minister Nicolai Wammen emphasized the necessity of curbing inflation without exacerbating the problem, outlining measures in the budget proposal for 2023 designed to dampen economic activity. The plan, which is expected to have a negative impact of 0.9% on the Danish economy, reflects a downward revision in growth forecasts, with the economy now projected to expand by only 0.2% this year compared to an earlier estimate of 0.8%. This cautious approach follows a period of robust economic performance marked by low unemployment and heightened industrial activity. However, concerns about the possibility of recession loom large, prompting the government to adopt a conservative fiscal stance amidst global efforts to combat inflation through monetary tightening.

In response to escalating prices, the Danish central bank has raised its key interest rate to 2.6%, the sixth hike since July last year, aligning with similar moves by central banks worldwide. The government has also recently approved a 2.4 billion Danish crowns ($346.12 million) aid package targeted at alleviating the financial strain on vulnerable segments of the population. Despite these interventions, Arbejdernes Landsbank chief economist Jeppe Borre highlights the precarious economic situation, suggesting that Denmark may be on the brink of a recession. This backdrop of economic uncertainty underscores the government's rationale for pursuing a strategy of fiscal restraint to mitigate inflationary pressures and stabilize the economy in the face of potentially challenging times ahead.

https://www.reuters.com/markets/europe/denmark-forecasts-39-inflation-this-year-2023-03-23/

Deflation in China

China, which has the second largest economy in the world, has had slowed economic growth in recent months. Last year, China reported a 0.3% decrease in year to year prices. Economists hoped for a steady increase in prices, but after posting a flat reading in September, experts fear China may experience prolonged deflation. Producer prices have also now fallen 2.6% in January, dropping for the 16th consecutive month.

China's Economy has grown at 9% on average per year since 1978, but due to strict COVID-19 restrictions, that number has slowed to 3% in recent years. Economists expected China's economy to recover quickly following lockdowns, but the recovery has taken much longer than expected.

Due to cheaper than usual Chinese imports, the United States economy could see an increase in imported goods and a decrease in manufacturing.

NVIDIA earnings could potentially kill the momentum driving U.S stocks higher

     Concerns amongst investors has increased about the impact of NVIDIA's earnings report on the broader stock market. Due to NVIDIA's rising stocks, there is a possibility that after it's results come out everyone will rush to sell their shares and that could lead to a decrease in prices. If Nvidia's report doesn't meet investor's expectations, they might want to sell those options quickly.

     Even if Nvidia's earnings report is good, there's still concerns that it could still disrupt the stock market. This is because of how many investors have been buying options, which are a type of investment. If Nvidia's report is better than expected, these investors might still decide to sell their options quickly, causing a rush of selling in the market. This sudden selling pressure could lead to a drop in stock prices. So, regardless of the actual content of the report, the reaction of investors who have bought these options could potentially affect the broader market negatively. Overall, the article says that Nvidia's report is very important for the stock market and could affect how people invest in the future.

Source : https://www.marketwatch.com/story/nvidias-earnings-report-could-kill-the-momentum-driving-u-s-stocks-higher-regardless-of-how-it-turns-out-66c17b16

How Companies Are Starting to Use Generative AI to Improve Their Businesses

     The Wall Street Journal had the opportunity to talk to CIOs from Ally Financial and Cisco about the use of generative AI in their firms.  Fletcher Previn of Cisco stated that the firm sees AI as "a force multiplier for human potential." Previn stated how he has been in consistent communication with senior leadership about investing in AI technology. He stated that the opportunity cost of being early to the AI frenzy is huge. Cisco has begun using AI for their help desk and for following up with potential employment candidates. Initially, programmers within the firm were skeptical of the generative AI suggestions only accepting the code it provided 19% of the time.  Currently, programmers at Cisco are now accepting just below 50%.

    Sathish Muthukrishnan explained how Ally Financial uses AI for customer-care calls. Associates taking calls write general notes and then create a summary of the conversation. AI has begun developing summaries from these calls and Muthukrishnan shared that associates feel that the technology is able to capture more detail than they can. He stated that since implementing AI, associates can focus more on higher priority projects for their customers. 

    Wall Street Journal was also able to discuss AI with Boston Consulting Group (BCG).  The firm has been conducting research on how serious firms are about investing in generative AI. Out of 1,400 executives, 90% are "observing and waiting for things to happen." Sesh Iyer of BCG stated that the other 10% are "being pioneers." One important piece that wasn't discussed by these business leaders was how generative AI would affect employment at their firms moving forward. AI clearly has the capability of spurring growth while also reducing costs. Moving forward, we'll continue to witness how it is revolutionizing the economy. 

https://www.wsj.com/tech/ai/generative-ai-business-implementation-ac995975?mod=hp_lead_pos11

 

World’s Major Economies Fall Behind U.S.

    The economies in the UK and Japan shrank at the end of last year, falling further behind the US. It has widened the gap in growth from the US to the rest of the world. The growth numbers from the UK and Japan mirror similarly weak conditions in much of Europe and China. The divergence between the US and the other wealthier countries or economies is majorly due to surprising US strength. The US economy grew much faster in 2023 than many had predicted. While Europe was hot with high energy prices from the Ukraine war and rising interest rates many predict that the gap will shrink but still have a wide spread. 

US consumer spending has remained resilient in the face of rising interest rates more than the rest of the world. Also, US government spending has been at historical levels giving the economy an added boost. Many are resilient to label the UK and Japan economic slowdowns as full-blown recessions but some have already labeled them as such. We will have to wait to see for more data to come out to see if they are true recessions. 

https://www.wsj.com/economy/global/u-k-enters-recession-after-economy-shrinks-more-than-expected-30407624?mod=economy_lead_pos5

christian wolter

How bad is Pakistans debt crisis and can IMF save it?

The second-largest party in Pakistan, the Pakistan People's Party (PPP), has thrown its support behind the country's largest political organization, the Pakistan Muslim League-Nawaz (PML-N), in their efforts to form a majority coalition. Recent legislative actions have increased this administration's authority over economic affairs and electoral oversight.

Although there has been some improvement, Pakistan's economy is still in unstable shape, with foreign exchange reserves of only $8 billion, barely sufficient to cover basic imports for two months. But a $1 billion bond payment is due soon, and the IMF is also going to pump in $700 million. This could further deplete reserves, which is why former deputy governor of the central bank Murtaza Syed has called for an immediate IMF initiative because of the unstable reserve levels.

Pakistan has the highest debt-to-GDP ratio among major global economies, with projections indicating that interest payments will consume between 50% and 60% of government revenues this year. The ratio has surpassed 70%. The core of Pakistan's debt problem, according to eminent analyst firm Tellimer, is its domestic debt, which accounts for about 60% of the country's total debt stock and 85% of its interest burden. In addition, the bulk of Pakistan's external debt, which is expressed in US dollars, is owed to bilateral and multilateral creditors and makes up about 85% of the total debt.

https://economictimes.indiatimes.com/news/international/business/how-bad-is-pakistans-debt-crisis-and-can-the-imf-save-it/articleshow/107692424.cms. 

The Problems with the World Cup Final being held in New Jersey

 New York was selected over Dallas to host the final, even though AT&T Stadium in Arlington, Texas is considered an architectural jewel and Dallas's host committee made a strong bid. The last World Cup Final was viewed by over 1.5 billion globally. This World Cup will be held in 16 cities across North America.

Over the next two and a half years, organizers must ensure that MetLife Stadium has been properly modifed and prepared, and that the surrounding area can be locked down for security purposes and converted into a miniature autonomous state. The stadium will host five group-stage games, a round of 32, a quarterfinal and then the final. It is estimated that the World Cup will bring in around $2 billion in economic activity and 14,000 jobs to the region. The major logistical problem the city faces is determining how the region can best accomodate close to one million visitors during the month of the tournament. There are no direct trains to MetLife from NYC. The 2014 Super Bowl at MetLife caused transportation chaos, and there is concerns that the World Cup Final may be even worse.

Nike to lay off 2% of employees, cutting more than 1,500 jobs during broad restructuring

 This article explains how Nike is going through a major restructuring where they are trying to simplify their business and go back to the basics in a way. In doing this, they will be cutting 2% of their workforce. Whilst doing this, they plan to be able to save about 3 billion over the next three years. This comes after Nike has seen slowing growth, and they are hoping that this plan will reignite their growth as a company. This being said Nike is not happy with having to do this as their CEO said, This is a painful reality and not one that I take lightly,” he added. “We are not currently performing at our best, and I ultimately hold myself and my leadership team accountable.” It will be interesting to see how this will affect their stock price shortly, but also in the long run.

https://www.cnbc.com/2024/02/16/nike-to-lay-off-2percent-of-employees-cutting-more-than-1500-jobs.html

Touchdown! Super Bowl brings big economic victory to Las Vegas

    The Superbowl was held at Allegiant Stadium in Las Vegas, Nevada. The Superbowl brought in an estimated $500 million in revenue. The Las Vegas Convention and Visitors Authority said that number could be lower than what future economic impact reports state. Analysts predicted around 330,000 people would visit Las Vegas for the game and its festivities. But it's now reported that the number could reach as high as 450,000. Spending over the weekend could reach as high as $1.1 billion. Steve Hill, president and CEO of the LVCVA stated, “Anecdotally, it looks like the estimates that we’ve been putting out are gonna be a little conservative,” also, “Just talking to the properties about how the week went for them — better than expected, which expectations were pretty high. So, we’re pretty happy about that.”

    There were 300 events in the days leading up to and on Sunday. Chief marketing officer Kate Wik during a presentation said that more than 100 national and international broadcast stations were on Radio Row — a media area in the Super Bowl run-up. The event generated an estimated 14,000 news stories with more than 5 billion domestic impressions. Nevada sportsbooks took in a historic amount wagered, $185.6 million in bets. TV viewership was 123.4 million viewers, according to CBS Sports. More than 202 million viewers watched at least some of the game. 

Link: Touchdown! Super Bowl brings big economic victory to Las Vegas (msn.com)

British Retail Rebound Provides Some Hope for Recession-hit Economy

Sales recovered 3.4% in Britain from December according to the Office for National Statistics which is the best monthly gain they have seen since April of 2021. This has provided hope for economists that the nation's recession will be shorter than they had originally expected. This increase in sale was fairly uniform across all sectors with food shops specifically seeing the largest jump at 3.9%. 

The latest figures also show the British economy has officially entered a recession after a 0.3% decline in GDP in the fourth quarter, following a 0.1% decline in the third. In December Britain saw their biggest monthly decline in sales since January of 2021 at 3.3%, meaning even after the large recovery in sales seen this month they are still 1.3% below their pre-pandemic levels. Economist Joe Maher believes the uptick in sales indicates the worst could be behind them and the combination of falling inflation and rising wages will allow for a good chance of recovery.

The outlook this month is only semi-positive as growth figures are down, however inflation seems steady and December saw a healthy job report in December. Economists also note that monthly data are very volatile and the sales jump lat month really only worked to offset the decline that was seen in December and restore the level seen in November. This is consistent with the stagnation seen through the last 18 months in Britain, however economists believe this could be the start of a momentum shift that leads to a real increase in activity in the retail sector. 

Source - https://www.cnbc.com/2024/02/16/uk-retail-rebound-provides-glimmer-of-light-for-recession-hit-nation.html

Japan slips into recession

 After contracting for two straight quarters, Japan's economy unexpectedly entered a recession, primarily as a result of low domestic demand. This has delayed expectations for when the Bank of Japan might end its negative interest rate policy and surprised economists who were expecting growth.

In the final quarter of 2023, the GDP shrank at an annual rate of 0.4%, after declining 3.3% in the previous quarter. Spending reductions by both companies and households caused Japan to fall out of third place in the world economy.

The Bank of Japan's intentions to raise interest rates for the first time since 2007 are complicated by this less successful than anticipated performance. The recession throws a wrench in the central bank's plans to end its negative rate policy, which it has been discussing.

Private consumption fell by 0.2% as households tightened their budgets in response to growing living expenses. For the tenth consecutive month, household spending decreased in December compared to the same month last year, with wage increases falling short of inflation. The previous quarter's business spending was likewise weak, declining by 0.1%.

In the upcoming months, there is a risk that the yen's reversal to levels not seen since November will increase cost-push inflationary pressure. Japan's yen saw minimal movement in relation to the US dollar following Thursday's data, trading at 150.40.

Growth was boosted by net exports by 0.2 percentage points. December saw a spike in exports, driven mostly by cars going to the US and equipment for making chips going to China. As a subset of service exports, inbound tourism also continued to grow, with December seeing a record number of visitors.

Looking ahead, given that growth is predicted to slow down in some of Japan's major trading partners in 2024, external demand may become a less dependable source of support for growth.


Source: https://www.bloomberg.com/news/articles/2024-02-14/japan-s-economy-slips-into-recession-clouding-boj-s-policy-path

 

Brazil: Tackling Corruption

According to the Organization for Economic Co-operation and Development (OECD), despite foreign bribery schemes being on the rise in Brazil, the country has made some progress. According to the report, Brazil has implemented legislation against corporate bribery and taken enforcement actions against large-scale foreign bribery cases, including utilizing leniency agreements.

The report, however, raises a concern about Brazil's ability to effectively charge individuals, noting that only 28 of 60 foreign bribery allegations have been investigated, and that only three companies have received leniency agreements since 2014. OECD suggests Brazil should increase its efforts to prevent foreign bribery, especially in the private sector, by prosecuting more individuals. Brazilian policymakers should enhance efforts to deter foreign bribery, including bringing more individuals to justice and improving whistleblower protections.

The report also highlights challenges in enforcing anti-bribery laws, such as the lack of convictions of people in foreign bribery cases. It highlights the first criminal anti-bribery proceeding to last nearly a decade in which eight of nine defendants were found not guilty due to the country's statute of limitations. It is recommended by the OECD that Brazil amend the statute of limitations through legislative action or other means to address these issues.

 

Even as inflation wanes, voters still worry about getting by.

An AP news article titled It’s a mismatch on the economy. Even as inflation wanes, voters still worry about getting by, covering economic worries despite a relatively strong economy. The article covers the economic woes of the people of the city of Grand Rapids, MI. During the poll, the city of 200,000, responded rather negatively to the US economy, despite recent inflation, production, and employment numbers coming out rather strong compared to the rest of the world. The article highlighted several reviews from the inhabitants of Grand Rapids, varying from political affiliation, job, and family size. However, all interviews reported a negative outlook on the economy, mainly around housing and food costs. I think this article is a good example of how the average American is impacted by the economy, while regulators only run off of indicators and macro concerns. While regulators, investors, and the wealthy are celebrating the state of the economy, price levels have kept the rest of America from feeling the same about the economy. The article gives a good parallel on how theory and real-life interact with each other.

Link to the Article: https://apnews.com/article/economy-voters-stress-biden-michigan-2024-election-92071eacbbb7a39f12e838ec9daaa51c

ESPN, College Football Playoff reach new TV contract extension

 

The CFP has decided to stay with ESPN for the coming years. The Athletic reported that the sports division of the Walt Disney Company and the power brokers behind the playoffs reached a massive extension on their current broadcast agreement. Starting in 2026, ESPN will pay $7.8 billion over 6 seasons for the rights of the playoff.

While there are two years left on the current deal, many questions circulated wether ESPN would want to or be able to commit towards keeping the most important games in college football. What makes next season different is it will be the first year of the expanded 12 team playoff, changing from the original 4 team playoff.  ESPN who already has deals with UFC, Top Rank Boxing, major tennis, hockey, etc.. decided that the CFP will be worth the buy.

Another note that was made is that ESPN has the choice to sublicense games, which would most likely be first round, to another network or digital player. This is perhaps what the future of streaming looks like, with Warner Bros. Discovery and Fox comes into play. As this is all happening, nothing T.V related will be set in stone until the Pac-12 is settled, which right now is a conference shrinking to two members and is in danger of losing its seat at the Power 5 table.

Russia’s economy ‘in for very tough times’ despite improved growth outlook, IMF managing director says

Russia’s economy ‘in for very tough times’ despite improved growth outlook, IMF managing director says

link- https://www.cnbc.com/2024/02/12/russias-economy-in-for-very-tough-times-despite-improved-outlook-imf.html

The head of the International Monetary Fund, Kristalina Georgieva, has warned that the Russian economy, despite receiving a growth upgrade, is still facing significant challenges. The IMF recently raised its forecast for Russia's economic growth from 1.1% to 2.6% for this year, attributing it to the country's investments in its war economy since the invasion of Ukraine. However, Georgieva emphasized that this growth comes at a cost, with a significant outflow of skilled workers and reduced access to technology due to sanctions. She believes that the Russian economy is in for tough times ahead, despite the seemingly positive growth forecast.

Global military spending hits record $2.2 trillion

 The latest report of the International Institute for Strategic Studies (IISS) paints a worrying picture of instability and an era of contested power. According to the IISS, global military spending reached a new high of $2.2 trillion, a 9% increase since 2022. The reason for this is because of recent events such as Russia invading Ukraine, China’s military modernization, conflict in the Middle East, and military coups in Africa. 

The war on Ukraine pressures other nations to increase defense budgets. The member nations of NATO increased spending by 32%, making this the second consecutive year of growth and contributing to over 50% of the world's military spending. Because of the war, Russia has increased military spending by 30%, which accounted for 7.5% of the country's GDP. China has increased its military spending for the 29th consecutive year, due to its ambition of creating a “world-class” military by the middle of the century. 

The United States continues to be the world's top military spender. In 2023, the United States had a military budget of $900 billion, which is greater than the top 15 countries combined. Compared to previous years, from a GDP standpoint, the United States military spending is 3.36% less than in previous eras such as the Cold War. 

The global arms race raises a serious concern about the political state of the world. Increased military spending and an increase in tension between nations increase the risk of international conflict. Increasing spending on defense systems also means cutting back on other areas such as healthcare, education, and public services. 

https://apple.news/AHMy7wdLnT--W8cEf-acVJQ

China's market crash could be the last straw for many foreign investors who leave permanently, think tank says

     China has been taking hits recently and now China's stock market decline could spell disaster for the country. With the decline of the stock markets, foreign investors have been pulling out en masse and they are likely not to come back. China's firms collectively have also suffered a 7 trillion dollar loss since early 2021 which has and will continue to greatly affect offshore traders. 

    China, which was originally a staple for stable growth for investors, will now change course because of these issues and become a beacon for fast profits. This will continue to contribute to the volatile funds swing that permeates through modern Chinese markets. There has been a response to these issues as Beijing has responded to the financial stress by including state-backed purchases as well as restricted access to offshore markets and curbs on short-selling.

    One of the leading concerns for China is its property market which accounts for most of the country's GDP. It has recently sustained a mass of default waves with real estate giants forced to liquidate. There was also a crackdown on the tech sector in 2020 which led to more investors pulling out. Net foreign inflows last year reached only $6.1 billion, the lowest level since 2017.

    And even without all the underlying issues China continues to impose worry by its intentions for stock investors. They have made various announcements directed at financial markets that suggest less tolerance for business as usual.

https://markets.businessinsider.com/news/stocks/china-economy-crash-real-estate-property-stock-market-foreign-investors-2024-2

Markets everywhere

I listened to a very timely podcast on market efficiency.

 

What do you think? Can you come up with an example where markets would be an efficient way to arrange allocation of a particular good or a service but not necessarily fair, or equitable, or acceptable in some way? Would like to get some examples in the comments. 

YOLO spenders have created a huge credit bubble in the US economy

 Consumers today have taken on a massive amount of debt but are spending like crazy and it's creating a bubble in the US economy. Today, consumers drive 70% of the US economy and in the fourth quarter of 2023, their spending jumped up by $208 billion. At the same time, household saving rates currently sit at a mere 3.7% which is way down from the historical rate of 9%. What’s worrisome is that along with this, households have added a shocking $212 billion to their debt during that period, resulting in over a 100% increase in consumer spending that was financed by debt. 

While consumers show no signs of slowing down, credit card delinquency rates with 30-day default rates have risen from 5.9% a year ago to 8.5% today and one in every twelve holders of credit cards is missing their payments. The last time this happened was in 2011 when unemployment was at 9%, but today it sits at a near all time low of 3.7%. Delinquency rates for auto loans and mortgage loans have also increased lately, but none of this seems to worry consumers.

https://apple.news/A1h3Sb45HQc2--f93MI3OkA

Cooper Meek

Fast Passes.....yes or no? The wealthy are cutting the line at the airport, Disney World and ski resorts

An interesting article on the topic of efficiency and fairness. What is your take on the ability to pay to skip lines? Is waiting in line to get a service and using a fast pass the same product? What happens when more people use these passes? Are there negative externalities to the people who do not pay? The wealthy are cutting the line at the airport, Disney World and ski resorts

  Attacks in the Red Sea are disrupting Global Trade. Here's how it could affect what you buy.

    Car factories have stopped production in Belgium and Germany, spring fashion lines are delayed all over Britain, and a Maryland company that makes hospital supplies doesn't know when they are going to get parts from Asia. Attacks in the Red Sea are delivering an unexpected shock to global trade, along with pandemic related port jams and Ukraine's Invasion of Russia. The attacks are coming from Houthi Rebels in Yemen that are seeking to stop Israel's offensive against Hamas in Gaza. They attack cargo ships by forcing them away from the Suez Canal and causing them to have to go around the tip of Africa.

    Ryan Petersen, CEO of global supply chain managment company Flexport, described what is happening right now in the Red Sea as short-term chaos that will lead to increased costs. This problem will continue to grow the longer the war in Gaza drags on. Petersen explained that the disruption in the Red Sea lasting a full year could inflate prices of goods by 2%. This will lead to even higher interest rates and weaken the economy. 

Attack in the Red Sea

Clouds over global economy ‘beginning to part’ but Red Sea crisis could spell trouble, says IMF