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News Items by John Ellis.
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1. The Treasury Department released final budget numbers for Fiscal Year (FY) 2019 today, showing last year's deficit totaled $984 billion, a $205 billion (or 26 percent) increase from the prior year and a 48 percent increase from 2017. As a result of September tax payments, these figures are slightly lower than the $1.07 trillion deficit reported in the first 11 months of 2019. Nonetheless, they total 4.6 percent of Gross Domestic Product (GDP), the highest as a share of the economy since 2012 and highest ever at this point in the economic cycle.
2. The New York Fed injected permanent and temporary liquidity into financial markets Friday. The Fed said Friday it had bought $7.501 billion in Treasury bills to increase its balance sheet, with eligible banks submitting $35.755 billion in short-term government securities to the central bank for purchase. As of data released by the Fed Thursday, the central bank balance sheet stands at $3.969 trillion, up from the $3.8 trillion it stood at before the Fed started up big repo operations and balance-sheet expansion. Don't worry about it; everything's fine.
3. A year-long investor flight from US leveraged loans has slashed the assets of some of the largest fund managers in the market, underlining mounting unease over the prospects of some of the most debt-laden borrowers. Investors pulled $550 million from loan funds for the week ending October 23, taking total outflows over the past 12 months to $42 billion, according to data from EPFR Global. There have been just three weeks of small inflows over that time. Some of the riskiest loans in the market have started to wobble. Rating agency Fitch increased its predicted default rate for next year from 2 per cent to 3.5 per cent this week, on an expectation of further stress.
4. China said parts of the text for the first phase of a trade deal with the U.S. are “basically completed” as the two sides reached a consensus in areas including standards used by agricultural regulators. The Saturday comments followed a call Friday with Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The trade negotiators “agreed to properly resolve their core concerns and confirmed that the technical consultations of some of the text agreement were basically completed,” China’s Ministry of Commerce said in a statement earlier today.
5. Three decades after communism collapsed in Europe, revolt is raging in cities on four continents and feeding fear that global upheaval may be succeeding an era of relative order. From Latin America through Europe and the Middle East to Hong Kong, millions have taken to the streets to vent their wrath over the vast distance between rich and poor; the increasing cost of living and an indifferent, uncaring ruling elite. Alarm is amplified by signs that the world could be slipping into recession after nearly a decade of restored growth.
6. Renewed clashes between Kurdish and Turkish forces tested a shaky cease-fire in northern Syria on Friday, as the Russia-backed Syrian government moved troops into the area in part of its efforts to reclaim territory it ceded during the eight-year war. Defense Secretary Mark Esper, meanwhile, said the U.S. would reinforce its defense of oil fields in northeastern Syria, as America shifts away from President Trump’s earlier planned full troop withdrawal from the region. Speaking at a press conference after meetings in Brussels, Mr. Esper said the deployments would include some mechanized forces—a classification that includes tanks, artillery, armored vehicles and other heavy equipment.
7. President Trump was persuaded to leave at least several hundred troops behind in Syria only when he was told that his decision to pull them out would risk control of oil fields in the country’s east, according to U.S. officials. Trump had rejected arguments that withdrawing U.S. forces would benefit American adversaries, while endangering civilians and Kurdish allies, but he tweeted Thursday that “we will NEVER let a reconstituted ISIS have those fields.”
8. At least 40 people were killed and dozens injured in Baghdad as police fired rubber bullets and teargas canisters in an attempt to disperse a protest on the streets of the Iraqi capital amid unrest sweeping the country. Tens of thousands gathered in Tahrir Square in central Baghdad on Friday morning to begin the march to the city’s fortified Green Zone, where government buildings and foreign embassies are located, but were blocked by police on the al-Jumhuriya bridge.
9. More than a million people poured into Santiago’s public squares and thoroughfares yesterday in one of the biggest street protests ever seen in the Chilean capital. Downtown areas such as the iconic Plaza Italia came alive with people, mainly student-age and twenty-somethings but also older people and families, waving flags and banners seeking better pay, pensions, health care and education. Many who participated in neighborhood protests earlier in the week joined the downtown demonstrations Friday, which were organized on social media via the hashtag #LaMarchaMasGrandeDeChile (Chile’s biggest march).
10. Voters in Argentina go to the polls tomorrow to elect their next president, with recent surveys showing the leftist, anti-American opposition camp with a comfortable lead over business-friendly incumbent Mauricio Macri. At stake in the election are relations with Beijing and Washington. Unlike the pro-American administration of President Macri, the opposition has made no secret of its affinity for China. Brushing aside concerns about being ensnared in a Chinese "debt trap," senior members of the opposition feel that Argentina should rely more on China than the International Monetary Fund, as the country has done in the past.
11. Heading into tomorrow's regional elections in Italy, polls indicate that a rightwing coalition fronted by Donatella Tesei, a League senator, may wrest control away of Umbria from the left for the first time since the 1970s. If the League does emerge triumphant, the result will underline how Mr Salvini’s pivot away from northern separatism to hard right anti-migrant nationalism has transformed his party into a pan-Italian movement. It will also provide a reality check to those who hoped the ejection of the League from national power in August and the formation of an alternative coalition including the centre-left Democratic party (PD), would shift Italian politics.
12. Facial recognition technology is reshaping the way consumers in China pay for their purchases, just as mobile payment has done in the past few years. At stores, shoppers are increasingly purchasing goods with just a turn of their heads, while commuters "pay with their face" at subway stations. In a country where mobile payments have spread by leaps and bounds in the past couple of years, some 1,000 convenience stores have already installed a facial payment system, and more than 100 million Chinese have registered to use the technology.
13. China has set up a new national semiconductor fund of 204.2 billion yuan ($28.9 billion), as it seeks to nurture its domestic chip industry and close the technology gap with the U.S. The government-backed fund is bigger by some $9 billion compared with a similar fund launched in 2014 that had raised 139 billion yuan, according to corporate registration information, which showed the fund was established on Tuesday.
14. The disruption of "legacy banks" won’t necessarily come from the likes of Bitcoin. It’s more likely to come from a “stablecoin” that’s pegged to the dollar or some other major currency. It could also come from a digital currency offered by a central bank — and most of them are looking at such possibilities. Or it might come from tech companies, like Facebook, that find ways to circumvent the banks. One way or another, banks are likely to lose their easy access to low-interest deposits — and easy profits — within 10 years. Banks also earn large profits on credit card interchange fees collected from vendors, who pass many of those costs on to customers. “At some point, new payment methods will trigger greater competition for deposits,” says Darrell Duffie, professor of finance at Stanford GSB. “If consumers have faster ways of paying their bills, and merchants can get faster access to their sales revenue without needing a bank, they won’t want to keep as much money in accounts that pay extremely low interest.”
15. Ford Motor Co. sustained its second cut in as many months by a major credit-ratings company concerned that the major restructuring the automaker embarked on last year is moving too slowly. S&P Global Ratings lowered its grade on Ford to BBB-, one step removed from junk, and assigned a stable outlook. It called the carmaker’s performance in China and Europe “subpar” and said Chief Executive Officer Jim Hackett faces “high execution risks” in his efforts to turn the company around.
16. Northern California braced for a weekend in uncharted territory as Pacific Gas & Electric prepared to shut off power to more than 2 million people amid forecasts for one of the worst periods of fire weather in a generation. It’s a perilous combination that left many anxiously planning for blackouts and the potential for more destructive wildfires, fueled by 36 hours of intense winds. Some fear they will have to confront fires without power, an experience those who fled this week’s Sonoma County fire described as terrifying. The Diablo winds are expected to pick up Saturday evening and last until Monday morning, longer than the windstorms that fueled the three most catastrophic fires in California history.
17. In a move that worries many public health experts, the federal government is quietly shutting down a surveillance program for dangerous animal viruses that someday may infect humans. The United Nations Environment Program estimates that a new animal disease that can also infect humans is discovered every four months. Ending the program, experts fear, will leave the world more vulnerable to lethal pathogens like Ebola and MERS that emerge from unexpected places, such as bat-filled trees, gorilla carcasses and camel barns.
18. Miguel McKelvey, WeWork co-founder and chief culture officer: "I think I’ve run out of the words to describe what’s been going on, from surreal to crazy to unbelievable to — someone texted me yesterday — 'bonkers,' which all of those things are true and yet the reality is is that we’re still here and we’re still here together. I just want to remind all of us that we came here to do something meaningful in the world. While this may have been the craziest thing we’ve been through, we’re not a company that hasn’t been through crazy things before."
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Quick Links: Pentagon awards $10 billion cloud computing deal to Microsoft, snubbing Amazon. Pentagon, with an eye on China, pushes for help from American tech. Hackers shut down Johannesburg’s networks once again. Death knell for fossil fuels? Stanford study casts doubt on carbon capture. Musk says Tesla has finally made a ready-to-deploy solar roof. The market is concerned about SoftBank's massive debt load again. The Daily and Sunday Telegraph newspapers have been put up for sale.
Political Links: Hitler or Hocke? The rise of an AfD extremist. US and China ‘close to finalizing’ parts of trade deal. General Motors workers approve deal to end strike. Trump accuses Obama of treason for ‘spying’ on his 2016 campaign. Trump is using impeachment to collect new supporters with Facebook ads. Trump Organization weighs sale of Washington hotel. Trump campaign urges White House to soften proposed flavored vape ban. Joe Biden’s presidential campaign is spending more money than it is taking in. Rachel Maddow confronts her bosses at NBC News. President Obama's eulogy for Elijah Cummings. A millennial’s hymn to Generation X.