Headlines:
- Dow Plunges 1,700 Points as U.S. Coronavirus Cases Rise, amid Fed’s Grim Economic Outlook
- Can the US Refuse to Pay $1 Trillion Debt to China for Using COVID-19 as a Bio-Weapon?
- Japan’s Top Billionaire Tadashi Yanai says the Image of America is Breaking
- Egypt Lashes Out
- Trumps Arctic Strategy
- Economic Gloom ahead
Dow Plunges 1,700 points as U.S. Coronavirus Cases Rise, amid Fed’s Grim Economic Outlook
U.S. stocks convulsed lower, plumbing intraday nadirs Thursday afternoon, amid signs of a resurgence of cases of the illness derived from the novel strain, and as investors digested Wednesday’s downbeat economic outlook from the Federal Reserve. The market moves came even as the number of Americans filing for first-time jobless benefits declined again in the most recent week. The number of U.S. coronavirus infections passed the two million mark and over 112,000 Americans have died, according to Johns Hopkins University. Despite fewer cases being recorded in some cities and states, the seven-day average of new cases over the last two weeks is still rising in more than 20 states, leading investors to worry about a second wave of the epidemic just as business activity is resuming. President Trump announced he will resume holding election rallies with the first in Tulsa, Okla., on June 19 but he isn’t expected to require that attendees practice social distancing. Meanwhile, U.S. Treasury Secretary Steven Mnuchin said the U.S. shouldn’t shut down the economy again even if there is another surge in coronavirus cases. The global case tally for the coronavirus climbed to 7.39 million on Thursday, according to data The death toll rose to 417,022. Earlier, on Wednesday the Fed’s updated policy statement and projections indicate that it expects a 6.5% contraction by the end of the year on a year-over-year basis, with the unemployment rate ending at 9.3%, well above the Fed’s estimate of the long-run rate forecast of 4.1%. The central bank’s dour outlook has a lot to do with the stock market selloff, said Kristina Hooper, Invesco chief global market strategist. “The stock market has almost had blinders on,” Hooper said in an interview. “More than one in three companies in the S&P 500 are dispensing with earnings guidance. So investors have anchored to data, which has been relatively positive about reopenings in various states, improvements in PMIs and the jobs report last week. In one fell swoop Jay Powell threw a lot of cold water on that narrative.” Hooper thinks the market moves of this week aren’t necessarily the start of a sustained leg downward. “Typically the initial reaction to the Fed press conference is not the subsequent reaction. There needs to be some digestion by investors.” In U.S. economic data Thursday, another 1.54 million Americans filed for initial jobless claims, the government said. That beat expectations for 1.565 million people seeking unemployment benefits, according to the Econoday consensus. Although new jobless claims have been falling since March, more than 2.2 million applications for unemployment compensation were filed in the last week of May through state and federal relief programs. That is almost as many as the 2.5 million jobs regained by the economy in the entire month. [Source: Market Watch].
The artificial reality of the Fed’s printing machine has collided with the real economy, and the markets have plunged. The sharp rise in the Dow Jones was driven by the Fed and the C-suite of major corporations buying back shares, so they could exit richer than ever before.
Can the US Refuse to Pay $1 Trillion Debt to China for Using COVID-19 as a Bio-Weapon?
US-China relations are at all time. US President Donald Trump has left no stone unturned in countering and cornering China and even threatened to cut all ties with Beijing. However, the most dangerous counter-measure that the US could take against China, as proposed by many right-wing lawmakers and political experts, is to default on nearly $1 trillion in U.S. Treasury bonds held by China. Sen. Lindsey Graham, a close ally of US President said on Fox News, “They should be paying us, not us paying China,” and expressed support for a suggestion from Sen. Marsha Blackburn, R-Tenn., that the U.S. should cancel its sovereign debt held by China. John Yoo, a law professor at the University of California, Berkeley said in an article that the U.S. could “make China pay for COVID-19” by reneging on its commitment to bondholders. “Conceivably, Washington could even cancel Chinese-held treasury debt and use the proceeds to create a trust fund that would compensate Americans harmed by the pandemic.” There are other experts who differ and say- we are the biggest debt market in the world when it comes to sovereign debt and the dollar is valued as the world’s reserve currency. The problem behind this notion is it heightens the interest rates and devalues the dollar and could negatively impact the markets. One of the biggest advantages the US has is the most inexpensive cost of borrowing and the fundamental reason behind this is that we pay our debts, and that’s been a blessing to the US taxpayer and the economy,” said Mark Zandi, chief economist at Moody’s Analytics. If the U.S. intentionally walked away from these commitments, that advantage would erode. It will mean that all investors will price in the event that the US government gets exasperated at them for whatever reason… and you don’t get your bonds paid,” Zandi said. “They’re going to demand a much higher interest rate for taking that risk. Earlier, as the EurAsian Timed had reported, a suit was filed in a Texas District Court in the US seeking compensatory damages of over $20 trillion US Dollars against China for the “creation and release, accidental or otherwise” of the Novel Coronavirus (COVID-19) as a biological weapon in violation of China’s international obligations. The plaintiffs have sought a whopping $20 trillion, which even surpasses the Chinese GDP, claiming coronavirus is the result of a biological weapon prepared by Beijing. They blamed China of aiding and abetting death, provision of material support to terrorists, conspiracy to cause injury and death of US citizens, negligence, wrongful death, and assault and battery. Meanwhile, White House chief economic adviser Larry Kudlow affirmed in a recent interview that he didn’t expect China to sell U.S. debt because he said doing so “would bankrupt the Chinese government.”. But China pared its holdings of long-term treasuries by roughly $36 billion in the first three months of 2020. “I think they’re already becoming more cautious in their buying,” Zandi said. “If the Chinese take it seriously, then they’re going to be more cautious buyers” — which could drive borrowing rates higher and make it more expensive for the Treasury Department to pay off its massive debt. [Source: Eurasian Times]
The fact that the US is considering on defaulting on Chinese debt to punish Beijing for Covid-19 indicates that Washington is not prepared to engage China on a military war footing. This is likely to embolden China to reassert its economic and military might in the Asian Pacific.
Japan’s Top Billionaire Tadashi Yanai says the Image of America is Breaking
The race relations crisis is changing how the world sees America, according to Japan’s richest man. “The very image of America is breaking,” Tadashi Yanai, CEO of Uniqlo owner Fast Retailing, told CNN Business in an exclusive interview. “I truly hope that this will have a positive impact in the long term, just like the Civil Rights Movement.” Yanai, 71, is Japan’s biggest billionaire and one of the world’s wealthiest people. As the largest shareholder of Fast Retailing, Asia’s biggest clothing retailer, his estimated net worth is about $31.3 billion, according to Bloomberg. In recent weeks, the company’s operations in US cities such as New York, Philadelphia, San Francisco and Los Angeles have all been “hit hard” as protests erupt nationwide over the death of George Floyd, said Yanai. “It shows just how devastated the US spirit is. The political situation is untenable. It’s not working,” he added. “There needs to be a stronger desire to take positive civic action when there are social problems. It’s wrong to keep ignoring them like some are now.” [Source: CNN]
America’s staunchest allies are openly questioning America’s manifest destiny and so called exceptionalism. Today, America is the sick man of the world, and it is very unlikely that the US will regain its standing in the world.
Egypt Lashes Out
Egypt’s top religious authority has lashed out at Turkish President, Recep Tayyip Erdogan, over alleged plans to turn the Hagia Sophia museum into a mosque. The Dar Al-Iftaa, the country’s top Sunni Muslim body, slammed the plans as “propaganda” and the continuation of what it said was the “occupation” of Istanbul. Earlier this year, the religious body targeted Turkey over its popular television industry, alleging influential series such as such as “Resurrection: Ertugrul” and “Valley of the Wolves”, are part of efforts led by Erdogan to revive the Ottoman Empire. Ever since the Arab soring uprisings, Egypt has fallen form grace in regional affairs. When army general Sisi overthrew the government in 2013, he has run the economy into the ground and the Egyptian leadership has been watching nations such as Saudi Arabia, Turkey and the UAE tale centre stage in regional affairs. This latest outburst comes in this context.
Trumps Arctic Strategy
US President, Donald Trump, has instructed his agencies to begin the buildup of a “fleet of polar security icebreakers” that would be fully operational by 2029, citing the need to protect US interests in the Arctic and the Antarctic. In a memo issued to the State Department, Pentagon, Commerce, Energy and Homeland Security, Trump said the US needs to “develop and execute a polar security icebreaking fleet acquisition program.” Trump has long had his eye on the Arctic, floating the idea of buying Greenland from Denmark in August 2019. Though the Danes snubbed the US offer, Washington has continued to explore the possibility of acquiring the world’s largest island and the gateway to the Arctic ever since. His predecessor Barack Obama vowed in 2015 to close the “icebreaker gap” with Russia – which at the time operated 34 such ships, 11 times as many as the US – but nothing came of that initiative. Since then, Russia has built several major nuclear-powered icebreakers, while China also got into the Arctic action by launching its first icebreaker in 2019. The arctic is the next region that is being fought over, with the melting of the ice, new sea routes are opening up which will make it quicker for sea trade to reach form the far eats to the west. The regions energy potential is what is leading to many nations laying claim to the region.
Economic Gloom ahead
The world was heading for a recession when 2020 began but the COVID pandemic has accelerated the crisis and made it much deeper and broader. This week, Germany revealed its economic figures which reveal a gloomy picture. German exports declined in April by 24% over month and 31% year over year – the largest monthly fall since the introduction of foreign trade statistics in 1950. This is significant as exports are a critical part of the German economy as they account for nearly 50% of the country’s gross domestic product. China, France and the US are soon to reveal their economic figures and it is expected their economy will be far worse than Germany’s.