Period: 23 – 29 January 2021
Top news story: There are two major news stories today.
The first is the stock market scandal in the United States. We quote Pavel Ryabov (Spydell):
«The enchanting corner and all-consuming short quiz organized at Gamestop promotions will go down in history – just because there has never been such a scale, speed and brutality…
Growth 30 times per month… In the last five trading days, Gamestop ranked 3rd in monetary terms among all shares traded on the American stock market, losing only to Tesla and Apple…
Of greater interest is the fact that more than 10 medium-sized capitalizations have been traded in five days – an absolute record for stocks capitalized above $5 billion. By comparison, the most liquid stock in the US, Tesla, trades only 10-15% of its capitalization, Apple 3-5%, and Google, Microsoft, poor 2-4% of its capitalization in five trading days in five days. And then 1000%!»
The second was a public speaking by Russian President Vladimir Putin at a forum in Davos. For the first time at the highest level, the problem of the current crisis (exhaustion of the emission mechanism for stimulating demand) was clearly described, the consequences of the continuation of the current situation and possible (political, not economic) ways out of it were discussed.
Macroeconomics
South Korea’s annual GDP decline accelerated in late 2020:
France’s GDP in the 4th quarter went down by 1,3% per quarter, due to which the annual recession became more intense from -3,9% to -5,0%:
In Germany, only 0,1% per quarter and -3,9% per year after -4.0% in 3 quarters:
The IFO Business Climate Index in Germany in January is the weakest in six months:
In general, the mood of the Germans is pessimistic almost as it was last spring:
US GDP slowed down to 1,0% per quarter in the fourth quarter, the annual downturn did not change significantly (-2,5% after -2,8% earlier).
In general, in 2020, US GDP slumped by 3,5%.
Business activity in Texas is minimal for six months:
The same in the Richmond Federal Reserve Bank region:
United States goods trade balance narrowed slightly in December, but remained close to a record high:
Crude oil stocks in the US have been minimized since July:
Service sector sentiment in the Euro Area is worst in half a year:
The number of new buildings in Japan accelerated the decline to -9,0% per year.
The Japanese retail sales returned to the annual minus:
It should not be surprising that consumer sentiment has deteriorated to last year’s summer:
S&P/Case-Shiller house prices in the United States rose 9,5% per year in November – at most since 2014:
Official government figures confirm this trend:
British employment is down eight consecutive months, job losses in 12 months have peaked since 2010:
Unemployment rate at peak since 2016:
In Germany, unemployment also has begun to rise:
The UK retail balance returned to the quarantine lows last spring:
The US Federal Reserve has maintained an ultra-soft monetary policy, although it has slightly improved its assessment of the economy. This optimism has no basis in reality, but why quarrel with the administration of the new US president?
Summary: According to economic statistics, by the end of last year the economic situation had seriously deteriorated. As statistics are cleared of seasonal influences, it is not necessary to refer to the effect of the end of the year. And in this case, an analysis of the behavior of monetary authorities is very interesting. On the one hand, they are constantly pouring emission money into financial infrastructure institutions. D. Trump attempted to reverse this trend by directing money to the real sector, but suffered a painful defeat. On the other hand, the authorities are trying to stop inflation through man-made deflation linked to falling demand (quarantine)!
Strategically, this is like schizophrenia, as Putin told in Davos. There is an urgent need to rescue banks and hedge funds (in the first section of this Review, only one, the most striking example, in the reality of disturbing news much more) – and monetary authorities are pouring money into the financial structure. As a result, inflationary processes are intensifying and the authorities are tightening the quarantine against the backdrop of increased vaccination campaigns.
As a result – falling demand, the demise of small and medium-sized businesses (which do not have financial reserves like large companies), banks get new money to stimulate the economy. Another round of the spiral of crisis is coming to an end, the recession is getting stronger. But the question is: Why is demand falling when money is allocated to stimulate it?
The answer is very simple. The fact is that the main jobs are created by trade (in the US, for example, the largest employer – retail) and small and medium-sized businesses. If jobs fall, demand falls very hard and stimulus measures do not fully reverse the decline. And recently, banks are reluctant to lend to consumers, given the underlying economic trend.
Accordingly, the structure of private (final) demand is becoming much simpler, and more goods are becoming “luxery”, meaning that their production is being drastically reduced with a simultaneous increase in trade margins. As a result, jobs are being cut back, and entire industries are sometimes disappearing (as we have seen before us, the tourism industry that was created after 1981 is disappearing).
It seems to us that Trump lost not because he was worse than Biden (the difference in their plans the Khazin Foundation already commented). And he lost because, like Biden, he has no constructive plans for the future, and his administrative position is weaker. Apparently, it is not possible to stop the spiral of the crisis any longer (according to the theory stated in «Reminiscences about the future»). In the meantime, it is still possible to avoid the worst socio-political and geopolitical consequences. That is what Putin said in Davos.
Overall, the outcome of January shows that global economic instability has increased significantly.