Banking turmoil has driven up spreads on sovereign bond yields over US Treasuries to levels that impair ability to raise funds
Archive for category: #Capitalism
Bank sector stress makes a stagflationary debt crisis more likely and severe, writes Nouriel Roubini.
The US dollar still dominates debt markets, but some niche-sounding data suggests things could be set to shift
We speak with journalist Alissa Quart, executive director of the Economic Hardship Reporting Project, about her new book, Bootstrapped: Liberating Ourselves from the American Dream, which examines myths about individualism and self-reliance that underpin the U.S. economy and the inequality it fosters. She says a focus on succeeding through hard work obscures the degree to which many rich and powerful people have benefited from social support, resulting in a cycle of “shame and blame” for those who fall short.
Anadolu Agency/Getty Images
- Sovereign defaults are at a record high, with 14 default events since 2020, Fitch said.
- That’s compared to 19 such events between 2000 and 2019, according to the ratings agency.
- Default events are also taking 107 days on average to resolve, up from 35 days in 2000, Fitch added.
Sovereign defaults have jumped exponentially in the last three years, according to a Fitch Ratings report published Wednesday.
Since 2020, 14 such events occurred across nine countries, compared to the prior two-decade span between 2000 and 2019 that saw 19 defaults across 13 different countries.
The surge in defaults comes as sovereign borrowing ramped up, with the median general government debt-to-GDP ratio climbing to 48% pre-Covid from 31% in 2008, helped by easier access to the eurobond market and financing from China.
“Against this backdrop, frontier markets with limited buffers were poorly placed to cope with the severe shocks from the pandemic and the impact of Russia’s invasion of Ukraine on food and energy prices, global inflation and the subsequent abrupt tightening in monetary policy,” Fitch said.
Currently, Belarus, Lebanon, Ghana, Sri Lanka and Zambia are in default. Other countries that underwent such events since 2020 include Argentina, Ecuador and Suriname, as well as Ukraine.
Meanwhile, Russia faced its own default last year, after Western sanctions limited its ability to pay back investors.
Default events are also taking longer to resolve, particularly due to a lack of coordination between Chinese stakeholders, in addition to China’s demand for multilateral debt within restructuring efforts.
While it took around 35 days to resolve a delinquency event in 2000, the average duration now takes around 107 days since 2020. Slower restructurings lead to higher financing costs, Fitch added.
Read the original article on Business Insider
Surge in China’s rescue lending shows need for co-operation on restructuring
Kilito Chan/Getty Images
- Generative AI could lead to “significant disruption” in the labor market, says Goldman Sachs.
- Researchers at the company estimated that the new tech could impact 300 million full-time jobs.
- AI systems could also boost global labor productivity and create new jobs, according to the report.
Generative artificial intelligence systems could lead to “significant disruption” in the labor market and affect around 300 million full-time jobs globally, according to new research from Goldman Sachs.
Generative AI, a type of artificial intelligence that is capable of generating text or other content in response to user prompts, has exploded in popularity in recent months following the launch to the public of OpenAI’s ChatGPT. The buzzy chatbot quickly went viral with users and appeared to prompt several other tech companies to launch their own AI systems.
Based on an analysis of data on occupational tasks in both the US and Europe, Goldman researchers extrapolated their findings and estimated that generative AI could expose 300 million full-time jobs around the world to automation if it lives up to its promised capabilities.
The report, written by Joseph Briggs and Devesh Kodnani, said that roughly two-thirds of current jobs are exposed to some degree of AI automation while generative AI could substitute up to a quarter of current work.
White-collar workers are some of the most likely to be affected by new AI tools. The Goldman report highlighted US legal workers and administrative staff as particularly at risk from the new tech. An earlier study from researchers at Princeton University, the University of Pennsylvania, and New York University, also estimated legal services as the industry most likely to be affected by technology like ChatGPT.
Manav Raj, one of the authors of the study, and an Assistant Professor of Management at the Wharton School of the University of Pennsylvania, told Insider this was because the legal services industry was made up of a relatively small number of occupations that were already highly exposed to AI automation.
Goldman’s report suggested that if generative AI is widely implemented, it could lead to significant labor cost savings and new job creation. The current hype around AI has already given rise to new roles, including prompt engineers, a job that includes writing text instead of code to test AI chatbots.
The new tech could also boost global labor productivity, with Goldman estimating that AI could even eventually increase annual global GDP by 7%.
Read the original article on Business Insider
By Pam Martens and Russ Martens: March 28, 2023 ~ Senator Sherrod Brown (D-OH), the Chair of the Senate Banking Committee, will convene a hearing this morning at 10 a.m. to take testimony from federal bank regulators on why the second and third largest bank failures in U.S. history occurred within two days of each other this month. (A number of other regional banks have seen their share prices plunge this month.) The two banks that failed and were taken over by the Federal Deposit Insurance Corporation (FDIC) were Silicon Valley Bank (SVB) and Signature Bank. Both had experienced bank runs in March and both had extreme exposure to uninsured deposits. One of the witnesses at today’s hearing, Martin Gruenberg, Chair of the Federal Deposit Insurance Corporation (FDIC), explains as follows in his written testimony for today’s hearing: “A common thread between the failure of SVB and the failure of Signature … Continue reading →
The new study looks at the ways governments and markets have responded when banks looked shaky, and anxiety ran high.
Adding to crises like the pandemic, recent stress in the banking system is a new threat to world growth, experts at the organization said.