This is my annual post on the top Financial stories of the year now ending. As usual, I do not try to rank them, merely listing one Big Story for each of the twelve months of the year. Each story is accompanied by a (bold) acknowledgement of the theme it may illustrate. But my emphasis is on the story, not the theme. Something happened with a particular who-what-when-where structure in each of these twelve instances.
Despite all the storm-and-stress over the election campaign in the US, and the obvious financial significance of the result both within the US and without, you will not find much of that campaign in this post. It isn't even featured in the November entry. Yet four of our grafs are US-focused. They focus not on the racehorse of the campaign, but on the stakes.
If there is a theme here, though, it is the significance of financial/economic sanctions in wartime. Most of the "western world" has sanctioned Russia for its assault upon the sovereignty of Ukraine. And, as a supplementary matter, it has found ways to support Ukraine in getting through the opportunity costs of war. That has not brought Russia to its knees in a war-ending way (these non-lethal weapons seldom work that well). But it has mattered.
The entries for April and May both address that nest of issues from different directions. In December we will come back to the nest from a somewhat different flight path.
That understood, let us get right to work.
January: Commercial real estate. United States. In the US, among financial institutions concerned with the issue of how much we owe each other, this month sees an outbreak of worry about a "maturity wall". Or, to change the metaphor, a maturity cliff. Is too much debt coming due too soon in the near future? If so, various underlying businesses, especially perhaps the commercial real estate market, will have to focus on refinancings until the wall can be overcome.
February: Commercial real estate. United States. It becomes clear this month that the bankruptcy proceedings in the matter of WeWork (a case filed last November) turn on the issue of how badly a bankrupt debtor can stiff landlords. (And it is doing pretty well at that.) So, on the one hand the CRE owners are going to have to work hard on refinancing debts over the next two-three years, and on the other hand their bankrupts tenants may end up paying them less through the chapter 11 proceedings than they had previously had reason to hope. Happy still-new year to them.
March: Alternative fuels. Malaysia. The World Trade Organization upholds a decision by the EU that biodiesel fuel made from palm oil from Malaysia should NOT count as a renewable biofuel. [Under EU rules, member countries are obliged to get the share of biofuel used in transportation up to 14% by 2030.] A conflict between two policy goals. Malaysia has promoted its palm oil exports as renewable/sustainable, but the spreading palm oil plantations are replacing forests. I wrote about an earlier stage in this very dispute, in some depth, back in Feb. 2020.
April. The impact of sanctions. Eastern Europe. The lasting Russo-Ukraine war is driving Russia into a closer economic relationship with the People's Republic of China. CNN reported in April that in 2023, an amazing 90 percent of Russia's micro-electronics imports came from China. The micro-electronics are used for missiles, tanks and aircraft. The PRC is also critical in that it offers a market for Russian oil. The passage of a US aid bill later in the month ensures that the war will continue: so this relationship will become even tighter over time.
May: Financing a war. Eastern Europe. The lasting Russo-Ukraine war is making some of the creditors holding Ukraine's sovereign bonds nervous. BlackRock, Pimco and others accepted a suspension of payments in the wake of the Russian attack two years ago. Now in May they make it clear they want payments to resume, although they are willing to forgive a big chunk of the debt in return. Servicing the interest of the affected creditors could cost Ukraine $500 million annually. [The parties reached a deal in July, what Reuters called an "unprecedented debt rework." ]
June: Continued viability of fossil fuels. Saudi Arabia. On June 2, Saudi Arabia began selling shares in Saudi Aramco, in an effort to raise money to diversify the economy. It sold only a small sliver of the value of the company, less than 2/3s of one percent (0.64%) and received $12 billion. This implies a valuation of the whole enterprise of roughly $1.7 trillion. But the new sale, and the fact that the slice the Kingdom put on the market sold out within hours, certainly indicates that the world markets continue to expect that a lot of hydrocarbons will continue to sell for a long time to come.
July: IMF austerity measures cause disorder. Africa. Isn't that just what the IMF does? This time around the site of the disorder is Kenya. IMF pressure produced a "Kenya Finance Bill," which in turn produced riots that killed roughly 50 people. Under pressure President Ruto (a) announced that he would not sign the bill after all, and (b) he replaced his entire cabinet. The current 4-year program, with its IMF disbursements, will run out in April of next year, and further drama is very likely around that time.
August: Microcredit. Bangladesh. A strange twist of fate played itself out this month with regard to Muhammad Yunus, long-time advocate of micro-credits and the winner of the Nobel Prize in economics in 2006. After protests against some ruling-class employment privileges unexpectedly morphed into a revolution, the heads of the former government of the country took flight. The successful but half-accidental revolutionaries turned out to be admirers of Yunus. He took office as Chief Advisor, in effect the head of the new government. Micro-credits as a development tool may get itself scaled up.
September: The business cycle. United States. The Federal Reserve met on the 17th-18th of this month. This meeting produced the first Federal funds rate decrease since the spring of 2020 and the start of the Covid crisis. The Fed cut the rate to essentially zero back then. When the crisis was deemed to have passed, nearly two years later, the Fed entered a round of increases followed by a frustrating period of holding-them-steady. Now: full circle to another decrease, perhaps the first in a line of them.
October: Climate change. United States. A powerful one-two punch, Hurricanes Helene and Milton smack against the Gulf Coast of Florida and crystallize a recent shift in the debates over climate change. Such matters as average global temp, sea level, etc., are fading from discussion as the issue of extreme event attribution becomes paramount. Category Five monsters "are no longer outliers, freak disasters or storms of the century." They are the new normal, with all the predictable-though-irregular costs -- human and financial -- they entail.
November: Stimulus plans. China. In Beijing, leading officials met over the issue of local government debt (widely considered a dangerous time bomb threatening the economy there.) They came out of the meeting announcing a debt swap plan and ... investors reacted with disappointment. Put off for example by the absence of any move toward bank recapitalization.
December: Tightening sanctions (Syria/Russia). The government of Syria, which has been the possession of the Assad family for half a century, suddenly collapsed this month. This is bad news for Russia, since the Assad-run Syrian govt made itself a useful ally of Russia in the avoidance of western sanctions. So this will make the question discussed in the April paragraph above, how Russia continues to finance this war, more difficult even if China continues to be 'game'.
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