Economic Update – IMF No Longer Resisting All Forms of Protectionism, Fed Chairman Warns Trump on Reforms, more…

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Bloomberg: IMF Panel Adopts G-20 View on Trade as Trump Considers Options

  • The IMF’s steering committee adopted the position on trade taken by the Group of 20 last month in an effort to accommodate Donald Trump’s administration, which is considering how far to go in fulfilling the president’s campaign pledges to impose tariffs and reshape international accords.
  • A communique from the International Monetary and Financial Committee, released Saturday in Washington, said that officials “are working to strengthen the contribution of trade to our economies.” Such language echoes a statement last month from G-20 nations, which have a similar makeup as the IMF panel, reflecting the Trump administration’s call to rethink the global order for commerce.

CNBC: Fed’s Fischer warns that Trump’s changes to bank reforms could be ‘very dangerous’

  • “We seem to have forgotten that we had a financial crisis which was caused by behavior in the banking and other parts of the financial system and it did enormous damage to this economy,” Fischer told CNBC in a live interview. “Millions of people lost their jobs, millions of people lost their houses.”
  • “The strength of the financial system is absolutely essential to the ability of the economy to continue to grow at a reasonable rate, and taking actions which remove the changes that were made to strengthen the structure of the financial system is very dangerous,” he added.

SCMP: China’s Credit Excess Is Unlike Anything The World Has Ever Seen

  • From a global macroeconomic perspective, we encourage readers to consider that the world is experiencing an extended, rolling process of deflating its credit excesses. It is now simply China’s turn.
  • For context, Japan started deflating their credit bubble in the early 1990s, and has now experienced more than 20 years of deflation and very little growth since. The US began its process in 2008, and after eight years has only recently been showing signs of sustainable recovery. The euro zone entered this process in 2011 and is still struggling six years onward. We believe China is now entering the early stages of this process.

Zero Hedge: “The Retail Bubble Has Now Burst”: A Record 8,640 Stores Are Closing In 2017

  • The devastation in the US retail sector is accelerating in 2017, and in addition to the surging number of brick and mortar retail bankruptcies, it is perhaps nowhere more obvious than in the soaring number of store closures.
  • While the shuttering of retail stores has been a frequent topic on this website, most recently in the context of the next “big short”, namely the ongoing deterioration in the mall REITs and associated Commercial Mortgage-Backed Securities and CDS, here is a stunning fact from Credit Suisse:“Barely a quarter into 2017, year-to-date retail store closings have already surpassed those of 2008.”

CNBC: ECB’s Nowotny says policy on rates, bond purchases set for 2017, still mulling 2018

  • The European Central Bank has decided on interest rates and bond purchases for the rest of 2017 and will decide what to do beyond that in the second half of this year, ECB Governing Council member Ewald Nowotny said in an interview published on Saturday.
  • Nowotny’s remarks were in line with recent comments by other policymakers pushing back against German Finance Minister Wolfgang Schaeuble, who has called for the ECB to move away from its ultra-accommodative monetary policy. But Nowotny’s remarks suggested that the soonest any decision would be reached is July.
  • “We have decided for 2017. We are continuing bond purchases at a reduced level and leaving the interest-rate structures as they are,” Nowotny said in an interview with Austrian magazine Profil. “In the second half of the year we will then reach the decisions concerning the period after the end of 2017.”
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