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China Likely to Trigger Next Economic Crash, says IMF

It could be 2008 all over again in a few years but it might also be far worse this time around, warns the International Monetary Fund (IMF).

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Arthur J. Villasanta – Fourth Estate Contributor

New York, NY, United States (4E) – It could be 2008 all over again in a few years but it might also be far worse this time around, warns the International Monetary Fund (IMF).

In its Global Financial Stability report, the IMF is sounding the alarm that global debt levels are above 2008 and failure to reform the banking system will trigger a larger crisis. As a consequence, the world economy is at risk of another financial meltdown – but far worse than that of 2008.

This impending crisis will also be due to the failure of governments and regulators to implement all the financial and regulatory reforms needed to protect the global financial system from reckless behavior, said the IMF.

The organization asserts that global debt levels are well above those at the time of the Great Recession of 2008.because of this, the risk remains that unregulated segments of the financial system might trigger a global panic.

IMF Managing Director and Chair Christine Lagarde said she is concerned the total value of global debt in both the public and private sectors has rocketed by 60% in the decade since the financial crisis to reach an all-time high of $182 trillion.

She said the build-up made developing countries and companies more vulnerable to higher U.S. interest rates. These higher rates, in turn, might ignite a flight of funds to the U.S. and destabilize their economies. “This should serve as a wake-up call,” she said.

The IMF noted with some irony that “risks tend to rise during good times, such as the current period of low interest rates and subdued volatility, and those risks can always migrate to new areas.” It also pointed out that “supervisors must remain vigilant to these unfolding events.”

It warned that “large challenges loom for the global economy to prevent a second Great Depression.” It said the huge increase in borrowing by corporations and government at cheap interest rates hasnot resulted in higher levels of research and development or more general investment in infrastructure.

This trend since the 2008 collapse of Lehman Brothers, which triggered the Great Depression, has left the global economy in a weaker position, especially as it enters a period when a downturn is possible.

The stability report pinpointed China as a massive danger to the world’s financial system. A dramatic surge in lending by shadow banks in China, and the failure by Beijing to impose tough restrictions on insurance companies and asset managers (which handle trillions of dollars of funds) are causes for great concern, said the IMF. Too big to fail banks are now even too bigger to fail.

The IMF stability report chided Donald Trump’s administration for undermining efforts to prepare for another downturn. It also said the development of digital trading platforms; digital currencies such as bitcoin and other financial technology companies had been too rapid.

“Despite its potential benefits, our knowledge of its potential risks and how they might play out is still developing. Increased cybersecurity risks pose challenges for financial institutions, financial infrastructure, and supervisors. These developments should act as a reminder that the financial system is permanently evolving, and regulators and supervisors must remain vigilant to this evolution and ready to act if needed.”

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Politics

US Budget Deficit Hits Record $204.9B for November

The federal budget deficit surged to a record for the month of November of $204.9 billion, but a big part of the increase reflected a calendar quirk.

In its monthly budget report, the Treasury Department said Thursday that the deficit for November was $66.4 billion higher than the imbalance in November 2017.

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Washington, DC, United States (VOA) – The federal budget deficit surged to a record for the month of November of $204.9 billion, but a big part of the increase reflected a calendar quirk.

In its monthly budget report, the Treasury Department said Thursday that the deficit for November was $66.4 billion higher than the imbalance in November 2017.

But $44 billion of that figure reflected the fact that December benefits in many government entitlement programs were paid in November this year because Dec. 1 fell on a Saturday.

For the first two months of this budget year, the deficit totals $305.4 billion, up 51.4 percent from the same period last year. The Trump administration is projecting that this year’s deficit will top $1 trillion, reflecting increased government spending and the loss of revenue from a big tax cut.

The new report showed that the higher tariffs from President Donald Trump’s get-tough trade policies are showing up in the budget totals. Customs duties totaled $6 billion in November, up 99 percent from November 2017.

Trump has imposed penalty tariffs on steel and aluminum imports froma number ofcountries and on $250billionof Chinese imports as the administration seeks to apply pressure to other countries to reduce their barriers to American exports. However, China and other nations have retaliated by imposing penalty tariffs on U.S. exports, sparking a tit-for-tat trade war.

The administration still believes it will prevail and is currently in talks with China over trade practices the administration feels are unfair to American companies and workers.

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Criminal Probe Launched into Trump’s Inaugural Spending

Federal prosecutors based in Manhattan have launched a criminal probe to determine if $107 million in donations to then President-elect Donald Trump’s inaugural committee were illegally spent.

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Arthur J. Villasanta – Fourth Estate Contributor

Manhattan, NY, United States (4E) – Federal prosecutors based in Manhattan have launched a criminal probe to determine if $107 million in donations to then President-elect Donald Trump’s inaugural committee were illegally spent.

Investigators are also looking into whether some of the committee’s top spenders traded money for access to the incoming Trump administration. They also want to know if Trump’s people sought money in exchange for “policy concessions or to influence official administration positions.”

Giving money in exchange for political favors can run afoul of federal corruption laws. Diverting funds from Trump’s inaugural committee, which is a registered nonprofit, also violates federal law.

More specifically, Trump’s inaugural committee is being probed for accepting cash-for-access from Middle Eastern nations like Qatar, Saudi Arabia and the UAE. Secret recordings made by Trump’s personal lawyer Michael Cohen revealed these cash-for-access transactions.

Investigators are focusing on Middle Eastern donors like Qatar, Saudi Arabia and the United Arab Emirates. They’re trying to determine if these nations used straw donors to disguise their donations to Trump’s inaugural committee and the pro-Trump super PAC, Rebuilding America Now, in hopes of buying influence.

Foreign nations are banned from contributing to federal campaigns, PACs and inaugural funds by law.

Federal prosecutors have questioned Richard Gates, ex-partner of former Trump campaign chairman Paul Manafort. In February, Manafort pleaded guilty to conspiracy and lying charges lodged by special counsel Robert Mueller.

Gates served as deputy chairman of Trump’s inaugural committee. He’s cooperated with investigators in Mueller’s probe of Russian interference during the 2016 U.S. presidential election.

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China Beginning to Feel the Pain from Trump’s Trade War

China said its retail sales and industrial output growth for November badly missed their targets, confirming that China’s economy continues to slow down amid Trump’s trade war.

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Arthur J. Villasanta – Fourth Estate Contributor

Beijing, China (4E) – China said its retail sales and industrial output growth for November badly missed their targets, confirming that China’s economy continues to slow down amid Trump’s trade war.

China’s National Bureau of Statistics (NBS) reported that industrial output grew 5.4 percent year-on-year, the slowest pace in almost three years. This growth was also lower than the 5.9 percent analysts had predicted.

On the other hand, retail sales rose 8.1 percent, which is the weakest pace since 2003. This pace is also lower than the 8.8 percent analysts expected. November retail sales growth was down from 8.6 percent in October.

Fixed asset investment rose 5.9 percent from January to November, marginally higher than the 5.8 percent forecast by economists. FAI rose 5.7 percent from January to October.

Despite Trump’s trade war, data from China unexpectedly shows its economy on the upside for much of 2018. Manufacturing benefited from front-loading, or rushing to ship as much goods as possible, before tariff deadlines hit on Jan. 1, 2019.

The weaker Chinese data in November shows the positive impact of front-loading is beginning to vanish and that downward pressure on the Chinese economy is increasing, said RBC Capital Markets in Hong Kong. Industrial output and retail sales data released on Friday were ugly, said the firm.

NBS said after the release of the data that the impact from bilateral trade tensions with the U.S. was not yet obvious. So, the worst is yet to come and policymakers will be very worried, particularly with consumption growth falling off a cliff.

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