Line graph of total debt as a percentage of GDP, showing that global debt increased during the pandemic

Coronavirus Business Update: Fear of a “debt tsunami” as governments increase borrowing

Your level-headed briefing on how the coronavirus pandemic is affecting markets, global business, our jobs and daily life, with expert input from our reporters and specialists around the world.

For updates, visit our live blog. Please send your reactions and suggestions to [email protected] We’d love to hear from you.

The FT is offering a free 30-day trial of Coronavirus Business Update that includes access to FT.com. Please spread the word by forwarding this newsletter to friends and colleagues who you think are valuable. And if this has been forwarded to you, hello. Please sign in here.

Latest news

  • According to the president of the Dallas Federal Reserve, the global oil market will remain oversupplied until early 2022

  • UK regulator Ofgem is proposing an increase in energy costs to offset suppliers’ pandemic debt

  • Scotland plans to vaccinate up to 1 million people by the end of January as the most populous parts of the country prepare for a tougher lockdown

British government deficit high in peacetime

Data this morning showing the UK hit a record peacetime deficit once again puts the focus on the rapid rise in debt levels of governments and businesses around the world grappling with the aftermath of the pandemic.

The Institute of International Finance, which represents financial institutions, warned on Wednesday of a “debt tsunami” as global borrowing accelerated at a rate that could have “a significant adverse impact on economic activity”.

The debt burden on developing countries is becoming particularly acute, as emerging markets correspondent Jonathan Wheatley explains in our Big Read. Zambia became the sixth such country this week to default or restructure debt this year. The G20 leaders meeting this weekend are expected to agree on a “common framework” to help poor countries overcome their impending cash flow problems and address the longer-term debt sustainability problem .

Tensions revel in richer regions too. The President of the European Central Bank, Christine Lagarde, refused this week to back any aid to over-indebted eurozone governments, while the European Commission urged EU member states not to build unsustainable debt positions when signing the 2021 budgets.

Back in the UK, there was more evidence that households were also affected. Nationwide, the largest building society in the country, the amount earmarked for non-performing loans was doubled.

The FT’s new Foundation for Financial Competence aims to provide the most vulnerable with personal financial literacy. Read deputy editor Patrick Jenkins on why these skills are more important than ever.

Markets

A vaccine-induced economic boom could die U.S. dollar Some analysts say they should fall by as much as 20 percent over the next year. The greenback is usually in demand during stressful times, which reflects its safe haven status. “Even if the US economy does reasonably well, we think the dollar can weaken significantly as investors look for higher returns outside of the US and leave the safe havens they have been in throughout the entire Covid period” said a Goldman Sachs manager.

Another safe haven – gold – can also be a victim of possible recovery. There are signs that the precious metal’s two-year rally is coming to an end as investors invest in commodities more closely linked to industrial demand, such as silver, which is used in solar panels, and platinum, a component in catalysts.

Line chart of the price of gold (USD per troy ounce) shows that yellow meat has surpassed its 2011 peak this year

An emergency pandemic rule that allowed UK businesses to move faster Sharing problems was scrapped. The provision had enabled common shareholders to be excluded from large fundraising drives.

Companies

Retailers Governments across Europe are campaigning to lift restrictions to save the crucial Christmas season, starting with the promotions on Black Friday next week – a month that typically accounts for up to half the annual sales of many non-food Company is responsible. UK retail sales rose in October as shoppers flocked to stores ahead of the forced shutdown of non-essential stores in England earlier this month.

Graphic with retail volume (newly based, 2015 = 100)

BuzzFeed’s The acquisition of HuffPost highlighted the impact of the pandemic on digital media titles and their reliance on advertising. Traditional publishers like the Financial Times and the New York Times, on the other hand, are now mainly supported by subscription income. Conde nast, Owner of Vogue, accelerates the move to digital after print advertising fell off a cliff during the crisis.

The online shopping boom triggered by pandemics means parcel sales for the UK Royal Mail surpassed that of letters for the first time. The company began collecting parcels from doorstep across the UK last month. Customers can hand items over to postmen and postmen or store their packages in a “safe place” for a small fee.

Global economy

The US Treasury Department declined to extend some of the Federal Reserve’s emergency loan measures, prompting the Fed to warn that the US economy remains “tense and vulnerable” amid uncertain prospects and rising coronavirus cases. Markets were unsettled as the US Chamber of Commerce said the decision “ties the hands of in-depth management and closes the door to key liquidity options for companies at a time when they need them most”.

Bar chart of Fed Emergency Facility Assets ($ Billion)

The pandemic has shown the need to rebuild Food supply chainsWith more investment in local suppliers and distributors, improvements in waste management and a greater emphasis on food security. Read our special report: Sustainable Food and Agriculture

UK Consumer Confidence has fallen to its lowest level in six months, while bars and restaurants closings had a serious impact expenditureafter two surveys. Watch our video on how the pandemic hit the UK hospitality sector.

Video: How Coronavirus Met Hospitality | Crunched

Get in touch

How is your workplace dealing with the pandemic? How do you deal with it as a professional or a manager? And what do you think companies and markets – and our daily lives – will look like when we show up? Also tell us what you think about this newsletter and how we can make it more useful for you. Email us at [email protected] We can publish your contribution in an upcoming newsletter. Many thanks.

Adrian_Nantwich comments on Gita Gopinath: “Fiscal policy plays an essential role in the recovery.”

Investing in “health” and spending on “health” requires a careful distinction. Our inputs into our state of health include other measures and investments (housing, child development) as well as those that we would normally recognize as health expenses (beds, number of doctors). Indeed, income inequality is related to aggregate and individual measures of health status, so health policies include education. There is an ongoing discussion about the income elasticity of health spending, so it would be interesting to know whether public sector spending replicates market spending in countries with Beveridge and Bismarck models.

The most necessary

Coronavirus cases in the United States rose a record Thursday as hospital stays topped 80,000 for the first time and deaths rose the fastest in more than six months. The states reported 182,832 infections, surpassing the previous record of November 13 by more than 10,000. Compare the country’s performance with its peers using our interactive tool.

Millions of workers have seen theirs Retirement plans challenged by the pandemic. FT Money addresses some of the main problems savers face.

science

An encouraging week for vaccine development ended with the news that Pfizer and BioNTech will be the first to submit a candidate for regulatory approval – in this case from the US Medicines Agency – and potentially pave the way for shipping by mid-December.

The following is the news that the vaccine is under development by Oxford University and AstraZeneca shows promising initial results for the elderly.

Science editor Clive Cookson is looking at this mRNA technology behind the Pfizer-BioNTech and Moderna candidates, while the magazine’s columnist Tim Harford warns us not to get carried away: many obstacles still stand in the way of our dream of vaccinating the world.

Infographic explaining how mRNA vaccines work

Last thought

Lockdowns may have turned traditional Christmas gift shopping on its head, but fear not: From dandy objects of desire to foodie finds to home comforts, the How to Spend It gift guide has you covered.

© Getty Images