Evelyn Reynolds

The world is looking at a debt crisis that will span the next 10 years, said economist Arthur Laffer.
Global debt hit a record of $307.4 trillion in the third quarter of 2023, with a substantial increase in both high-income countries and emerging markets.

A mosaic collection of world currencies.
FrankvandenBergh | E+ | Getty Images

The world is looking at a debt crisis that will span the next 10 years and it’s not going to end well, economist Arthur Laffer has warned, with global borrowings hitting a record of $307.4 trillion last September. 
Both high-income countries as well as emerging markets have seen a substantial rise in their debt piles, which has grown by a $100 trillion from a decade ago, fueled in part by a high interest rate environment. 

“I predict that the next 10 years will be the Decade of Debt. Debt globally is coming to a head. It will not end well,” Laffer, who is President at investment and wealth advisory Laffer Tengler Investments, told CNBC.
As a share of the global gross domestic product, debt has risen to 336%. This compares to an average debt-to-GDP ratio of 110% in 2012 for advanced economies, and 35% for emerging economies. It was 334% in the fourth quarter of 2022, according to the most recent global debt monitor report by the Institute of International Finance.

To meet debt payments, it is estimated that around 100 countries will have to cut spending on critical social infrastructure including health, education and social protection.
Countries that manage to improve their fiscal situation could benefit by attracting labor, capital and investment from abroad, while those that do not could lose talent, revenue — and more, Laffer said.
“I would expect that some of the bigger countries that don’t address their debt issues will die a slow fiscal death,” Laffer said, adding that some emerging economies “could quite conceivably go bankrupt.”

Mature markets such as the U.S., U.K., Japan and France were responsible for over 80% of the debt build-up in the first half of last year. While in the case of emerging markets, China, India and Brazil saw the most pronounced increases. 
The economist warned that repaying the debt will become more of an issue as population in the developed countries continues to age and workers become more scarce.
“There are two main ways to cover this issue:  raise taxes or grow your economy faster than debt is piling up,” he said.
Laffer’s comments come on the heels of the U.S. Federal Reserve’s decision to leave rates unchanged in January, and shooting down hopes of a rate cut in March.  More

Ford Motor attributed the loss in the fourth quarter to charges related to pension plans and a restructuring of overseas operations.Ford Motor said it lost $526 million in the final three months of 2023, mainly as a result of special charges related to its employee pension programs and the reorganization of some of its overseas operations.The automaker said its fourth-quarter revenue rose to $46 billion, from $44 billion a year earlier, thanks to strong sales of internal-combustion vehicles and light commercial trucks.The division of the company that makes gasoline and hybrid vehicles earned $813 million before interest and taxes in the fourth quarter, and its commercial vehicle division made $1.8 billion. The unit that makes electric vehicles lost $1.6 billion.John Lawler, Ford’s chief financial officer, said the company’s profit in the fourth quarter was also hurt by an extended strike by the United Automobile Workers union, and higher labor costs stemming from the new contract it signed with the U.A.W.“You adjust for those two factors, and you see a pretty strong quarter,” Mr. Lawler said in a conference call.Ford had previously said the strike reduced its pretax profit by $1.7 billion in 2023.Looking ahead, Ford said it expected to make between $10 billion and $12 billion in adjusted earnings before taxes and interest this year.Ford reported a profit of $4.3 billion in 2023, compared with a $2 billion loss in 2022. Revenue in 2023 rose to $176 billion, up from $158 billion in 2022. The company said its 58,000 U.A.W. workers would be paid profit-sharing bonuses of up to $10,400 based on its performance in 2023.The automaker said it wanted to improve its financial performance by investing less in some areas, like electric vehicles, while setting higher profit goals for the projects it was still putting money in. “Simply ‘good’ isn’t good enough and investments are going to projects that have credible plans to deliver their targeted returns,” Mr. Lawler said in a statement.Ford shares were up about 6 percent in extended trading after it reported earnings. More

Mary Kay Henry of the nearly two-million-member Service Employees International Union will not seek re-election when her term ends in May.Mary Kay Henry, the president of the Service Employees International Union, one of the nation’s largest and most politically powerful labor unions, announced Tuesday that she would step down after 14 years in her position.Ms. Henry was the first woman elected to lead the union, which represents nearly two million workers like janitors and home health aides in both the public and private sectors.Under her leadership, it launched a major initiative known as the Fight for $15, which sought to organize fast-food workers and push for a $15 minimum wage. Winning over skeptics in the ranks, Ms. Henry argued that the union could make gains through a broad-based campaign that targeted the industry as a whole rather than individual employers.Labor experts and industry officials cite the campaign as a major force behind significant minimum-wage increases in states including California and New York and cities like Seattle and Chicago. It also pushed a recent California law creating a council to set a minimum wage in the fast-food industry, which will become $20 an hour in April, and to propose new health and safety standards.But the Fight for $15 campaign has not unionized workers on a large scale and enabled them to negotiate collective bargaining agreements with their employers.Ms. Henry’s tenure has coincided with a series of legislative and legal challenges to organized labor, including state laws rolling back collective bargaining rights and allowing workers to opt out of once-mandatory union fees, as well as a landmark Supreme Court ruling allowing government employees to do the same.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Fed reported Tuesday.
Total debt rose by $212 billion in the quarter, a 1.2% increase quarterly and about 3.6% from a year ago.

D3sign | Moment | Getty Images

Credit card delinquencies surged more than 50% in 2023 as total consumer debt swelled to $17.5 trillion, the New York Federal Reserve reported Tuesday.
Debt that has transitioned into “serious delinquency,” or 90 days or more past due, increased across multiple categories during the year, but none more so than credit cards.

With a total of $1.13 trillion in debt, credit card debt that moved into serious delinquency amounted to 6.4% in the fourth quarter, a 59% jump from just over 4% at the end of 2022, the New York Fed reported. The quarterly increase at an annualized pace was around 8.5%, New York Fed researchers said.
Delinquencies also rose in mortgages, auto loans and the “other” category. Student loan delinquencies moved lower as did home equity lines of credit. Overall, 1.42% of debt was 90 days or more past due, up from just over 1% at the end of 2022.
“Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels,” said Wilbert van der Klaauw, economic research advisor at the New York Fed. “This signals increased financial stress, especially among younger and lower-income households.”
While delinquency levels are rising, the New York Fed researchers said total debt is moving higher about in line with the pace before the Covid-19 pandemic began in March 2020.
Household debt rose by $212 billion in the quarter, a 1.2% increase quarterly and about 3.6% from a year ago. Credit card debt, however, jumped 14.5% from the same period in 2022. Auto debt climbed to $1.61 trillion, up $12 billion on a quarterly basis and $55 billion annually, or 3.5%.

Borrowers have been hit by higher interest rates. In a tightening cycle that ran from March 2022 to July 2023, the Federal Reserve hiked its short-term borrowing rate by 5.25 percentage points, taking the fed funds rate to its highest level in about 23 years. The benchmark rate feeds into most adjustable-rate consumer debt products.
Since the central bank began its tightening, the typical rate on credit cards leaped from about 14.5% to 21.5%, according to Fed data. Credit card debt as a share of income is still below pre-pandemic levels.
While the rise in delinquencies happening from low levels, the trend “bears watching because it is happening while the economy is still growing,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities.
“What happens if the economy slows and unemployment quickly rises? Delinquencies could surge, in turn leading to a self-reinforcing credit crunch,” LaVorgna said in a note. “In other words, a mild downturn could turn into a deep one.”
Fed researchers said rising rates probably have played a role in delinquency rates. In the case of autos, for instance, they said payments have changed little even as prices have come down, owing to the elevated rate structure.
Student loan debt, an area of interest for Washington lawmakers, has increased little during the pandemic period, currently totaling just more than $1.6 trillion. That was little change from the third quarter and it was up just 0.4% from a year ago. President Joe Biden has forgiven some $136.6 billion in student loan debt since taking office. The share of debt in serious delinquency edged lower to 0.8%.
Mortgage debt rose 2.8% in 2023, while the delinquency rate increased to 0.82%, up a quarter percentage point from the previous year.
Don’t miss these stories from CNBC PRO: More

The Treasury secretary will offer an upbeat assessment of the economy on Tuesday, a year after the nation’s banking system faced turmoil.Treasury Secretary Janet L. Yellen will tell lawmakers on Tuesday that the United States has had a “historic” economic recovery from the pandemic but that regulators must vigilantly safeguard the financial system from an array of looming risks to preserve the gains of the last three years.Ms. Yellen will deliver the comments in testimony to the House Financial Services Committee nearly a year after the Biden administration and federal regulators took aggressive steps to stabilize the nation’s banking system following the abrupt failures of Silicon Valley Bank and Signature Bank.While turmoil in the banking system has largely subsided, the Financial Stability Oversight Council, which is headed by Ms. Yellen, has been reviewing how it tracks and responds to risks to financial stability. Like other government bodies, the council did not anticipate or warn regulators about the problems that felled several regional banks.“Our continued economic strength depends on a solid and resilient U.S. financial system,” Ms. Yellen said in her prepared remarks.Last year’s bank collapses stemmed from a confluence of events, including a failure by banks to properly prepare for the rapid rise in interest rates. As interest rates rose, Silicon Valley Bank and others absorbed huge losses, creating a panic among depositors who scrambled to pull out their money. To prevent a more widespread run on the banking system, regulators took control of Silicon Valley Bank and Signature Bank and invoked emergency measures to assure depositors that they would not lose their funds.The bank failures — and the government’s rescue — prompted debate over whether more needed to be done to ensure that customer deposits were protected and whether bank regulators were able to properly police risk.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Previously the central bank’s deputy governor, Karahan’s resume features years spent in prominent American institutions and companies.
With Turkey’s inflation at 65%, the 42-year-old economist has his work cut out for him.
Investors and economists say continuity in monetary policy priorities will engender confidence in Turkey’s new central bank chief.

Newly appointed Governor of Turkish Central Bank, Fatih Karahan is seen in Ankara, Turkey on February 04, 2024. 
Emin Sansar | Anadolu | Getty Images

Turkey’s newly appointed central bank governor, Fatih Karahan, has his work cut out for him, after being named to the job by presidential decree over the weekend following the sudden resignation of his predecessor, Hafize Gaye Erkan.
Previously the central bank’s deputy governor, Karahan’s resume features years spent in prominent American institutions and companies. He received both a master’s degree and doctorate in economics at the University of Pennsylvania, spent nearly a decade as an economist at the Federal Reserve Bank of New York, worked as a part-time lecturer at Columbia University and New York University, and served as a senior economist at Amazon.

It is hoped that the 42-year-old economist’s experience will serve him well as he heads the institution working to tackle the eye-watering inflation and cost-of-living crisis that has hit Turkey’s population of 85 million. The country’s currency, the lira, is down 38% against the dollar year to date and has lost more than 80% of its value against the greenback over the last five years. 
Turkey’s consumer price index print came out Monday showing a roughly 65% increase year on year for the month of January. Its central bank has made eight consecutive interest rate hikes since May 2023 — for a cumulative 3,650 basis points — in an effort to rein in soaring inflation. The latest rate increase, on Jan. 25, raised Turkey’s key interest rate by 250 basis points to 45%, though its leaders signaled at the time that the hiking cycle was at its end.
While painful for the country, investors and economists say that the rate hikes have been necessary and that continuity in monetary policy priorities will engender confidence in the new central bank chief.
In his statement posted to the Turkish central bank’s website Sunday, Karahan stressed “price stability” as his team’s main priority, vowing to “ensure disinflation” and “maintain the necessary monetary tightness until inflation falls to levels consistent with our target.”

“All eyes now focus on new central bank governor Fatih Karahan,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a note Monday. “As things stand, continuity in monetary policy looks set to continue.”

Wolfango Piccoli, co-president at advisory firm Teneo, agreed.
“Like Erkan, Karahan is not a monetary economist, but is nevertheless regarded as a credible choice,” Piccoli wrote in an analysis for the firm.
“Unlike recent gubernatorial changes, Erkan’s departure will not result in a dramatic shift in policy stance,” he said, adding that the central bank could still “adopt a more hawkish tone in terms of forward guidance to support Karahan in his new role.”

Unorthodox policy

Piccoli noted that Turkey’s monetary policy still ultimately remains at the mercy of Turkish President Recep Tayyip Erdogan, who spooked investors for years by stifling the central bank’s independence and preventing it from raising interest rates despite runaway inflation that at one point topped 85%.
The more conventional policy approach that began under Erkan and Turkish Finance Minister Mehmet Simsek, also appointed last year, followed several years of unorthodox policy. Erdogan has previously decried interest rates as “the mother of all evil” even as consumer prices soared and the lira plunged.

Turkish Central Bank Governor Hafize Gaye Erkan answers questions during a news conference for the Inflation Report 2023-III in Ankara, Turkey on July 27, 2023.
Anadolu Agency | Anadolu Agency | Getty Images

“Regardless of Karahan’s stature and the backing provided by Treasury and Finance Minister Mehmet Simsek, Erdogan remains the ultimate decision-maker,” Piccoli said.
“As long as the president stays supportive of the (gradual) turn to orthodoxy that he endorsed after the 2023 elections, the identity of the governor is almost irrelevant as the TCMB has weak (if any) institutional independence.”
Karahan “will still have to operate within the boundaries of a central bank that is neither independent nor staffed by adequate professionals,” Piccoli added. CNBC has reached out to the Turkish central bank for comment.
Investor confidence in Turkey improved over the roughly eight-month tenure of Erkan, who became Turkey’s first-ever female central bank governor in June 2023. She tendered her resignation on Friday in a surprise announcement, saying the decision was due to a “reputation assassination” campaign and the need to protect her family.
Erkan, like Karahan, also has a resume featuring elite American institutions; she has a Ph.D. in financial engineering from Princeton and degrees from both Harvard and Stanford’s business schools, and later worked at Goldman Sachs and First Republic Bank, the latter for which she served as co-CEO. She also was on the board of directors for Tiffany & Co., and was appointed director of Marsh McLennan, a professional services company and Fortune 500 firm. More

Higher shipping costs due to the Red Sea crisis could add 5 percentage points to OECD member import costs, the Paris-based group said Monday.
Clare Lombardelli, chief economist at the OECD, told CNBC that recent data on inflation has nonetheless been encouraging, and shipping-driven inflation pressures remain a risk rather than its base case.
Tiemen Meester, chief operating officer at Dubai-based logistics firm DP World, said the current situation was in a “steady state” and that cargo flows were catching up, but networks had already adjusted.

Elevated shipping costs as a result of ongoing tensions in the Red Sea could impede the global fight against inflation, the Organisation for Economic Co-operation and Development said Monday.
The Paris-based group estimates that the recent 100% rise in seaborne freight rates could increase import price inflation across its 38 member countries by nearly 5 percentage points if they persist.

That could add 0.4 percentage points to overall price rises after a year, the OECD said in its latest economic outlook.
In late 2023, major shipping firms began diverting their vessels away from Egypt’s Suez Canal, the quickest trade route between Europe and Asia, due to a spate of attacks by Iran-backed Houthi militants based in Yemen. Tensions remain high, with the navies of countries including the United States involved in the conflict.

A cargo ship travels on the Suez Canal in Ismailia Province, Egypt, Jan. 13, 2024. 
Ahmed Gomaa | Xinhua News Agency | Getty Images

Ships are taking the longer Cape of Good Hope route around the southern coast of Africa, which increases journey times by between 30% and 50%, taking capacity out of the global market.
However, the OECD also notes that the shipping industry had excess capacity last year, a result of new container ships being ordered, which should moderate cost pressures.
Clare Lombardelli, chief economist at the OECD, told CNBC on Monday that a sustained increase in inflation as a result of the latest crisis is a risk, but not the group’s base case.

“It’s something we’re watching closely … we have seen an increase in shipping prices, if that were to continue for for an extended period, then that would feed through into consumer price inflation. But at the moment, we don’t anticipate that to be the case,” Lombardelli said.
According to Tiemen Meester, chief operating officer at Dubai-based logistics firm DP World, European imports are presenting the biggest challenge and have seen significant delays to cargo that was already en route.
“Unfortunately, there’s higher cost in the inefficiencies in the network, so ultimately, the rates are going up. But it’s actually nowhere near to where they were at their peaks during Covid … How that costs will find its way to the consumer, we’ll have to see,” Meester told CNBC, describing it as a “short-term problem.”
“I think kind of where we are now is a steady state, because the networks have adjusted and cargo is flowing, bookings are taking, it just takes more time,” he added.

The OECD’s Lombardelli said that overall there has been positive data among its members in recent months showing inflation coming down consistently. This will help rebuild real incomes and support consumption, she said.
The OECD’s 38 members include the United States, United Kingdom, Australia, Canada, Mexico, France, Germany, Israel, Turkey, Japan and South Korea.
Its latest outlook hiked its economic growth forecast for the U.S. by 0.6 percentage points from its previous November estimate, to 2.1% for this year. Its euro zone outlook was lowered by 0.3 percentage points, to 0.6%, while its U.K. outlook was flat at 0.7%.
“We’ve seen positive news in the U.S., we’re seeing inflation coming down now, but we’re not seeing a big cost in terms of the labor market there,” Lombardelli told CNBC.
“Growth is looking stronger, and inflation is coming down. So you’ll see a rebuilding of real incomes there in the U.S., and that will support consumption growth.”
Europe has been hit harder by an energy price shock, the impact of inflation on real incomes and consumption, and its greater dependence on bank-based financing amid tighter montary policy, she said.
In the medium-term, the OECD expects a greater drag on growth from its aging workforce.
The OECD nonetheless sees the European Central Bank as being in a position to cut interest rates in the second half of the year if current trends continue, Lombardelli said. More

In January, Turkish inflation logged its biggest monthly jump since August with a 6.7% rise from December, while year-on-year inflation hit nearly 65%.
Food, beverages and tobacco, as well as transportation, all increased between roughly 5% and 7% month on month, while housing was up 7.4% since December.
The figures come two days after Turkey’s appointment of a new central bank governor, Fatih Karahan.

A tram passes shoppers as it travels along Istiklal Street in the Beyoglu district of Istanbul, Turkey, on Tuesday, Dec. 19, 2023.
Bloomberg | Bloomberg | Getty Images

In January, Turkish inflation logged its biggest monthly jump since August with a 6.7% rise from December, while year-on-year inflation hit nearly 65%, according to the Turkish central bank’s figures released Monday.
The consumer price index for the country of 85 million people increased by 64.86% annually, up slightly from 64.77% in December. Sectors with the largest monthly price rises were health at 17.7%, hotels, cafes and restaurants at 12%, and miscellaneous goods and services at just more than 10%. Clothing and footwear was the only sector showing a monthly price decrease, with -1.61%.

Food, beverages and tobacco, as well as transportation, all increased between roughly 5% and 7% month on month, while housing was up 7.4% since December.
The monthly rises, economists say, stem from a significant increase to the minimum wage that Turkey’s government mandated for 2024. The minimum wage for the year has risen to 17,002 Turkish lira ($556.50) per month, a 100% hike from January 2023.
Turkey’s central bank has been on a prolonged mission to bring down inflation, implementing eight consecutive interest rate hikes since May 2023, for a cumulative 3,650 basis points. The bank’s latest increase, on Jan. 25, raised the key interest rate by 250 basis points to 45%.
The more conventional approach follows several years of unorthodox policy during which Ankara refused to tighten rates despite ballooning inflation. The lira is down 38% against the dollar year to date and has lost more than 80% of its value against the greenback over the last five years. 
The latest inflation print comes just days after Turkey’s central bank governor, Hafize Gaye Erkan, announced her resignation, saying Friday that the decision was due to a “reputation assassination” campaign and the need to protect her family.

Erkan became the bank’s central governor by presidential decree in June 2023, and led — along with Turkish Finance Minister Mehmet Simek — the turnaround in Turkey’s monetary policy and subsequent series of interest rate rises.

Turkish Central Bank Governor Hafize Gaye Erkan answers questions during a news conference for the Inflation Report 2023-III in Ankara, Turkey on July 27, 2023.
Anadolu Agency | Anadolu Agency | Getty Images

She was replaced on Saturday by the central bank’s deputy governor, Fatih Karahan, who spent nearly a decade as an economist at the Federal Reserve Bank of New York.
January’s inflation figures “highlight the continued strength of services inflation and may put pressure on new central bank governor Karaham to restart the central bank’s tightening cycle,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a research note.
“The fact that inflation didn’t rise significantly more than expected in January is positive given the uncertainty about the impact of the minimum wage hike,” Peach wrote. “But the figures present a small setback to the disinflation process and highlight the continued strength of services inflation. For now, the central bank’s end-year inflation forecast of 36% remains intact.”   More