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tv   Counting the Cost  Al Jazeera  June 6, 2022 7:30pm-8:01pm AST

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it's to revive relationships which his government says have been neglected recently . the relationship between a strain in asia we have we are too close neighbors that do not deal with each other enough harmonies. he says he will attend the g 20 summit hosted by indonesia in november, despite controversy over the russian president's purported plans to attend as well . and in terms of, while b is say on focus on sitting with president would died or not sitting with prison, including the prime minister and his delegation will visit the island of so the way see, next, seeking to prove australia is serious about engaging with its neighbors. in the north, jessica washington al jazeera chicata. ah, so this is out there, these are the top stories and the u. k. prime minister will face a new competence vote from his own conservative party in the company hours. it was
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triggered when 15 percent of the parties, members of parliament formerly requested the ballots. the head of the you and nuclear watchdog has raised concerns about the safety of a ukrainian nuclear plant and a russian control. ukraine says there's a risk, the facility supply chain could be interrupted. russia's foreign minister has denounced several european countries are blocking his plane from entry maris space, call yet an unthinkable move. so gay leverett was due to visit serbia on monday, but was forced to cancel his trip. the mexican president under manuel lopez abra door has confirmed he will not go to the summit of the americas in los angeles. this week. he criticized the u. s. his refusal to invite cuba, venezuela, and nicaragua, investigators in bangladesh are working to determine the cause of a massive fire to contain a depot that killed at least 49 people. the 1st part of the explosion when it ignited chemicals stored in some of the containers. right, yes,
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date with the headlines here are not 0. we got more news coming up right after we go to county, the coff. ah. what what do we need to know that on this is i don't need to be with them when you look and i'm just going to put them to me. i just need you to whom and ya today. and we're going to give you what we said as well. they sent me all of them a lot of them at the football game when i know, i mean,
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i mean i often use ah ah ah hello, i'm money by this is counting the cost on al jazeera,
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your weekly look at the world of business on economics, this week, energy prices are soaring ahead of the world bank says it's enough to trigger a global recession by itself. so is a contraction of the world economy inevitable? am which nations almost at risk? also this week the british government takes aim at expensive energy bills. can the $19000000000.00 aid package ease the squeeze on incomes or could the cost of living crisis get even worse? on pakistan's teetering economy, the country with ages. second, fastest, inflation rates is seeking critical financing from the i'm f, accounting, the pakistani government implement the required reforms out the coast of almost everything from food to fossilize. this is soaring, causing consumers to spend less, as governments aim to bring down the cost of living containing inflation without
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pushing economies into slow down is difficult. and that's all, while russia's warning crane and pandemic disruptions continue to constrain supply chains darkening the outlook for the months ahead. so should we be ready for global recession? well, the head of the well bank has warned that russia's invasion of ukraine could cause a global recession. david mal past told an event hosted by the us chamber of commerce, the germany's economy, the wells, 4th largest, has already slowed significantly. while the u. s. in china are also seeing slow growth. he added a fertilizer shortage could work in economic conditions elsewhere. the world bank has already cost it's global growth will cost for this year by nearly a full percentage point to 3.2 percent from 4 point one percent. well, the international monetary fund has also declined to rule out a global recession,
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but it says, well, the economy still has a cushion against contraction. there are many head winds to the global economy, the war could escalate, you could have sanctions encounter with sanctions. we central bankers around the world type thing, monetary policy, financial conditions could tighten much more rapidly than we want to the scene. and growth in china is slowing. so all of these pows downside risks to our forecast. so again, globally, i would say 3.6 percent, there is a buffer at the same time, there are countries that are getting hit hard new countries in europe that are getting hit hard by the war where we could certainly see technical recession. now let's have a look at some of the recession factors cited by financial institutions. the m. s. c, i will talk index fell more than 18 percent since a pink in early january. and there's been a sell off in bonds, industrial metals, gold, and crypto assets. china's g d. p growth had flowed because of strict coven 19 locked
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downs. the country's retail sales fell 11 percent year on year in april, while industrial production was down, 3 percent and unemployment is rising. the u. s. is increasing interest rates, am tightening its monetary policy to slow economic growth and bring inflation down . meanwhile, europe's household suffering a cost of living crisis. this price is rise much faster than incomes limiting spending and the recovery from the pandemic. and the situation could be worse than many developing markets where fears of food crisis, all mounting to discuss all of this on join now from new york by megan green. megan is a senior fellow at harvard kennedy school. i'm the global chief economist at the crow institute. thank you for joining the program, meghan. now the last global recession was brought on by the u. s. sub prime crisis 10 years ago. all we entering similar territory?
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no. so i think we're in a very different position from where we were before the global financial crisis. i spend all of my time looking for bubbles everywhere that could potentially burst. and it's actually hard to figure out where the exact bubble is in part. everything's kind of a bubble, but i can't imagine any of them bursting in quite as spectacular a fashion as they did before the global financial crisis. that being said, we are slowing down pretty significantly in the us. the government is re trenching massively relative to last year. rates are going up, so the investment environment is, is less conducive towards spending. consumption is, is weakening though that actually remains pretty strong. and the external demand picture for in demand is really weak, particularly as china is slowing significantly there. 8 a lot of worries that the u . s. is going into recession, particularly because the central bank is hiking so aggressively. i actually don't think we need to worry about that in the next 12 months. mainly because of the
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health of the u. s. consumer and the consumer drives about 70 percent of growth in the u. s. households have massive cash balances. so to businesses, for that matter, there are 11 and a half unfilled jobs in the u. s, so i can't see the labor market really deteriorating massively. any time too soon, that being said, you know, the next 12 months, i think we'll continue to slow the 12 months after that. or when i think we need to worry about a recession as rates go up even higher, making the i m f has also said that the world economy still has a buffer against recession. is that what you referring to full employment? people saving, still intact and so on. that's right. so there is a huge cash buffer, particularly across the u. s. economy, given how big the stimulus measures were, the government pushed out 2 and a half trillion dollars into household bank accounts. and so the bottom core tile by income of the u. s. is burn through that cash cushion,
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but the rest of hasn't yet. and so i think there's a lot of space for people to go ahead and use their savings to spend and keep consumption up over the next 12 months. at the same time, companies use the opportunity during the pandemic to build a massive cash position. so even the rates are going up and earnings are probably going down the risk there to the downside. they have big cash buffers to burn through before they really have to retrench. and it's when everybody has to retrench when we can expect a recession to come. i think that that's coming certainly down the line, but i don't think it's imminent. i don't think it will happen in the next year. the buzzword seems to be stag deflation at the moment where countries face sustain periods of low growth, but high prices at the same time. it's a very tricky combination, isn't it for policy makers to tackle? yeah, it's every central bankers, worst nightmare because central banks are supposed to try to support growth and demand. 1 also to lean against inflation and keep prices stable. so if you have an
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environment where you have very weak or virtually no growth and very high inflation and central banks have to choose which one they're going to support rather than doing both. if they had rates aggressively, they'll kill off growth, but will be able to bring inflation down if they don't high grades aggressively, then a supports growth, but inflation can become run away. and that's, that's, you know, a repeat of the 1970 s. as every central banks, worst nightmare. so stagflation is something to be avoided to be sure that being said, i don't think the u. s. is going to be instead inflation over the next year, i think the euro zone is actually at the greatest risk of being in stagflation with incredibly weak growth this year. and very high inflation. you mentioned china that spin on to lockdown, which has weighed heavily on the global picture growth picture, but they've started easing restrictions. is that going to make a huge difference? certainly it will help you, you know, will get a kick back and growth from china as shanghai in particular is reopen. and then
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also more directly for the west. in particular, all these factory shutdowns will be reversed and so we can hopefully see an easing of some of the global supply chain snarls that we've been stuck with over the past at least year. and so that is one factor that's driving up inflation in the developed economies. and so if those factories stop shutting down, that should certainly help take some of the upper pressure off of inflation. one of the other issues in developed countries we're seeing is countries imposing exports on goods like india, lately restricting the flow of sugar, malaysia, finding the export of chicken, given the state of food protect protectionism. what is going to be the outlook for developing countries? so i think that, you know, we are absolutely facing a global in food insecurity crisis and a lot of emerging markets, particularly in north africa and the middle east will feel the squeeze because they're so dependent on imports for their food. i think we will see more more
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export controls. unfortunately, i think it's the wrong response. but given that we live in an environment of protectionism globally, i think it's the most likely response. if you impose export controls, of course, you're just imposing rigidities and markets. they are not allowing markets to function in clear as they should, that ultimately just ends up putting, pushing prices up higher, and that pushes inflation up even higher. but unfortunately, i think that's probably where we're headed and left the major food importers and major food export, or go ahead and agree that you know, the export is just aren't going to impose export controls so far. i don't see that kind of coalition coming together that kind of announcement being made if what we should hope for, but i'm not particularly optimistic making green really good to talk to make an senior fellow at harvard kennedy school. thank you. the,
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the rising cost of everyday items has pushed inflation in the united kingdom to its highest level in 40 years. millions of persons have seen the energy bills increase spot and least 54 percent. that's an additional $863.00 a year, on average for every household. the government has announced a $19000000000.00 package to soften the impact of the cost of living crisis. part of the money would come from a temporary winful tax and the profits of oil and gas firms of around 25 percent. and the government says the measures would target the most vulnerable, including disabled people and retirees. in particular, more than a 1000000 of the countries low income households will receive a one time government payment off at least $800.00. that's an addition to around $500.00 discounts on energy bills for every household. well, the government help comes off to the bank of england has raised the cost of borrowing from a pandemic era. lo know point one percent,
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that team year high of one percent. this is in an attempt to rain and inflation. but the spot, the efforts to bring down the cost of living a recent survey showed bersan can't afford to eat every day and all skipping meals as food prices rise. they bunker reports from london. o trouble at the tills. the price of staple foods his sword in recent months with as many as $2.00 in every 5 britons now buying less to eat. and for the 1st time in 40 years, inflation, the gradual increase of the cost of goods and services across a year, rose to 9 percent. with the governor of the bank of england warning, of apocalyptic food price hikes. further back the supply chain, the middleman a trying their best to absorb the rising costs. this is london's biggest wholesale food market where the industry's experiencing a perfect storm of problems from the pandemic to breaks it. and more recently,
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the war in ukraine, the crisis go on in ukraine. ah, with the floods going on in spain, diverse marketing costs, fuel costs breaks as an alps, as well, in terms of all the or the extra effort as be done. who knows what's around the corner, if the war continues, is gonna get worse, the winter may a worse look, look over looking at an hour. yeah. the, the cost of heating, the cost of electricity, is all going up and up and up. russia and ukraine, some of the world's largest producers of cooking oils fertilizes, and grains uses everything from bread to animal feed for the conflict means goods are stuck in ports or rotting in fields, produces and sellers are used to dealing with unpredictable situations from low yields, to economic pressures to supply chain problems, but rarely have the issues come this thick and fast, leaving no time for companies to recover, leaving everybody from feel to for counting the cost. and what's
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a worry for wealthy western consumers is potentially catastrophic for some of the world's poorest in somalia already cripple by drought, the worn ukraine's push fuel and fertilizer prices up by 40 percent. while in india, a decision to ban grain exports to protect domestic supplies. that is to push global we price is even higher in the u. k. the national dish fish and chips is the can marry the coal mine. oil has gone up, pets has gone up. they've gone up, it will adds on everything. and joy public's paying for it will pay for it. and how much more can we pay for the cost of cooking oils increase 30 percent in 3 months. and cotton hartwick are becoming more expensive as global warming, striving fish stocks per the new hosting fisherman to spend longer at sea. and now russian fish has disappeared. the market industry bosses be a 3rd of the u. k. sufficient chip shops to close in the next 9 months as the world
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bounces back from the pandemic. it's now out of the frying pan and into the fire. greg swenson joins is not from london. greg is the founding part of london based match and bank brig mcadam. thank you for joining the program. greg. what do you make of the ne, british household aid package? is that enough to ease the cost of living crisis? well, mullin, i don't think it's enough to ease it completely, it will surely help. and that's the problem with subsidies and, and these type of welfare payments or transfer payments, you know, they definitely ease the pain a little bit early. they definitely eat, you know, will help lower income communities with the, with the costs, the higher costs or the cost of living crisis. but it never solves the problem. and that's, i think that's the problem is that more spending more subsidies will help in the short run, but actually creates more inflationary pressure in the medium and long term. and so
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that's inflationary in itself. so it's not a solution. i think it's an unwise government policy. greg, the opposition also says measure is poorly targeted and will benefit those who are better off. do you think that's fair? i don't think it's necessarily accurate, moline, so it, it is targeted and it does. it's clued people who make over a certain threshold. so i think the design of the, the strategy is compassionate because it's helping people that need it. the most inflation by nature always hurts the people on the lower end of the income scale the most because they spend more of a higher percentage of their income on basics like food and energy. so it's always more hostile to, to lower income people. and that's where this is targeted, but a, it won't work in the long run and solving the problem and be, they're not fixing the supply issue, which is really one of the factors that's causing inflation. but as i said earlier,
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you know, printing more money to, to help people in the short run is compassionate, but it's not going to solve the problem and make inflation worse bars. johnson's government has previously resisted winful taxes. he said, it's said to turn for investment. so what's changed here? it is, it's a turn and i think we were all disappointed in here in the u. k. to see the, the windfall tax announcement. i think there was some political pressures, you know, with party gate. they felt like there was a need to get a know, maybe change the headlines from the focus on party gate to something that's helping voters and it is a vote getter welfare typically is where government spending it typically is. so you know that, but the fundamentals haven't changed the party right now for us and, and the chance we're sound more like labor that's what's changed is that the,
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the conservative party is governing. like they're not really conservative. and i think that's, that's a big change. a winful tax in itself was the labor idea, wasn't it? so let's look at the dilution. we've seen the bank of england increase interest rates for times in just the last 6 months in an attempt to contain the hi and rising inflation. how much further do you expect interest rates to rise in order to get on top of this? it's a great point, moline and i expect rates will continue to rise of granted, there have been 4 increases, but they're very, very small in nature. whereas you've seen the fed actually increase, you know, at a 50 basis points rather than the normal 25. so i think the, the bank of england has been a bit too incremental. they have to do it a lot more than it really has to be to the point where the interest rates that they said are above the inflation rate. right now they're below the inflation rate. inflation came in at 9 percent. we expected to go to 10 percent and as long as
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rates are lower, that is what we call negative real rates, where the, the, the actual inflation adjusted rates are still below 0. and that's the case now. so in many ways it's too little, too late. they have to do more, the cost of living crisis is, is happening all over whenever europe, elsewhere in the world. how much worse do you think it's going to get in the u. k. and especially with attempts to get less dependent on russian energy. all they're going to be able to deal with it. yes, you know, in many ways, you case in a better position than the rest of europe because they were only buying 3 percent of their natural gas. for example, from the russians. it was very easy for the u. k. to stop buying any energy product products from or energy supplies from russia, whereas the dependency is much greater in the rest of the continent. we've all talked about germany, you know, importing 40 percent of their, of their not gas in
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a significant amount of their energy overall. so i think the challenges will be greater in europe. as you mentioned, the bank of england has at least started the process of raising rates, whereas the e. c. b is, is way behind. they haven't indicated that their 1st height will be until july. it's way too little too late. greg swenson from london based merchant bank brig. mccadden. thank you for your time. thanks. molly. soaring inflation, a high current account deficit and foreign exchange reserves barely enough to cover 2 months of imports. pakistan is struggling to keep its economy afloat, raising the prospect that one of the wells most populous nations could soon follow sri lanka, on default on its debt. laid is on seeking to revive a $6000000000.00 bailout package from the international monetary fund to help pay the bills. pakistan needs more than $36000000000.00 in financing for the fiscal year starting june. and the government has increased the cost of petrol by 20
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percent, to pave the way for a deal with the i m f. the prime minister has been reluctant to end energy subsidies. rollback on funded subsidies to oil and power sectors, which all key demands by the i m f. the measures could hook pakistan. he's wallets and spark a public backlash at a time of political instability. on the decision to increase fuel prices comes a day off to the 2 sides ended week long talks without reaching an agreement to revive the learn out there is some a ben job aid spoke to the countries finance minister miss smile. withholding discussions with the m f in couples, capital doha. marks on continues to face a depleting foreign to those a spiraling currency and a current account deficit which continues to rise. and those are the challenges that a month old government is facing while facing and rest on the streets in pockets on the business to discuss it. if the finance minister focused on mr. mr. smith,
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thank you very much for speaking to us. you've been in talks with the i m f. what have you achieved and various focused on headed. we've talked about this year's budget, we've talked about next year's budget. and in particular, we've talked about petra subsidies that the previous government had given against an agreement with the m f. and we've talked about how to resolve those things, how to unwind a subsidies and how to move forward in the coming year. so that the trucks is that unless you remove those subsidies, unless you experientially increase the price of petroleum products, as well as some tax issues in august on the i, m f is not going to continue its program. and that jitters, confidence from other investors in focus on other lenders to focus on as well. how are you going to build that confidence because your government seems to be facing a lot of resistance and it might be on its way out. first of all, i mean let me just say that there is a broad base consensus in park is don amongst all critical factors that the m f
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program has to continue and that whatever necessary changes that we need to make, in particular to pass on the real prices of, of these foreign imported commodities, boyd and diesel, etc, that they're, that we have to pass this on to the consumers. and that's the broad based agreement, even including opposition parties that said, i mean, they may do politics with it, but that's, that's, that's a consensus. so doesn't really matter whether i stay in finance, mr. or somebody else come then in finance, mr. over that our government is not the will continue to work with the i m f and i pretty sure that we would very soon reach an agreement with the m f, v, our government in place. and now the situation in buckets on seems to be precarious at best, where your government is being accused of heavy handedness, political activists are being rounded up. how are you going to stabilize progress on when you're not letting the democratic spirit stay on the streets at? that's absolutely not trivial. absolutely not going to disrupt democratic the
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demonstration or the sub democratic peaceful democratic demonstration. but when somebody, as you know that, you know, we have got our police of court arms, no arms, arms in, you know, in garza political opponents. so as long as p t, i promise to be school, i think they will be allowed. and in fact, i think the courts have allowed them to demonstrate peacefully, but they don't have the right to disrupt life. they don't have to write to occupy central government offices. they don't have to write to occupy main boulevard to allow us to go to offices. but other than that, i mean in brown. i've been doing one daily after the after another the last month and he begged him to go on pakistan and speak his mind very quickly. you've a few weeks away from presenting the 1st budget of the government. very difficult economic decisions to be made. how confident are you that you are going to present the budget, which is going to be people friendly when you're facing an increase in inflation
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and entries in commodity prices and even energy prices? how, what is your plan? what i mean, we take that in the next 3 to 4 months, we are going to get a handle on, on these increased prices. and that be the type monetary policy that we have. and it's likely consolidating a fiscal policy. we will get hold of inflation. we will captive that control inflation. and once that happens, then we can loosen the monetary policy and allow growth again to flourish. so i think we have a plan, we reverted to the i may be reached, you know, some conclusions about where we want the economy to be headed. and in very short period of time, you will see both an agreement with the i m f and a budget which is inclusive, which targets for target subsidies towards the poor and which will not leave anybody behind. that is also the way to get in touch with us by 3. think
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me at marlene site and do you have like a j. c. when you do or drop us an email count from the call at algebra dot net address, what this movie online at al jazeera dot com slash ptc. that'll take you straight to our page, which has individual report links and anti episodes you to catch. that's it for this edition accounting the call. i'm money insights in the whole team. thanks for joining us. nice on out of there. if i aah and al jazeera world meets 2 arabs, both built successful lice. a lot pirate scholars have made enormous contributions
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to size such as are mathematics, astronomy and medicine, a cutting edge, dr. formulating new h, i, b drug treatments in south africa. and the specialist in engineering science is changing lives. in malazan villages, i purify polluted water and turn it into drinking water. arabs abroad the pharmacologist in the scientist and al jazeera with bold and untold stories of asia and the pacific. analogies here. ah another test for the british prime minister leadership, members of his own party get ready to hold the confidence for.


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