U.S. Cuts Ukraine Off
My View
President Trump and the U.S. have suspended military aid ( including soldiers and weaponry to Kyiv for 3 years ) and sharing intelligence to Ukraine and Trump increases pressure on Zelenskyy to force a peace deal
“ This would probably be the best contribution to the cause of peace ”
– Peskov, Press Secretary of the President of the Russian Federation
Backing his own campaign strategies, Trump’s “ America First ” move makes it clear that the U.S. is not the world’s police, appealing to his republican base. Ukraine may have to spend more to acquire weapons in search of another supplier and a market substitute, Increasing military expenditure in Ukraine, reducing funds for economic development. Also triggering global trade disruptions and a shift in geopolitical alliances but the broader economic effect all depends on how NATO, the EU and other global powers respond
Starmer to Abolish NHS England
My View
Sir Keir Starmer has announced the abolition of NHS England, a body of more than 15,000 staff, saving hundreds of millions of pounds ( estimated ). NHS England directs manages and oversees the whole health service in England and are responsible for allocating £ 134 billion to local NHS systems
“ Back in democratic control ”
– Sir Keir Starmer, Prime Minister
With more than 15,000 jobs at risk, there will be a major spike in structural unemployment, also reducing AD ( Aggregate Demand ) and demand-pull inflation due to a potential decrease in consumption ( 60% of AD ) as people will have less disposable income, but may also improve efficiency with less paperwork for doctors and nurses so they can spend more time on the patients treatment. However it may be at the cost of the PM’s and his party ( Labour ) credibility, electoral consequences and media criticism
Volkswagen Plants Producing Tanks ?
My View
Rheinmetall ( German arms manufacturer ), says it could be using soon to be idle Volkswagen plants to manufacture tanks as Germany scours for extra production capacity. Germany’s largest weapons contractor also said it would hand out more than 350 million euros to shareholders after reporting record orders and profits as European countries look to boost defence spending. Also a planned raise dividend 42% to 8.10 euros per share
“ An era of rearmament in Europe has begun ”
– Papperger, CEO of Rheinmetall
Could create new job opportunities in the defence sector, increasing employment, increasing real GDP, consumption and as a result an Increase in AD. Rheinmentalls profits may also be celebrated by investors also attracting more capital to the company
Private Equity Shrink
My View
The Private Equity industry shrinks for the first time since 2005 as investors confronting a $3tn backlog of ageing and unsold deals pulled back from committing new funds to the sector. Down 2% from 2023. Buyout firms managed $4.7tn in assets as of June last year
“ it’s a three or four year problem ”
– MacArthur, Chairman of Global Private Equity Practise at Bain & Company
Pullback suggests diminished investors confidence in PE sector and firms may find it harder to raise new funds and will face lower capital available for new investments potentially reducing profitability. Could also cause strains in employment and market liquidity and may stimulate an economic slowdown
ECB Cuts Interest
My View
The European Central Bank has signalled a possible slowdown in cuts to borrowing costs as rate-setters reduced it by a quarter point. As we can see from the graph, ECB has cut interest rates 6 times since June 2024 !
“ monetary policy is becoming meaningfully less restrictive ”
– ECB
Cheaper cost of borrowing will encourage investments and loans. It also reduces monthly mortgage and loan payments for consumers, resulting in an increased disposable income, encouraging spending, consumption and AD. ECB are keeping inflationary pressures in check while avoiding a recession. This move could also influence government policies, especially in countries with weaker economies
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