Bloomberg - Evening Briefing - ‘Potentially catastrophic’

While more signs point to the US economy slowing and the Federal Reserve making progress in its inflation fight, Washington could soon destroy all that while jolting the global economy in unprecedented fashion. US President Joe Biden is expected to meet next week with Republican leaders who have been demanding unrelated cuts to spending as their price for letting America pay its bills. A growing chorus is warning that the fallout from a default could lead to a deep recession, a spike in unemployment and borrowing rates, a blow to national security and other grim ripple effects. With US government cash set to run out in the coming weeks, Treasury Secretary Janet Yellen repeated that the only good outcome is for Congress to raise the country’s $31.4 trillion borrowing limit—though she hasn’t said what measures she would take if that doesn’t happen. The International Monetary Fund warned of “very serious repercussions” for the global economy, while JPMorgan Chief Executive Officer Jamie Dimon, who says his bank is convening a war room to prep for the self-inflicted disaster, took a jab at Donald Trump for encouraging the GOP to dig in over raising the debt limit even if it means crashing the economy. “It’s one more thing he doesn’t know very much about,” Dimon says. “Anyone who’s anyone knows that is potentially catastrophic.”

It’s been an eventful week for 2024 GOP presidential candidates. A federal jury in New York found Trump liable for sexually assaulting writer E. Jean Carroll and then defaming her. Ron DeSantis failed to get a donation from Blackstone co-founder and GOP megadonor Steve Schwarzman, who left a meeting with the Florida governor unconvinced of his White House prospects. Still, DeSantis—who has driven Florida to the far right with restrictions on abortion, voting access, LGBTQ rights and education—is selling himself to voters as the drama-free alternative. 

Russian leader Vladimir Putin presided over a severely scaled back “Victory Day” parade: there was only one vintage tank and the traditional flyover by warplanes and helicopters was canceled. Ukraine, armed with well over $30 billion in weapons freshly supplied by its allies, is said to be gearing up for a counteroffensive. Leonid Bershidsky writes in Bloomberg Opinion that the coming attack may push Russia closer to ending its war, which has killed tens of thousands of Ukrainians, or show neither side has enough firepower to seize the advantage. 

Ukrainian servicemen ride a T-64 tank towards the front line near Bakhmut, in the Donetsk region, on May 7.  Photographer: Sergey Shestak/AFP

US authorities are seeing historic numbers of migrants arrive at the border with Mexico, but no fresh spike following the expiration of pandemic-era border restrictions. Cities around the US are bracing as migrants gather south of the border. New York Mayor Eric Adams is suspending some rules that require the city to shelter asylum seekers. He also recently criticized Biden for his fellow Democrat’s immigration policies. Meanwhile, Adams faces another controversy. On Friday, Daniel Penny, the White Long Island man who asphyxiated a Black New Yorker while on the subway, was charged by prosecutors with second-degree manslaughter. Initially, Adams declined to call for his arrest, earning him criticism from civil rights leaders and triggering protests. 

Tesla recalled virtually every car it’s sold in China—some 1.1. million vehicles—due to a braking and acceleration defect that may increase crash and safety risks. Another Elon Musk venture has a new CEO, as NBCUniversal advertising chief Linda Yaccarino takes over Twitter. She “may soon come to realize the only thing more stressful than working under Musk is working over him,” David Lee writes in Bloomberg Opinion. 

Linda Yaccarino  Photographer: Jason Alden/Bloomberg

Global luxury home prices fell for the first time since 2009, according to real estate agency Knight Frank. New Zealand posted the biggest slump. San Francisco, New York, Los Angeles, Hong Kong and Vancouver also saw prices drop. Dubai, Miami and Zurich bucked the trend. London, however, had its best year for sales of super-prime or luxury properties above £10 million ($12.6 million) since before 2016’s Brexit vote, which sent the pound tumbling. 

• Turkey elections; President Recep Tayyip Erdogan seeks another term.
• The annual G-7 summit takes place in Hiroshima, Japan.
• Another big earnings week across Asia, particularly in Japan.
• US retailers report, including bellwether Home Depot.
• Regional banks bear watching as  hedge funds disclose investments.

No Latin American country churned out as many college graduates as Venezuela during the petroleum-powered boom that began there in the 1970s. Now, migration experts estimate some 2 million Venezuelans with advanced degrees live outside the country as turmoil at home prompted a brain drain. In Panama alone, the expats have started more than 5,500 businesses and are contributing more than $200 million a year in taxes and fees.

Gian Guido Arditi, Ron Diplomático’s manager in Panama, says the 2015 collapse of Venezuela’s petroleum boom drove his rum company out ​of the country.  Photographer: Rose Marie Cromwell for Bloomberg Businessweek

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