Firstly, an apology for suggesting last week that this week might be boring and that you could easily take a day or two off. I was ... wrong. I have located the source of the problem in the fact that I haven't had a proper Swabian laugenbrezel in far too long, so I'm off to rectify the situation and shall be back at the beginning of September. We might even experiment with changing the day this newsletter goes out...
Illustration: Sarah Grillo/Axios
Everybody's scared. After the Fed cut rates at the end of July, the pessimistic moves kept on coming, with India, New Zealand and Thailand all cutting rates on Wednesday alone. Safe-haven asset prices keep on hitting new highs: A record $15 trillion of bonds around the world now carries negative interest rates, and the price of gold has hit $1,500 per ounce, up 25% in the past 12 months.
The big picture: Sometimes, as in 2008, a global crisis feels like an exogenous shock — something that hits the world unexpectedly, and requires a unified and coordinated response. This time is different: Insofar as the world is headed for recession, it's a recession where government actions are the problem rather than the solution.
Driving the news: The Trump administration this week declared China a currency manipulator, in a move that the FT's Alan Beattie described as "both incoherent and impotent — indeed, counterproductive." If anything, it was the U.S. government that caused the latest weakening of China's currency by imposing extra tariffs on Chinese exports, thereby reducing the demand for Chinese yuan and accelerating capital flight to the safety of the U.S. dollar.
Context: The U.S. seems happy to fight multiple economic wars at once, if the full embargo this week on Venezuela is any indication. That action also seems calibrated to maximally annoy the Chinese, who are simultaneously facing possible recession in a febrile and angry Hong Kong.
Why you’ll hear about this again: Boris Johnson's Britain is headed for no-confidence votes, constitutional crises and — very possibly — a catastrophic no-deal Brexit. Even before Brexit, it saw negative growth in the second quarter. The full implications of Brexit for global trade are unknowable, but they're almost certainly going to be dreadful.
The bottom line: The world as we know it — of complex global supply chains and countries playing to their best Ricardian advantage — is rapidly transforming into an atavistic place of trade barriers and bellicose rhetoric. If countries increasingly retreat into their nationalistic shells, no amount of fiscal or monetary stimulus will be able to head off the inevitable economic and financial consequences.
Illustration: Aïda Amer/Axios
An ideal payment mechanism should do 2 things: It should take place in real time, and it should clear at par.
The new Apple credit card became reality this week — but, like all credit cards, it too fails the test. Getting the card onto your phone is easy, but if you pay a merchant $100, they receive significantly less than $100.
Everybody loves instant payments. As rapper A1 told the WSJ: "You got bottles. You got models. You have strippers. They want to get paid right away." But the instant payments system built by some of America's largest banks, known as RTP, has struggled to gain traction. Even if banks have it, they don't tend to use it.
Driving the news: The Federal Reserve announced its own instant payments system this week, which is due to arrive in "2023 or 2024." What happens then is anyone's guess.
The housing market is showing signs of life. Mortgages are being refinanced at astonishing rates, housing is more affordable thanks to lower interest rates, and Fannie Mae's housing sentiment index is at an all-time high.
The big picture, however, is different. Homeownership rates have plunged over the past 15 years, in a trend that won't (and shouldn't) reverse itself.
How it works: House prices have been rising where they're already unaffordable, and falling where they're within reach. To put it another way: If you want to make a good investment, you can't afford it; if you can afford it, it's not going to be a good investment.
Demographic trends also work against homeownership.
The bottom line: Homeownership has long been at the heart of the American dream, and it accounts for a huge proportion of middle-class wealth. But it's on the decline, and it's not coming back.
Illustration: Rebecca Zisser/Axios
While American households don't have a lot of liquid savings, the capital markets are positively sloshing with liquidity. They're a key source of funds for companies like Opendoor and Zillow, which are building enormous businesses buying houses for cash, at algorithmically-generated prices.
Why rent? Job security is a large part of the story. Median employee tenure is less than 5 years for anybody under the age of 45, and the expectation of how long you're going to stay with your current employer is probably even lower. Which is to say, your house is going to last longer than your job is, and no one likes being saddled with a mortgage when they lose their job.
The bottom line: Homeownership reduces optionality. We all know people who bought a home and then regretted it. As Americans delay homeownership, they're more aware of the possible downsides, more attuned to the idea that their home could turn out to be more of a liability than an asset. If the financial crisis taught us anything, it taught us that.
This was a big week for financiers looking to make enormous profits from the empire-building ambitions of businesses with dubious business models.
Exhibit 1: WeWork is planning to go public next month, raising some $3.5 billion. But this is a world where Uber can lose $5.2 billion in a single quarter, and potential shareholders are worried that $3.5 billion still won't be enough. So WeWork is raising $6 billion in debt, too.
Exhibit 2: The huge media merger of the week is the acquisition of newspaper chain Gannett by its smaller rival GateHouse. In order to get the deal done, GateHouse parent New Media Investment Group is borrowing $1.8 billion from Apollo at an eye-popping interest rate of 11.5%.
The bottom line: Whether WeWork and GateHouse succeed or fail, JP Morgan and Apollo are likely to come out ahead. It's a nice position to be in.
Kendall Roy (Jeremy Strong) enters a digital-media subsidiary. Photo: Peter Kramer/HBO
Tonight is the premiere of Season 2 of Succession, the greatest show on TV. It airs on HBO at 9 pm EST, but most likely you'll just stream it, since technology is taking over the media business and legacy media companies need to — actually, I'll stop there. No spoilers.
Illustration: Rebecca Zisser/Axios
Tomorrow, for the first time, Saudi Aramco will hold an earnings call with investors, Axios’ Courtenay Brown writes. It comes as there is once again speculation that the world’s biggest oil company is planning to go public.
Two of the biggest retailers in the world, Walmart and Alibaba, release earnings on Thursday.
Photo by Robert Champion. Courtesy the Paul Rudolph Heritage Foundation
A piece of architectural history is on the market, asking $4.445 million. Paul Rudolph's Milam Residence, built in 1961, is probably his greatest residential project, set 60 feet above the Atlantic Ocean on 200 feet of Ponte Vedra Beach, Florida.