IMF upgrades economic outlook, bank executives signal some optimism, and tax scheme catches up to billionaire investor: This Week in Finance

Welcome to This Week in Finance, your weekly roundup of the conversations trending among financial professionals on LinkedIn. Click Subscribe above to be notified of each edition. This week:

Recession not as bad as feared: IMF

The International Monetary Fund is predicting the global economy won’t suffer quite as severe a recession as previously forecast. In its World Economic Outlook, the IMF predicts the global economy will contract by 4.4% this year, which is 0.8 percentage points smaller than its June estimate. It expects the UK economy to shrink by 9.8% in 2020 (down from the June forecast of 10.2%). The only G7 economy expected to experience a sharper decline is Italy, with a predicted 10.6% contraction. The report notes that tourism-dependent economies are in a "particularly difficult spot." ?? Here's what people are saying.

Banks take brighter short-term view

Lifting their outlook on the U.S. economy, the nation’s biggest banks slashed loan-loss provisions from earlier in the pandemic. JPMorgan Chase, the No. 1 bank by assets, not only saw profit double during the third quarter but booked $611 million in provisions, down from $10.5 billion in the previous quarter. Citigroup set aside $2.26 billion to cover potential loan losses, compared with $7 billion in the second quarter. Still, JPMorgan CEO Jamie Dimon called for renewed fiscal stimulus, saying the bank’s improved prospects may not last without it, and he maintained an unemployment forecast of above 7% for all of 2021. ?? Here's what people are saying.

Has hiring’s recovery ended?

A report showing the most Americans filing new jobless claims since August — almost 900,000 — suggests the recovery in hiring following pandemic-induced shutdowns may be over. Further, a jump in the rolls of a federal aid program for people who have exhausted state benefits shows that, while many are coming off continued claims, they aren’t finding work. A new fiscal stimulus, still being debated in Washington, is seen as key to supporting businesses and hiring, as well as jobless Americans directly. ?? Here's what people are saying.

• What is true unemployment?: A gauge that includes work "that pays a living wage" would mean that a quarter of the U.S. population is currently unemployed, versus the official rate of 7.9%.
• Is the white-collar recession over?: The employment rate among Americans earning more than $60,000 a year had rebounded by September to within 1% of where it stood when the pandemic hit.

U.S. budget deficit blows past $3T

The U.S. budget deficit tripled to a record $3.1 trillion in fiscal 2020, as the federal government spent more than twice that amount to shore up businesses and households amid pandemic shutdowns. The gap between Washington’s outlays and receipts also reflects lower tax revenue due to the closures aimed at stemming the contagion. While Congress and the White House are negotiating a second stimulus package potentially worth $2 trillion, policymakers such as Federal Reserve Chair Jerome Powell have said the aid is needed to avert millions more Americans falling into poverty. ?? Here's what people are saying.

Bankers fired for loan abuse

More than 100 Wells Fargo employees have been fired for defrauding a U.S. small-business pandemic relief program, reported Bloomberg, citing anonymous sources. The federal Economic Injury Disaster Loans are made to help small businesses during the pandemic, and while bank employees can apply for them if they run a small business, the employees in question allegedly abused the program. Dozens of JPMorgan Chase employees were also found to have done so. About $1.3 billion in suspicious payments were found in a Bloomberg analysis of Small Business Administration data. ?? Here's what people are saying.

Could interest rates go sub-zero?

Bank of Canada Governor Tiff Macklem said that, while the prospect of negative interest rates isn’t being actively discussed for now, "it’s in our toolkit and never say never." Bloomberg reported that his remarks, made by videoconference following a speech to the Global Risk Institute, show that the Canadian central bank is open to more rate cuts, even as Macklem and other officials have recently downplayed moving rates into negative territory. The Bank of Canada’s current policy rate is at a record-low 0.25%. ?? Here's what people are saying.

The digital yuan gains currency

Digital currencies in Asia have taken a new leap forward, with 15% of Shenzhen’s population taking part in a lottery to get 50,000 "red packets" of digital yuan. Winners, who have been announced, can spend their virtual 200 yuan ($30) at 3,000 retailers citywide. The giveaway is part of trials by the Chinese government to launch a digital version of the nation’s currency, backed by the central bank and meant to help move China further toward cashlessness. Meanwhile, Japan’s central bank has said it plans to begin testing a digital yen in 2021. ?? Here's what people are saying.

Japan plots rise as finance hub

Tokyo, Osaka, and Fukuoka are in the running to become Japan’s next international finance hub, Nikkei Asia reported. The government is evaluating which city would receive extra support to attract professionals from around the world. Japan, which has been scaling up its ambitions to become a global finance hub amid uncertainties in Hong Kong and new curbs on expatriate workers in Singapore, is planning tax benefits and other incentives. But some question Japan’s ability, citing the recent outage of the Tokyo Stock Exchange and a non-English-speaking corporate environment as factors. ?? Here's what people are saying.

IRS hooks tech, PE billionaires

Houston software billionaire Robert Brockman pleaded not guilty to what federal prosecutors call the largest tax-evasion case against an individual in U.S. history. In a 39-count federal indictment, prosecutors allege Brockman used a complex web of entities in Bermuda and the Caribbean, as well as secret bank accounts in Bermuda and Switzerland, to hide $2 billion in income from the Internal Revenue Service. They also announced a non-prosecution deal involving Vista Equity Partners CEO Robert Smith, who they say admitted participating in the tax cover-up and agreed to pay nearly $140 million in penalties, back taxes, and interest. ?? Here's what people are saying.

Suits are going out of fashion

Formal wear is gathering dust as people have traded suits for sweatpants during the pandemic. Suits ranked among the most discounted and worst selling items in parts of Europe in September, including France, Germany, and Italy. The trend is affecting the wider supply chain: Reuters reports that merino wool farmers in Australia are switching to other forms of agriculture to survive, while wool mills in northern Italy increasingly produce casual wear and fabrics that don’t easily stain or crease. Lack of demand has also forced several retailers in Europe and the U.S. to shutter stores permanently. ?? Here's what people are saying.

?? Editors’ Picks: Must-read articles ??

Each week, editors at LinkedIn select thought-provoking articles that are sparking discussion among financial services professionals on the platform. Join the conversation by reading and commenting on them here.

With Emily Spaven, Cate Chapman, Jessica Hartogs, Jake Perez, Yunita Ong, and Pieter Cranenbroek.

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