In its quarterly report on the economic outlook, the OECD said it now expects global output to increase by 3.2% in 2024 and again in 2025
3 min
Falling interest rates and recovering real wages will help drive a slight pickup in global economic growth this year and next, while recent falls in oil prices could aid the final push to tame inflation, the Organization for Economic Cooperation and Development said Wednesday.
However, the Paris-based research body warned that “comparatively benign” projections may not come to pass, with uncertainties remaining about how large an impact high interest rates will have on demand in the months ahead, while an escalation of the conflicts in the Middle East could push oil prices sharply higher.
In its quarterly report on the economic outlook, the OECD said it now expects global output to increase by 3.2% in 2024 and again in 2025, having grown by 3.1% last year. That was a slight upgrade from the 3.1% growth it forecast in May, and a sizable revision from the 2.7% expansion it expected to see when it published forecasts at the end of 2023.
The U.S. is largely responsible for that better performance, but India and Brazil are also growing more rapidly than expected, as is the U.K. By contrast, Germany and Japan have disappointed, with the former now forecast to hover on the brink of stagnation this year, and the latter to experience a small contraction.
However, despite the improved outlook for growth, and inflation rates that the OECD expects to fall to central-bank targets by the end of next year, consumer confidence has yet to pick up significantly, which would give a further boost to growth.
The OECD said that persistent dissatisfaction with economic performance, which is not limited to the U.S., is likely linked to the fact that food prices remain well above their pre-pandemic levels.
“There is a disconnect between how the economy is perceived and how the economy is doing,” said Alvaro Pereira , the OECD’s chief economist. “For people who go to the supermarket, food prices relative to wages are still higher.”
In the U.S., the gap between food-price and wage inflation between the end of 2019 and the second quarter of this year was roughly four percentage points. But that gap was much wider in large European economies, and above 15 percentage points in Germany. In South Africa, it was above 20 points.
The recent fall in oil prices may help offset some of that dissatisfaction, and boost a global fight to tame inflation that appears to be in its final stages. The OECD estimated that the 10% decline since July would knock half a percentage point off the global rate of inflation, if it were to be sustained. But it is far from certain that it will be.
“If the conflict in the Middle East escalates, this will have an impact on energy prices,” Pereira said.
Should escalation be avoided, the OECD said further falls in oil prices could allow for a faster reduction in central-bank interest rates than it currently expects, and boost growth in countries that don’t produce oil.
With inflation rates set to fall further, the OECD said central banks should lower their key interest rates, but in a manner that is “carefully judged” to ensure price rises continue to slow. It expects the Federal Reserve’s key rate to fall by a further 1.5 percentage points by the end of 2025, while the European Central Bank’s key rate is forecast to fall by 1.25 percentage points.
The Paris-based body said the interest-rate rises that central banks announced in 2022 and 2023 to counter a surge in inflation continue to weigh on growth, although with diminishing force.
But it noted that many households and businesses continue to see the interest rates they pay rise as their debts mature and they enter into new contracts. The OECD estimated that almost a third of rich-country corporate debt is due to mature in 2026, with new debt issued to replace it likely paying a higher rate of interest.
The OECD left its forecast for U.S. growth in 2024 unchanged at 2.6%, and also retained its 4.9% projection for China. Pereira said the package of stimulus measures announced by the Chinese government Tuesday could lead to a “slight” upward revision when the OECD next releases growth forecasts in early December.
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Selloff in bitcoin and other digital tokens hits crypto-treasury companies.
3 min
The hottest crypto trade has turned cold. Some investors are saying “told you so,” while others are doubling down.
It was the move to make for much of the year: Sell shares or borrow money, then plough the cash into bitcoin, ether and other cryptocurrencies. Investors bid up shares of these “crypto-treasury” companies, seeing them as a way to turbocharge wagers on the volatile crypto market.
Michael Saylor pioneered the move in 2020 when he transformed a tiny software company, then called MicroStrategy , into a bitcoin whale now known as Strategy. But with bitcoin and ether prices now tumbling, so are shares in Strategy and its copycats. Strategy was worth around $128 billion at its peak in July; it is now worth about $70 billion.
The selloff is hitting big-name investors, including Peter Thiel, the famed venture capitalist who has backed multiple crypto-treasury companies, as well as individuals who followed evangelists into these stocks.
Saylor, for his part, has remained characteristically bullish, taking to social media to declare that bitcoin is on sale. Sceptics have been anticipating the pullback, given that crypto treasuries often trade at a premium to the underlying value of the tokens they hold.
“The whole concept makes no sense to me. You are just paying $2 for a one-dollar bill,” said Brent Donnelly, president of Spectra Markets. “Eventually those premiums will compress.”
When they first appeared, crypto-treasury companies also gave institutional investors who previously couldn’t easily access crypto a way to invest. Crypto exchange-traded funds that became available over the past two years now offer the same solution.
BitMine Immersion Technologies , a big ether-treasury company backed by Thiel and run by veteran Wall Street strategist Tom Lee , is down more than 30% over the past month.
ETHZilla , which transformed itself from a biotech company to an ether treasury and counts Thiel as an investor, is down 23% in a month.
Crypto prices rallied for much of the year, driven by the crypto-friendly Trump administration. The frenzy around crypto treasuries further boosted token prices. But the bullish run abruptly ended on Oct. 10, when President Trump’s surprise tariff announcement against China triggered a selloff.
A record-long government shutdown and uncertainty surrounding Federal Reserve monetary policy also have weighed on prices.
Bitcoin prices have fallen 15% in the past month. Strategy is off 26% over that same period, while Matthew Tuttle’s related ETF—MSTU—which aims for a return that is twice that of Strategy, has fallen 50%.
“Digital asset treasury companies are basically leveraged crypto assets, so when crypto falls, they will fall more,” Tuttle said. “Bitcoin has shown that it’s not going anywhere and that you get rewarded for buying the dips.”
At least one big-name investor is adjusting his portfolio after the tumble of these shares. Jim Chanos , who closed his hedge funds in 2023 but still trades his own money and advises clients, had been shorting Strategy and buying bitcoin, arguing that it made little sense for investors to pay up for Saylor’s company when they can buy bitcoin on their own. On Friday, he told clients it was time to unwind that trade.
Crypto-treasury stocks remain overpriced, he said in an interview on Sunday, partly because their shares retain a higher value than the crypto these companies hold, but the levels are no longer exorbitant. “The thesis has largely played out,” he wrote to clients.
Many of the companies that raised cash to buy cryptocurrencies are unlikely to face short-term crises as long as their crypto holdings retain value. Some have raised so much money that they are still sitting on a lot of cash they can use to buy crypto at lower prices or even acquire rivals.
But companies facing losses will find it challenging to sell new shares to buy more cryptocurrencies, analysts say, potentially putting pressure on crypto prices while raising questions about the business models of these companies.
“A lot of them are stuck,” said Matt Cole, the chief executive officer of Strive, a bitcoin-treasury company. Strive raised money earlier this year to buy bitcoin at an average price more than 10% above its current level.
Strive’s shares have tumbled 28% in the past month. He said Strive is well-positioned to “ride out the volatility” because it recently raised money with preferred shares instead of debt.
Cole Grinde, a 29-year-old investor in Seattle, purchased about $100,000 worth of BitMine at about $45 a share when it started stockpiling ether earlier this year. He has lost about $10,000 on the investment so far.
Nonetheless, Grinde, a beverage-industry salesman, says he’s increasing his stake. He sells BitMine options to help offset losses. He attributes his conviction in the company to the growing popularity of the Ethereum blockchain—the network that issues the ether token—and Lee’s influence.
“I think his network and his pizzazz have helped the stock skyrocket since he took over,” he said of Lee, who spent 15 years at JPMorgan Chase, is a managing partner at Fundstrat Global Advisors and a frequent business-television commentator.
