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September 2022 Monthly

The highlights of September include continued substantial rate hikes by the major central banks, save Japan. The Tories will pick a new leader, who will…

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The highlights of September include continued substantial rate hikes by the major central banks, save Japan. The Tories will pick a new leader, who will become the next prime minister of the UK. Italy looks determined to have a right-wing government. Sweden goes to the polls in mid-September. The price of defeating the Social Democrats, who have governed since 2014, maybe for the center-right to form an alliance with the nationalist Sweden Democrats. Like Brother of Italy, it has far-right and neo-fascist roots and has emerged as the largest opposition party. In Denmark,  the coalition government appears to be fracturing, and a snap election could be called. Also, the US midterm election in November begins coming into focus.  

Central banks have come under widespread criticism for letting inflation surge, not appreciating its persistence, and being generally too timid when they did move. However, they are demonstrating their resolve by hiking rates aggressively in the face of a dramatic slowdown, which many expect is a prelude to recession. When push comes to shove, central bankers are more worried about the ruinous effects of inflation than a cyclical economic downturn. Surveys suggest many businesses agree. For now, only the Bank of England forecasts a recession and sees the British economy contracting next year and in 2024.  

The market resisted the official attempt to tighten financial conditions. Between mid-June and mid-August, the S&P 500 rallied almost 19%. The 10-year US Treasury yield fell from 3.5% in mid-June to nearly 2.50% by early August. Europe's Stoxx 600 rose more than 11% from late June through mid-August, while the yield on the German 10-year Bund tumbled from above 1.90% in mid-June to less than 0.68% in early August.  

However, officials pushed back, and the markets capitulated in the second half of August. Stocks swooned, and yields surged. In the US, the market priced in a hike in Q1 23 and took out all but the slightest chance of a cut next year. Record inflation has spurred the swaps market tto price in a 75 bp ECB hike in early September. The Bank of Canada surprised with a 100 bp hike in July, and the market has discounted a 75 bp move for this month.

It is fashionable to play up the aggressively stimulative policies in explaining inflation. However, after the Great Financial Crisis, there were similar warnings about a price surge that never materialized. Even now, the relationship between inflation and the size of central bank balance sheets, the general government's deficit, and debts is not clear-cut. Note that Japan's July CPI stood at 2.6%, the US at 8.5%, and the eurozone at 9.1%, and this assumes that there is an agreed composition and weightings of CPI, which there isn't.  

The Bank of Japan's balance sheet is nearly 135% of GDP. The Fed's balance sheet is about 36.5% of GDP. The ECB's balance sheet is almost 69% of GDP. 

Japan's central government debt is more than 2.3-times larger than its GDP. In proportionate terms, US debt is less than half as much as Japan's. The eurozone's debt-to-GDP is a little more than 95%. 

Consider fiscal policy. The cumulative budget deficit in the US for 2020 and 2021 was a stunning 26.4% of GDP. The deficit in the eurozone was less than half the size (12.2%). Japan's was almost 16% of GDP.  

Inflation seemed over-determined in the sense of being driven by several forces, including energy, supply chain disruptions, and policy. In the US, each of these sources has eased. The price of West Texas Intermediate crude oil has fallen by around 20-25% since the June peak. The average price of retail gasoline in the US has eased consistently since mid-June, and at around $3.85 a gallon, it is nearly a quarter below the high water mark. Surveys show an easing in delivery times.  

The market is well aware of the Fed's rate hikes, the promise to deliver more,  and the pace of reducing the balance sheet to double to $95 bln a month starting in September. What may be less appreciated is the magnitude of the fiscal tightening. The US recorded a budget deficit of almost $58 billion in the first four months of the fiscal year. The deficit in the same 2021 period was nearly $834 bln. The median forecast in the most recent Bloomberg survey has the budget deficit falling to 4.5% of GDP this year from 10.8% in 2021. After the Global Financial Crisis, the US budget deficit peaked at 10.1% of GDP (2009), and it took four years for the deficit to fall below 5%.  

Europe is less fortunate. Since the end of June, the benchmark for natural gas has risen by more than 150%. Some estimates suggest this is the equivalent of $500 a barrel for oil. It rose almost 220% in the first half.   Europe continues to aid Ukraine and then feigns surprise that Russia seeks to use its energy supplies to punish it. Getting one's head around the surge in wholesale electricity prices is challenging. In Europe, which is best understood as the cost of hedging electricity rather than consumer prices. At the end of January, the price of a kilowatt hour of electricity in one year in Germany was 145 euros. In late August, it reached 985 euros before pulling back amid talk of a new EU initiative and gas reserves filling up faster than projected. In France, during the same period, one year forward, a kilowatt hour of electricity rose from about 153 euros to 1130 euros. It, too, fell into month's end. Many fear that Russian gas may be cut off completely, and this risk underscores the need for Europe to deliver, or prices will jump back. 

EU governments have already committed around 280 bln euros to blunting the impact of higher energy on households and businesses. There are numerous national efforts, from tax cuts to heating subsidies in Poland. The Greek government plans on covering almost 95% of the increase in power bills in September. Germany has cut the VAT on gas, introduced some conservation measures, and is preparing a third package of aid. In Italy, the leaders of the two largest parties differed over the imposition of price controls, with the Meloni of the Brothers of Italy arguing in favor of the Europe-wide cap on prices. At the same time, Letta, the head of the Democrat Party, advocated a national cap. Different types of rationing regimes have also been introduced sporadically to limit heating temperature in public buildings and their use of light. The EU will hold an emergency meeting of energy ministers on September 9 in a bid to cap gas prices and/or decouple electricity and gas prices.  

In late August, the UK regulator Ofgem lifted the country's electricity and natural gas cap by 80% to GBP3,549 (~$4200) as of October 1. This is almost three times higher than last winter. This will translate into a large jump in CPI and further exacerbate the cost-of-living crisis, which is spurring widespread labor unrest. Ofgem warned that prices could rise significantly next year. The cap will be reviewed again in January (every three months now, rather than six). The Bank of England had warned that inflation would peak at 13.2% in October, but the National Institute of Economic and Social Research warns that inflation may reach 14.2% in January. Some private economists' forecasts are above 18%. The government has already committed about GBP30 bln to help households, but that was back in May. The new UK government will be under pressure to act quickly. Truss, the likely next prime minister, has suggested boosting North Sea drilling and cutting the VAT. The aid may rival the GBP78 bln spent on the furlough and self-employed income support provided during the pandemic.  

Although the eurozone's economy expanded in the first and second quarters (0.5% and 0.6%, respectively), while the US contracted,  it is seen as more vulnerable. The cost-of-living squeeze is profound. For example, the 30-year fixed rate mortgage, which is commonplace in the US, is absent from most other countries, including the eurozone and UK. This means that higher interest rates feed through to the homeowner quicker.

Leave side Covid, the commodity shock in general and the energy shock in particular, and the heightened geopolitical tension over Taiwan, China has a different level of challenge. China's property market has been the engine of development and investment for many years.   The wheels came off last year, and the consequences are still rippling through the world's second-largest economy. China's economic managers have neither fixed the property sector nor found an alternative engine. They risk repeating the mistakes of the US and other countries when their property market bubble popped in 2007-2008, which is to under-appreciate the magnitude.  

Regulators, for example, the state-owned China Bond Insurance (CNI), have reportedly been instructed to guarantee onshore bond issues by a few private property developers. The CBI's equity capital at the end of June was almost CNY12.5 bln (~$1.85 bln), and it is estimated that developers have more than CNY300 bln of bonds (on- and offshore) that need to be refinanced. In late August, officials announced another CNY1 trillion. Some bolder and broader initiative seems politically necessary ahead of the Party Congress in October, which will be another blow to the political reforms of Deng Xiaoping that imposed an informal two-term limit on the President and Chairman of Everything.  

The extreme weather has aggravated economic challenges. In China, floods have crimped mining while droughts have cut into hydroelectric production. The rationing in some provinces may be another source of supply chain disruption. It could exacerbate the rise in food prices and inflation more generally. In Europe, the low level of the Rhine River is disrupting its use to transport goods, including coal and oil. Seasonal maintenance has curbed French nuclear output, and it finds itself in the usual situation of having to import electricity. In addition, the warm river water limits some nuclear generators' ability to cool their plants.  

In the US, while there are anecdotal reports of some water rationing, the crunch comes next year as the federal government declared a "Tier 2" crisis as of January 2023 for the Colorado River. The historic drought exacerbates the problem brewing from overuse and what some call "aridification."  The Colorado River and the country's two largest reservoirs (Lake Mead and Lake Powell) are shared by seven states, Mexico, 22 tribal nations, and around 40 mln people. As a result, Arizona, Nevada, and Mexico will face reduced water access to the Colorado River. Arizona faces the largest cut. Starting in January, its allotment of the river water will be cut by a little more than a fifth.  

Meanwhile, reports suggest that more than 20 million American households (about 1 in 6) are behind on their utility bills. During the heart of the pandemic, moratoriums were imposed on shutting off power in many states, but these have mostly been wound down. Reports suggest some power companies are getting more aggressive about cutting off services. 

The combination of tighter Fed policy, a rising dollar, a weaker Chinese economy, and extreme weather have stressed many emerging market economies. Most emerging market currencies depreciated against the US dollar, and raising debt in the global capital markets has been too expensive for many. Leaving aside the Russian rouble, which is obviously in a unique situation, three of the following four best performing emerging market currencies in August were in Latin America:  Peruvian sol (~2.2%), Mexican peso (~1.3%), and Chilean peso (~0.25%).

Bannockburn's World Currency Index, a GDP-weighted basket of the currencies from the dozen largest economies, fell by nearly 1.4% in August, reflecting the US dollar's broad strength. That is the largest decline in four months and the second largest since March 2020. It finished August at its lowest level since May 2020 and does not appear to have bottomed. The extreme reading is consistent with other measures that show the US dollar is historically rich.  

According to the OECD's model of purchasing power parity, the euro has now eclipsed the yen as the most undervalued of the major currencies. It is nearly 42% below this metric of fair value compared with the yen's 38.2% undershoot. Sterling is third, almost 24% undervalued. These extreme readings can be expected to distort trade, some types of capital flows, and inflation over time. 


Dollar:   The dollar's downside correction that began in mid-July ran its course by mid-August, and the underlying uptrend resumed. Even though the US economy contracted in the first two quarters, Europe seems more vulnerable. Many European currencies fell to new multiyear lows against the dollar in the second half of August. Federal Reserve Chair Powell warned that the efforts to rein in US inflation will cause some pain to households and businesses. The strength of the US labor market is the key to the central bank's commitment to continue to raise interest rates. While weekly jobless claims have risen, the still subdued continuing claims suggest new positions have quickly been found. The recent JOLTS data on job openings surprised to the upside, and the June series was revised higher. Benchmark revisions found another 571k private sector jobs were created in the 12 months through March, about 8.5% more than previously estimated. Economists forecast the economy grew another 300k jobs in August. While below the 450k average through the first seven months of the year, it would likely be deemed sufficiently robust to allow the Fed to hike another 75 bp on September 21. The dollar's peak may not coincide with the peak in inflation, which looked likely before, but when the labor market shows signs of cracking, 

Euro:  The eurozone is severely challenged. The extreme weather exacerbates the energy crisis spurred by Russia's retaliation for Europe's support of Ukraine. The economy was set to slow in any event as the Covid stimulus faded. There are bound to be political consequences of the cost-of-living shock rippling through Europe. Italy's national election on September 25 will likely renew tensions with the EU over reforms necessary to free up the EU recovery funds. Although the ECB unveiled a new tool (Transmission Protection Instrument) to resist unwarranted increases in interest rate spreads, it is not clear that a right-wing government attempting to renegotiate the agreement with the EU will qualify to trigger it. The euro is vulnerable to increased tensions in the periphery. At the end of July, the swaps market had discounted about an 80% chance that the ECB would deliver another 50 bp hike at the September 8 meeting. However, the hawks have pressed their case, and the market appears to have a 75 bp hike entirely discounted and another 50 bp in October. According to the OECD's model of Purchasing Power Parity, the euro has not been this cheap in more than 30 years. Germany's discount on two-year borrowing has fallen to about 225 bp at the end of August from more than 275 bp at the start of the month. Despite the extreme valuation and the movement on the interest rate differential, which could spur a correction, with the Russian risk, and Italy's election looming, we suspect the risk is still to the euro's downside against the dollar.


(August 31 indicative closing prices, previous in parentheses)


Spot: $1.0055 ($1.0220)

Median Bloomberg One-month Forecast $1.0065 ($1.3155)

One-month forward $1.0025 ($1.0240)   One-month implied vol 10.3% (10.2%)    

 

 

Japanese Yen:  At the risk of oversimplifying, the dollar-yen exchange rate seems to be driven by US rates. The correlation between the differences in the exchange rate and the US 2-year yield rose to a five-month high of more than 0.72 over the last 30 sessions and about 0.70 for the 10-year yield. Japanese officials are more concerned about the pace of the move than the direction or level. Moreover, the yen's weakness seems to cause less consternation than the euro's weakness for the ECB., perhaps reflecting the different inflation experiences. Three-month implied volatility peaked in mid-June near 14% and slipped below 10% in mid-August, finishing the most near 11%. The BOJ has not had to defend its 0.25% 10-year yield cap since June, but rising global rates may force its hand again in September. With a running start, the dollar looks poised push above JPY140 to new 24-year highs.  

 

Spot: JPY138.90 (JPY133.25)    

Median Bloomberg One-month Forecast JPY137.30 (JPY134.15)     

One-month forward JPY138.55 (JPY133.00) One-month implied vol 11.1% (10.8%)

 

 

British Pound: Sterling's 4.65% decline in August brings the year-to-date depreciation to 14.2%. Among the majors, only the Japanese yen (~-17%) and the Swedish krona (~-15.3%) have declined more. As is well known, Japan has not raised rates at all. Sweden's Riksbank raised its repo rate by 75 bp this year (to 0.75%). The Bank of England has hiked twice as much this year (to 1.75%) and is set to lift the base rate another 50 bp in Sept. The swaps market looks for the UK policy rate to peak between 4.25%-4.50% around the middle of next year. The BOE had anticipated inflation to peak near 13.2% in October, but this seems optimistic. Private forecasts are beginning to talk about 15% or higher. Meanwhile, the UK will have its fourth prime minister in six years. Truss, the leading candidate, will inherit an economy on the verge of a five-quarter recession, forecast by the BOE, an energy crisis of historic proportions, and strike activity in numerous sectors. She is likely to respond with tax cuts and some spending increases, perhaps packed into an emergency budget before the end of the month. That policy mix of tighter monetary policy and looser fiscal policy tends to be supportive of the currency. However, we suspect sterling will first retest the 2020 Covid-spike low near $1.14. The current compromise over implementing the Northern Ireland protocol expires in mid-September. Truss threatens to invoke Article 16, allowing unilateral action and escalating tensions with the EU.  

 

Spot: $1.1625 ($1.2170)   

Median Bloomberg One-month Forecast $1.1700 ($1.21350) 

One-month forward $1.1630 ($1.2180)  One-month implied vol 11.8% (10.1%)

 

 

Canadian Dollar:  The key driver of the Canadian dollar's exchange rate is the general risk appetite, for which we have used the S&P 500 as a reasonable proxy. What appears to be a bear market rally in the S&P 500 from roughly mid-July to mid-August coincided with the appreciation of the Canadian dollar. The US dollar fell from near a two-year high (~CAD1.3225) on July 14 to a two-month low on August 11 (~CAD1.2730). As the S&P 500 retreated in the second half of August, the greenback recovered to challenge the CAD1.3150 area at the end of the month. The risk extends toward CAD1.3300-CAD1.3350 in the coming weeks. The Bank of Canada surprised the market with an aggressive 100 bp rate hike in mid-July, which may have helped support the Canadian dollar briefly. In the last three meetings of the year, the swaps market is pricing in 125 bp more of tightening. The next meeting is on September 7. The market toyed with the idea of another 100 bp hike but seems to have settled on 75 bp, which we think is more likely. In terms of macroeconomic data, Canada's relative outperformance in the first half already appears to be fading. Labor market improvement is stalling, but consumption remains strong, even if shifting away from durable goods. Headline CPI softened in July for the first time since June 2021. However, the underlying measures remain firm.


Spot: CAD1.3130 (CAD 1.2795) 

Median Bloomberg One-month Forecast CAD1.3070 (CAD1.2825)

One-month forward CAD1.3135 (CAD1.2800)    One-month implied vol 7.7% (7.6%) 

 

 

Australian Dollar:  After a belated start, the Reserve Bank of Australia has aggressively tightened its monetary policy. It delivered a 25 bp hike in May to begin the cycle and made its third consecutive half-point hike in August. The futures market is pricing in a 60% chance of another 50 bp hike at the September 6 meeting. Furthermore, it is pricing in another 100 bp of tightening in Q4. There are signs that the labor market may have turned, and the interest-rate-sensitive property market has rolled over and will squeeze the indebted households. House prices have fallen 2% in the three months through July, while prices in Sydney are off 5%. Debt-to-income in Australia is at a record of more than 187%. The Australian dollar tracked the broad pattern of the US dollar. It recorded a two-year low in mid-July near $0.6680 and peaked on August 11 at almost $0.7140, just shy of the 200-day moving average (~$0.7155). It has trended lower in the last couple of weeks and appears to be on its way to retest the mid-July low (~$0.6680). 

 

Spot: $0.6845 ($0.6985)     

Median Bloomberg One-Month Forecast $0.6890 ($0.6995)    

One-month forward $0.6850 ($0.6995)    One-month implied vol 12.3% (12.0%)   

 

 

Mexican Peso: Last month, the Mexican peso continued to perform well, but the weakness at the end of August will likely continue into the new month. The US dollar found support in the MXN19.80 area, around where it had bottomed in late June as well. A move above the MXN20.25-MXN20.27 area could signal a return to the MXN20.60, if not higher, in the coming weeks. The August high was near MXN20.8350, and the July high was slightly north of MXN21.00. The central bank delivered its second consecutive 75 bp rate hike in August to bring the target rate to 8.50%. It can be expected to match the Federal Reserve for the remainder of the year. The economy is slowing and the central bank cut its forecast for 2023 growth to 1.6% from 2.4%.  The trade deficit is widening as exports fall faster than imports. Worker remittances remain high, averaging nearly $5.2 bln a month from May through July compared with $4.5 bln in the same period last year. However, the trade balance has deteriorated quicker. The average monthly shortfall in May-July was $4.0 bln compared with less than $1 bln average in the year-ago period.


Spot: MXN20.15 (MXN20.37)  

Median Bloomberg One-Month Forecast MXN20.24 (MXN20.32)  

One-month forward MXN20.27 (MXN20.48) One-month implied vol 12.2% (11.9%)

  

 

Chinese Yuan:  Chinese officials seemed shocked by the economic weakness seen in the July reports, while the Covid-related lockdowns and energy rationing mean that the headwinds are strengthening. China has announced a lockdown of its fourth largest city at the start of September.  Officials shaved key rates, announced new spending/lending efforts, and allowed the yuan to weaken against the dollar. The People's Bank of China appears to signal that while a modest yuan depreciation is acceptable, it is not looking to repeat the six-week move through mid-May when the dollar appreciated 6.5% against the dollar. That said, we had thought that the CNY6.85 area would be sufficient, and although the dollar consolidated around there at the end of August, the risk may extend toward CNY7.0, which it has not seen since July 2020. Chinese officials are expected to provide more stimulus in Q4, including a possible cut in reserve requirements. In addition, news that an agreement that allowed US authorities to review the accounting at many Chinese companies listed on the US exchanges helped trigger a bounce in Chinese shares. Still, the underlying fundamentals are poor and ultimately could drag prices down, even with the additional fiscal and monetary support.  

 

Spot: CNY6.89 (CNY6.7445)

Median Bloomberg One-month Forecast CNY6.8660 (CNY6.7475) 

One-month forward CNY6.8930 (CNY6.7465)  One-month implied vol 5.6% (5.6%)  






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Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

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6 hours ago

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March 10, 2024

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Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act. 

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

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‘I couldn’t stand the pain’: the Turkish holiday resort that’s become an emergency dental centre for Britons who can’t get treated at home

The crisis in NHS dentistry is driving increasing numbers abroad for treatment. Here are some of their stories.

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9 hours ago

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March 10, 2024

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This clinic in the Turkish resort of Antalya is the official 'dental sponsor' of the Miss England competition. Diana Ibanez-Tirado, Author provided

It’s a hot summer day in the Turkish city of Antalya, a Mediterranean resort with golden beaches, deep blue sea and vibrant nightlife. The pool area of the all-inclusive resort is crammed with British people on sun loungers – but they aren’t here for a holiday. This hotel is linked to a dental clinic that organises treatment packages, and most of these guests are here to see a dentist.

From Norwich, two women talk about gums and injections. A man from Wales holds a tissue close to his mouth and spits blood – he has just had two molars extracted.

The dental clinic organises everything for these dental “tourists” throughout their treatment, which typically lasts from three to 15 days. The stories I hear of what has caused them to travel to Turkey are strikingly similar: all have struggled to secure dental treatment at home on the NHS.

“The hotel is nice and some days I go to the beach,” says Susan*, a hairdresser in her mid-30s from Norwich. “But really, we aren’t tourists like in a proper holiday. We come here because we have no choice. I couldn’t stand the pain.”

Seaside beach resort with mountains in the distance
The Turkish Mediterranean resort of Antalya. Akimov Konstantin/Shutterstock

This is Susan’s second visit to Antalya. She explains that her ordeal started two years earlier:

I went to an NHS dentist who told me I had gum disease … She did some cleaning to my teeth and gums but it got worse. When I ate, my teeth were moving … the gums were bleeding and it was very painful. I called to say I was in pain but the clinic was not accepting NHS patients any more.

The only option the dentist offered Susan was to register as a private patient:

I asked how much. They said £50 for x-rays and then if the gum disease got worse, £300 or so for extraction. Four of them were moving – imagine: £1,200 for losing your teeth! Without teeth I’d lose my clients, but I didn’t have the money. I’m a single mum. I called my mum and cried.

Susan’s mother told her about a friend of hers who had been to Turkey for treatment, then together they found a suitable clinic:

The prices are so much cheaper! Tooth extraction, x-rays, consultations – it all comes included. The flight and hotel for seven days cost the same as losing four teeth in Norwich … I had my lower teeth removed here six months ago, now I’ve got implants … £2,800 for everything – hotel, transfer, treatments. I only paid the flights separately.

In the UK, roughly half the adult population suffers from periodontitis – inflammation of the gums caused by plaque bacteria that can lead to irreversible loss of gums, teeth, and bone. Regular reviews by a dentist or hygienist are required to manage this condition. But nine out of ten dental practices cannot offer NHS appointments to new adult patients, while eight in ten are not accepting new child patients.

Some UK dentists argue that Britons who travel abroad for treatment do so mainly for cosmetic procedures. They warn that dental tourism is dangerous, and that if their treatment goes wrong, dentists in the UK will be unable to help because they don’t want to be responsible for further damage. Susan shrugs this off:

Dentists in England say: ‘If you go to Turkey, we won’t touch you [afterwards].’ But I don’t worry because there are no appointments at home anyway. They couldn’t help in the first place, and this is why we are in Turkey.

‘How can we pay all this money?’

As a social anthropologist, I travelled to Turkey a number of times in 2023 to investigate the crisis of NHS dentistry, and the journeys abroad that UK patients are increasingly making as a result. I have relatives in Istanbul and have been researching migration and trading patterns in Turkey’s largest city since 2016.

In August 2023, I visited the resort in Antalya, nearly 400 miles south of Istanbul. As well as Susan, I met a group from a village in Wales who said there was no provision of NHS dentistry back home. They had organised a two-week trip to Turkey: the 12-strong group included a middle-aged couple with two sons in their early 20s, and two couples who were pensioners. By going together, Anya tells me, they could support each other through their different treatments:

I’ve had many cavities since I was little … Before, you could see a dentist regularly – you didn’t even think about it. If you had pain or wanted a regular visit, you phoned and you went … That was in the 1990s, when I went to the dentist maybe every year.

Anya says that once she had children, her family and work commitments meant she had no time to go to the dentist. Then, years later, she started having serious toothache:

Every time I chewed something, it hurt. I ate soups and soft food, and I also lost weight … Even drinking was painful – tea: pain, cold water: pain. I was taking paracetamol all the time! I went to the dentist to fix all this, but there were no appointments.

Anya was told she would have to wait months, or find a dentist elsewhere:

A private clinic gave me a list of things I needed done. Oh my God, almost £6,000. My husband went too – same story. How can we pay all this money? So we decided to come to Turkey. Some people we know had been here, and others in the village wanted to come too. We’ve brought our sons too – they also need to be checked and fixed. Our whole family could be fixed for less than £6,000.

By the time they travelled, Anya’s dental problems had turned into a dental emergency. She says she could not live with the pain anymore, and was relying on paracetamol.

In 2023, about 6 million adults in the UK experienced protracted pain (lasting more than two weeks) caused by toothache. Unintentional paracetamol overdose due to dental pain is a significant cause of admissions to acute medical units. If left untreated, tooth infections can spread to other parts of the body and cause life-threatening complications – and on rare occasions, death.

In February 2024, police were called to manage hundreds of people queuing outside a newly opened dental clinic in Bristol, all hoping to be registered or seen by an NHS dentist. One in ten Britons have admitted to performing “DIY dentistry”, of which 20% did so because they could not find a timely appointment. This includes people pulling out their teeth with pliers and using superglue to repair their teeth.

In the 1990s, dentistry was almost entirely provided through NHS services, with only around 500 solely private dentists registered. Today, NHS dentist numbers in England are at their lowest level in a decade, with 23,577 dentists registered to perform NHS work in 2022-23, down 695 on the previous year. Furthermore, the precise division of NHS and private work that each dentist provides is not measured.

The COVID pandemic created longer waiting lists for NHS treatment in an already stretched public service. In Bridlington, Yorkshire, people are now reportedly having to wait eight-to-nine years to get an NHS dental appointment with the only remaining NHS dentist in the town.

In his book Patients of the State (2012), Argentine sociologist Javier Auyero describes the “indignities of waiting”. It is the poor who are mostly forced to wait, he writes. Queues for state benefits and public services constitute a tangible form of power over the marginalised. There is an ethnic dimension to this story, too. Data suggests that in the UK, patients less likely to be effective in booking an NHS dental appointment are non-white ethnic groups and Gypsy or Irish travellers, and that it is particularly challenging for refugees and asylum-seekers to access dental care.

This article is part of Conversation Insights
The Insights team generates long-form journalism derived from interdisciplinary research. The team is working with academics from different backgrounds who have been engaged in projects aimed at tackling societal and scientific challenges.

In 2022, I experienced my own dental emergency. An infected tooth was causing me debilitating pain, and needed root canal treatment. I was advised this would cost £71 on the NHS, plus £307 for a follow-up crown – but that I would have to wait months for an appointment. The pain became excruciating – I could not sleep, let alone wait for months. In the same clinic, privately, I was quoted £1,300 for the treatment (more than half my monthly income at the time), or £295 for a tooth extraction.

I did not want to lose my tooth because of lack of money. So I bought a flight to Istanbul immediately for the price of the extraction in the UK, and my tooth was treated with root canal therapy by a private dentist there for £80. Including the costs of travelling, the total was a third of what I was quoted to be treated privately in the UK. Two years on, my treated tooth hasn’t given me any more problems.

A better quality of life

Not everyone is in Antalya for emergency procedures. The pensioners from Wales had contacted numerous clinics they found on the internet, comparing prices, treatments and hotel packages at least a year in advance, in a carefully planned trip to get dental implants – artificial replacements for tooth roots that help support dentures, crowns and bridges.

Street view of a dental clinic in Antalya, Turkey
Dental clinic in Antalya, Turkey. Diana Ibanez-Tirado, CC BY-NC-ND

In Turkey, all the dentists I speak to (most of whom cater mainly for foreigners, including UK nationals) consider implants not a cosmetic or luxurious treatment, but a development in dentistry that gives patients who are able to have the procedure a much better quality of life. This procedure is not available on the NHS for most of the UK population, and the patients I meet in Turkey could not afford implants in private clinics back home.

Paul is in Antalya to replace his dentures, which have become uncomfortable and irritating to his gums, with implants. He says he couldn’t find an appointment to see an NHS dentist. His wife Sonia went through a similar procedure the year before and is very satisfied with the results, telling me: “Why have dentures that you need to put in a glass overnight, in the old style? If you can have implants, I say, you’re better off having them.”

Most of the dental tourists I meet in Antalya are white British: this city, known as the Turkish Riviera, has developed an entire economy catering to English-speaking tourists. In 2023, more than 1.3 million people visited the city from the UK, up almost 15% on the previous year.

Read more: NHS dentistry is in crisis – are overseas dentists the answer?

In contrast, the Britons I meet in Istanbul are predominantly from a non-white ethnic background. Omar, a pensioner of Pakistani origin in his early 70s, has come here after waiting “half a year” for an NHS appointment to fix the dental bridge that is causing him pain. Omar’s son had been previously for a hair transplant, and was offered a free dental checkup by the same clinic, so he suggested it to his father. Having worked as a driver for a manufacturing company for two decades in Birmingham, Omar says he feels disappointed to have contributed to the British economy for so long, only to be “let down” by the NHS:

At home, I must wait and wait and wait to get a bridge – and then I had many problems with it. I couldn’t eat because the bridge was uncomfortable and I was in pain, but there were no appointments on the NHS. I asked a private dentist and they recommended implants, but they are far too expensive [in the UK]. I started losing weight, which is not a bad thing at the beginning, but then I was worrying because I couldn’t chew and eat well and was losing more weight … Here in Istanbul, I got dental implants – US$500 each, problem solved! In England, each implant is maybe £2,000 or £3,000.

In the waiting area of another clinic in Istanbul, I meet Mariam, a British woman of Iraqi background in her late 40s, who is making her second visit to the dentist here. Initially, she needed root canal therapy after experiencing severe pain for weeks. Having been quoted £1,200 in a private clinic in outer London, Mariam decided to fly to Istanbul instead, where she was quoted £150 by a dentist she knew through her large family. Even considering the cost of the flight, Mariam says the decision was obvious:

Dentists in England are so expensive and NHS appointments so difficult to find. It’s awful there, isn’t it? Dentists there blamed me for my rotten teeth. They say it’s my fault: I don’t clean or I ate sugar, or this or that. I grew up in a village in Iraq and didn’t go to the dentist – we were very poor. Then we left because of war, so we didn’t go to a dentist … When I arrived in London more than 20 years ago, I didn’t speak English, so I still didn’t go to the dentist … I think when you move from one place to another, you don’t go to the dentist unless you are in real, real pain.

In Istanbul, Mariam has opted not only for the urgent root canal treatment but also a longer and more complex treatment suggested by her consultant, who she says is a renowned doctor from Syria. This will include several extractions and implants of back and front teeth, and when I ask what she thinks of achieving a “Hollywood smile”, Mariam says:

Who doesn’t want a nice smile? I didn’t come here to be a model. I came because I was in pain, but I know this doctor is the best for implants, and my front teeth were rotten anyway.

Dentists in the UK warn about the risks of “overtreatment” abroad, but Mariam appears confident that this is her opportunity to solve all her oral health problems. Two of her sisters have already been through a similar treatment, so they all trust this doctor.

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An Istanbul clinic founded by Afghan dentists has a message for its UK customers. Diana Ibanez-Tirado, CC BY-NC-ND

The UK’s ‘dental deserts’

To get a fuller understanding of the NHS dental crisis, I’ve also conducted 20 interviews in the UK with people who have travelled or were considering travelling abroad for dental treatment.

Joan, a 50-year-old woman from Exeter, tells me she considered going to Turkey and could have afforded it, but that her back and knee problems meant she could not brave the trip. She has lost all her lower front teeth due to gum disease and, when I meet her, has been waiting 13 months for an NHS dental appointment. Joan tells me she is living in “shame”, unable to smile.

In the UK, areas with extremely limited provision of NHS dental services – known as as “dental deserts” – include densely populated urban areas such as Portsmouth and Greater Manchester, as well as many rural and coastal areas.

In Felixstowe, the last dentist taking NHS patients went private in 2023, despite the efforts of the activist group Toothless in Suffolk to secure better access to NHS dentists in the area. It’s a similar story in Ripon, Yorkshire, and in Dumfries & Galloway, Scotland, where nearly 25,000 patients have been de-registered from NHS dentists since 2021.

Data shows that 2 million adults must travel at least 40 miles within the UK to access dental care. Branding travel for dental care as “tourism” carries the risk of disguising the elements of duress under which patients move to restore their oral health – nationally and internationally. It also hides the immobility of those who cannot undertake such journeys.

The 90-year-old woman in Dumfries & Galloway who now faces travelling for hours by bus to see an NHS dentist can hardly be considered “tourism” – nor the Ukrainian war refugees who travelled back from West Sussex and Norwich to Ukraine, rather than face the long wait to see an NHS dentist.

Many people I have spoken to cannot afford the cost of transport to attend dental appointments two hours away – or they have care responsibilities that make it impossible. Instead, they are forced to wait in pain, in the hope of one day securing an appointment closer to home.

Billboard advertising a dental clinic in Turkey
Dental clinics have mushroomed in recent years in Turkey, thanks to the influx of foreign patients seeking a wide range of treatments. Diana Ibanez-Tirado, CC BY-NC-ND

‘Your crisis is our business’

The indignities of waiting in the UK are having a big impact on the lives of some local and foreign dentists in Turkey. Some neighbourhoods are rapidly changing as dental and other health clinics, usually in luxurious multi-storey glass buildings, mushroom. In the office of one large Istanbul medical complex with sections for hair transplants and dentistry (plus one linked to a hospital for more extensive cosmetic surgery), its Turkish owner and main investor tells me:

Your crisis is our business, but this is a bazaar. There are good clinics and bad clinics, and unfortunately sometimes foreign patients do not know which one to choose. But for us, the business is very good.

This clinic only caters to foreign patients. The owner, an architect by profession who also developed medical clinics in Brazil, describes how COVID had a major impact on his business:

When in Europe you had COVID lockdowns, Turkey allowed foreigners to come. Many people came for ‘medical tourism’ – we had many patients for cosmetic surgery and hair transplants. And that was when the dental business started, because our patients couldn’t see a dentist in Germany or England. Then more and more patients started to come for dental treatments, especially from the UK and Ireland. For them, it’s very, very cheap here.

The reasons include the value of the Turkish lira relative to the British pound, the low cost of labour, the increasing competition among Turkish clinics, and the sheer motivation of dentists here. While most dentists catering to foreign patients are from Turkey, others have arrived seeking refuge from war and violence in Syria, Iraq, Afghanistan, Iran and beyond. They work diligently to rebuild their lives, careers and lost wealth.

Regardless of their origin, all dentists in Turkey must be registered and certified. Hamed, a Syrian dentist and co-owner of a new clinic in Istanbul catering to European and North American patients, tells me:

I know that you say ‘Syrian’ and people think ‘migrant’, ‘refugee’, and maybe think ‘how can this dentist be good?’ – but Syria, before the war, had very good doctors and dentists. Many of us came to Turkey and now I have a Turkish passport. I had to pass the exams to practise dentistry here – I study hard. The exams are in Turkish and they are difficult, so you cannot say that Syrian doctors are stupid.

Hamed talks excitedly about the latest technology that is coming to his profession: “There are always new materials and techniques, and we cannot stop learning.” He is about to travel to Paris to an international conference:

I can say my techniques are very advanced … I bet I put more implants and do more bone grafting and surgeries every week than any dentist you know in England. A good dentist is about practice and hand skills and experience. I work hard, very hard, because more and more patients are arriving to my clinic, because in England they don’t find dentists.

Dental equipment in a Turkish treatment room
Dentists in Turkey boast of using the latest technology. Diana Ibanez-Tirado, CC BY-NC-ND

While there is no official data about the number of people travelling from the UK to Turkey for dental treatment, investors and dentists I speak to consider that numbers are rocketing. From all over the world, Turkey received 1.2 million visitors for “medical tourism” in 2022, an increase of 308% on the previous year. Of these, about 250,000 patients went for dentistry. One of the most renowned dental clinics in Istanbul had only 15 British patients in 2019, but that number increased to 2,200 in 2023 and is expected to reach 5,500 in 2024.

Like all forms of medical care, dental treatments carry risks. Most clinics in Turkey offer a ten-year guarantee for treatments and a printed clinical history of procedures carried out, so patients can show this to their local dentists and continue their regular annual care in the UK. Dental treatments, checkups and maintaining a good oral health is a life-time process, not a one-off event.

Many UK patients, however, are caught between a rock and a hard place – criticised for going abroad, yet unable to get affordable dental care in the UK before and after their return. The British Dental Association has called for more action to inform these patients about the risks of getting treated overseas – and has warned UK dentists about the legal implications of treating these patients on their return. But this does not address the difficulties faced by British patients who are being forced to go abroad in search of affordable, often urgent dental care.

A global emergency

The World Health Organization states that the explosion of oral disease around the world is a result of the “negligent attitude” that governments, policymakers and insurance companies have towards including oral healthcare under the umbrella of universal healthcare. It as if the health of our teeth and mouth is optional; somehow less important than treatment to the rest of our body. Yet complications from untreated tooth decay can lead to hospitalisation.

The main causes of oral health diseases are untreated tooth decay, severe gum disease, toothlessness, and cancers of the lip and oral cavity. Cases grew during the pandemic, when little or no attention was paid to oral health. Meanwhile, the global cosmetic dentistry market is predicted to continue growing at an annual rate of 13% for the rest of this decade, confirming the strong relationship between socioeconomic status and access to oral healthcare.

In the UK since 2018, there have been more than 218,000 admissions to hospital for rotting teeth, of which more than 100,000 were children. Some 40% of children in the UK have not seen a dentist in the past 12 months. The role of dentists in prevention of tooth decay and its complications, and in the early detection of mouth cancer, is vital. While there is a 90% survival rate for mouth cancer if spotted early, the lack of access to dental appointments is causing cases to go undetected.

The reasons for the crisis in NHS dentistry are complex, but include: the real-term cuts in funding to NHS dentistry; the challenges of recruitment and retention of dentists in rural and coastal areas; pay inequalities facing dental nurses, most of them women, who are being badly hit by the cost of living crisis; and, in England, the 2006 Dental Contract that does not remunerate dentists in a way that encourages them to continue seeing NHS patients.

The UK is suffering a mass exodus of the public dentistry workforce, with workers leaving the profession entirely or shifting to the private sector, where payments and life-work balance are better, bureaucracy is reduced, and prospects for career development look much better. A survey of general dental practitioners found that around half have reduced their NHS work since the pandemic – with 43% saying they were likely to go fully private, and 42% considering a career change or taking early retirement.

Reversing the UK’s dental crisis requires more commitment to substantial reform and funding than the “recovery plan” announced by Victoria Atkins, the secretary of state for health and social care, on February 7.

The stories I have gathered show that people travelling abroad for dental treatment don’t see themselves as “tourists” or vanity-driven consumers of the “Hollywood smile”. Rather, they have been forced by the crisis in NHS dentistry to seek out a service 1,500 miles away in Turkey that should be a basic, affordable right for all, on their own doorstep.

*Names in this article have been changed to protect the anonymity of the interviewees.

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Diana Ibanez Tirado receives funding from the School of Global Studies, University of Sussex.

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Beloved mall retailer files Chapter 7 bankruptcy, will liquidate

The struggling chain has given up the fight and will close hundreds of stores around the world.

Published

13 hours ago

on

March 10, 2024

By

It has been a brutal period for several popular retailers. The fallout from the covid pandemic and a challenging economic environment have pushed numerous chains into bankruptcy with Tuesday Morning, Christmas Tree Shops, and Bed Bath & Beyond all moving from Chapter 11 to Chapter 7 bankruptcy liquidation.

In all three of those cases, the companies faced clear financial pressures that led to inventory problems and vendors demanding faster, or even upfront payment. That creates a sort of inevitability.

Related: Beloved retailer finds life after bankruptcy, new famous owner

When a retailer faces financial pressure it sets off a cycle where vendors become wary of selling them items. That leads to barren shelves and no ability for the chain to sell its way out of its financial problems. 

Once that happens bankruptcy generally becomes the only option. Sometimes that means a Chapter 11 filing which gives the company a chance to negotiate with its creditors. In some cases, deals can be worked out where vendors extend longer terms or even forgive some debts, and banks offer an extension of loan terms.

In other cases, new funding can be secured which assuages vendor concerns or the company might be taken over by its vendors. Sometimes, as was the case with David's Bridal, a new owner steps in, adds new money, and makes deals with creditors in order to give the company a new lease on life.

It's rare that a retailer moves directly into Chapter 7 bankruptcy and decides to liquidate without trying to find a new source of funding.

Mall traffic has varied depending upon the type of mall.

Image source: Getty Images

The Body Shop has bad news for customers  

The Body Shop has been in a very public fight for survival. Fears began when the company closed half of its locations in the United Kingdom. That was followed by a bankruptcy-style filing in Canada and an abrupt closure of its U.S. stores on March 4.

"The Canadian subsidiary of the global beauty and cosmetics brand announced it has started restructuring proceedings by filing a Notice of Intention (NOI) to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (Canada). In the same release, the company said that, as of March 1, 2024, The Body Shop US Limited has ceased operations," Chain Store Age reported.

A message on the company's U.S. website shared a simple message that does not appear to be the entire story.

"We're currently undergoing planned maintenance, but don't worry we're due to be back online soon."

That same message is still on the company's website, but a new filing makes it clear that the site is not down for maintenance, it's down for good.

The Body Shop files for Chapter 7 bankruptcy

While the future appeared bleak for The Body Shop, fans of the brand held out hope that a savior would step in. That's not going to be the case. 

The Body Shop filed for Chapter 7 bankruptcy in the United States.

"The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday (March 9), it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution center that still holds millions of dollars worth of stock," The Guardian reported.

After its closure in the United States, the survival of the brand remains very much in doubt. About half of the chain's stores in the United Kingdom remain open along with its Australian stores. 

The future of those stores remains very much in doubt and the chain has shared that it needs new funding in order for them to continue operating.

The Body Shop did not respond to a request for comment from TheStreet.   

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