The world turned upside down: indebted to development

Jue, 11/09/2023 - 05:56 -- bacosta

The Keynesian premise of international finance was to allow rich, surplus countries to finance the economic development of poor, deficit countries. For some time now, this has not been the case. In the following, we will analyse the enormous debt of the developed countries and their relationship with their developing country creditors. For example, the G7 is the group of debtor countries in the G20, and the other 12 are emerging creditor countries with ample international reserves. The EU as a block is not taken into account here.

The elephant in the room

Jue, 11/04/2021 - 18:42 -- anegrete

The reasoning of modern monetary theory holds that countries with reserve currencies can maintain unlimited levels of fiscal deficits and public debt because they have financing available. The evidence, however, shows that massive deficits do not mean economic dynamism in the US.

After 2008, federal deficits have doubled from about 60% of GDP to about 120%. Emerging nations shift their resources to China through the US deficit instead of growing, since the world is one and the borders are all open, and trade is unrestricted.

US debt in nominal amounts is more than that of the rest of the world combined. So monetary inflation exists and hits first the most deficit countries, then the least, and finally the rest of the world as imported inflation.

The US public deficit and its global effects in 2021

Vie, 10/08/2021 - 17:42 -- anegrete

The Chinese conglomerate Envergando, and two large Chinese real estate companies (Fantasia and Sinic Hildings) stopped paying interest on their debt. This situation was interpreted as the possible start of a chain of international default and the trigger for a new financial crisis, which was false.

The decision of the last FOMC meeting of the FED was not to raise the Federal Funds rate and to maintain it in the range of 0 to 0.25%, which in real terms is -5.05%, and a forthcoming reduction in the pace of financial asset purchases to raise the long-term interest rate.

The U.S. government's financial situation raises more alarms than the bankruptcy of any real estate conglomerate. In the second quarter of 2020, the public debt/GDP ratio reached a record high, hence the Executive seeks to increase the public debt limit in the U.S. Congress.

G-8's first bankruptcy

Mié, 04/29/2009 - 00:33 -- Anónimo (no verificado)

By Chan Akya Asian Times 25-04-09  -  Obela 29-04-09 It is ironic that from a strictly economic point of view, the United Kingdom today appears more akin to the Russia of Joseph Stalin that was described by British statesman Winston Churchill in his memorable quote in 1939*. Its economy is in the throes of its greatest financial crisis in over two generations, yet the UK shows unmatchable resolve in trying to crash and burn itself faster and with greater impact than any other political economy appears to be even contemplating.

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