If you start the year owed, rest assured: you are not alone in this. According to a study conducted by the Institute of International Finance (IIF), approx 300 trillion dollars The entire world is in debt by households, corporations and even governments.
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This figure is about 349% of global GDP, equivalent to US$37,500 Loans for every person of the world. In this way, world leverage is higher than it was established before the global financial crisis, with its public debt/GDP ratio rising to 102% in 2022.
Also, experts at S&P Global Ratings say, “Rising interest rates and sluggish economies are compounding the debt burden.” In addition, the fees charged by the European Central Bank and the US Federal Reserve increased, meaning an additional $3 trillion in interest payments alone.
What are rising debts?
The Increase in interest rates Affects governments and businesses that already have low credit ratings. In addition, low-income households are also affected by rising interest rates on credit cards, mortgages and car loans. If loans continue to pile up and banks continue to raise interest rates, it is possible Depression will increase further.
This means that when government debt increases, loans to businesses also become more expensive. So businesses in the US are experiencing a ripple effect from rising interest rates. As a result, you either have to raise your prices or lower your expansion costs.
Therefore, there is no easy way out of the global debt crisis. This requires governments to take unpopular measures and change their policies. With that, it will be necessary making loans With more caution, excessive consumption and restructuring programs or companies not generating enough profits to pay for themselves.
America is on the brink of a major crisis.
One of the biggest concerns of US politicians in Washington is reaching the country’s debt ceiling, which has a high probability of happening. According to US Treasury Secretary Janet Yellen, this threshold could be reached as early as this Thursday (26).
Therefore, the country has an opportunity to get out of this situation: to increase the debt ceiling as it did last year. This approach can avoid partial government shutdowns and potential flow shortages. However, House Republicans have already said they will not support such a measure unless Democrats agree to spending cuts and other concessions.
Therefore, failure to meet government obligations could cause irreparable damage to the US economy and global financial stability. According to Moody’s Analytics, raising your credit limit is a “catastrophe” medicine. That move could result in a four percentage point drop in the PIC, six million job losses, and a one-third drop in stock prices.
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