The sheer amount of debt in the world makes temporary income disruptions a lot more financially impactful than they would be in a system with less leverage.Īs of 2019, global debt surpassed $250 trillion, which is more than 250% of the world’s GDP. However, the sheer speed of the market’s crash, and the unprecedented actions by the Federal Reserve and other central banks around the world to support the credit market, point to an even larger issue: we’re likely in the later stages of a global debt supercycle.
Job losses are likely to continue as well. Nearly 10 million jobless claims were filed in the United States in the past two weeks due to the shutdown of restaurants, travel businesses, casinos, physical retail, and parts of several other industries, and that can’t be understated.
Many analysts are focused on the impact of the virus itself, which is indeed very large. The short version is that most of what they are doing is ultimately to protect the U.S. This article takes a look specifically at some of the Fed’s international operations to help readers understand why the rest of the world is currently the Fed’s problem. The Fed has expanded the monetary base to buy Treasuries and other securities at a record pace, has put in place various lending facilities, and has opened a record number of currency swap lines with other countries. Federal Reserve has announced an unprecedented number of operations to relieve or bail out various markets, as the lender of last resort.Įric Basmajian provided a solid breakdown of the operations in place as of a couple of weeks ago, and that article is certainly worth a read. Over the past several weeks in response to the COVID-19-induced global economic shutdown, the U.S.
0 kommentar(er)
