World Bank data show that foreign debt in low-income countries rose by $15.5bn to about $166bn in 2020. Foreign debt in middle-income countries rose by $423bn to more than $8.5tn, leaving them especially exposed to interest-rate rises. Central banks are raising rates rapidly in the most widespread tightening of monetary policy for more than two decades. Over the three months to the end of May, monetary authorities announced more than 60 rate rises. More are expected in the months ahead.
The scissor blades between falling profitability and rising debt costs are closing and will eventually cut investment, jobs, prices and wages.
Last week, US Treasury Secretary Janet Yellen told the US Congress that “We now are entering a period of transition from one of historic recovery to one that can be marked by stable and steady growth. Making this shift is a central piece of the President’s plan to get inflation under control without sacrificing the economic gains we’ve made.”
It’s true that the US economy since the depths of the pandemic slump, (which remember in terms of national output, incomes and investment was the worst since the 1930s – even worse that the Great Recession of 2008-9) has made a recovery. But it could hardly be described as ‘historic’. And as for the claim that the US economy, the best performing of the major economies in the last year, is heading towards ‘stable and steady growth’, that is not supported by reality.
Yes, there is ‘full employment’ of sorts…
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