Lado Okhotnikov: A Big Purge Is Coming

 

The other day, the Federal Reserve announced that it was keeping the discount rate within 5.25-5.5%. It would seem that the news was positive but for some reason there was no increase in positivity on the market.

 

If previously the problems with the public debt's growth initially concerned only the United States, now they affect the world economy as a whole. The Institute of International Finance (IIF) reports that total global debt has risen by $10 trillion in just six months. For comparison, the current capitalization of the NFT market is about $2.5 billion.

 

Let me note that the increase in global debt was largely due to developed countries. In particular, the G7 alone accounts for 80% of the debt.

 

The IIF clarified that rates are now rising to a level that could threaten the stability of the economy and finances. “Since increasing rates and the level of public debt increase the expenses of all states, tension will inevitably grow,” the department emphasized.

 

Indeed, it is unlikely that high interest rates will lead to a reduction in inflation and stabilization of the labor market.

 

By raising interest rates the central bank makes money more expensive. Yes, this helps curb rising prices for goods and services but in return it makes borrowed money more expensive. As a result, in order not to borrow “expensive money”, the business begins to spend less which means there is no point in talking about any increase in profits.

 

At the beginning of this year the number of bankrupt companies more than doubled.

 

Given what is happening, it is hard to believe that the United States will return inflation to at least 2%. I'm not even talking about any recession in the global economy.

 

Do you think the G-7 will be able to repay its debts in the near future? If you do the math, on average each G7 country owes $30 trillion. How can France, whose GDP last year was only $2.8 trillion, or Canada with its level of domestic companies' capitalization below $2 trillion pay off their debts?

 

However, I also see a positive moment in it, a signal that sooner or later the debt “bubble” will burst. And then they will probably announce that the global economy needs a breath of fresh air which the cryptocurrency market will bring.

 

#G7 #Crypto #USA #Money #IIF