Why IMF give a big warning about America and Global Crisis?
You must have already heard the news of the pathetic condition of the people of Sri Lanka and Pakistan. Due to inflation and economic breakdown, both countries failed to repay their debt. The bad conditions of these countries did not have much impact on other countries of the world. But imagine what would happen if this was the situation of the world's largest economy?
Today all the countries of the world are dependent on each other for one thing or the other. The global ecosystem and international trade have brought the world into one net. In such a situation, if the news of defaulting in paying the debt of a big economy on which many countries are dependent starts coming, then it is a matter of great concern.
We are talking about America, the world's largest economy. The IMF has warned about the possibility of America being a loan defaulter. International Monetary Fund i.e. IMF says that after Sri Lanka and Pakistan, America can also default in paying the debt. The IMF has warned that if America defaults in repaying its debt, it will not only affect America but the entire global economy may have to bear the brunt of it.
Let us tell you, the deadline for America to increase or suspend its borrowing limit is fast approaching. In such a situation, Julie Kozack Deputy Director of the European Department of the IMF has appealed to all parties to find a solution as soon as possible. Along with this, it has been said that not only America but also the global economy may have to bear the bad consequences of America's debt default.
Republicans and Democrats have different views on the tax cap. Republicans in the US Congress demand that President Joe Biden's administration agree to a budget cut in exchange for raising the debt limit. If this does not happen, the debt crisis in America may deepen. Democrats want debt savings to be increased.
They are accusing the Republicans of pushing their political agenda. IMF has cautioned that defaulting will make borrowing expensive. Along with this, global instability to other economic effects can also be seen. Julie Kozack said that the world has faced many shocks in the last few years.
In such a situation, any possibility of US defaulting should be avoided. Let us tell you, increasing the limit of borrowing through Parliament has always been happening. This is necessary for Congress to meet its debt commitments so that it can meet its obligations. For this approval is taken before the Parliament.
But when Republicans won a small majority in the House of Representatives during last year's midterm elections, the right wings of the caucus pressured Kevin McCarthy to tackle America's rising debt in exchange for their support. The Joe Biden administration refused to negotiate on the debt ceiling, leading to a confrontation.
This has instilled fear in the minds of the people that whether America will be able to meet its debt repayment obligations or not. However, it is believed that efforts are being made to resolve this deadlock through talks. President Joe Biden met with McCarthy on the issue earlier in the week.
After the talks ended, Biden said default was not an option, while McCarthy told reporters he saw no new activity at the meeting. Talks will resume as both sides seek to resolve the issue before the ex-date, which the US Treasury recently warned of falling on June 1. Explain that Finance Minister Janet Yellen said that the country can default on June 1 if there is no debt ceiling increase.
Suppose
this happens, then after the default of America, the unemployment rate in the
US is expected to increase by 5%. Due to this, 83 lakh jobs can be lost in
America. The American stock market may decline to half and the US GDP may
decline by 6.1%.
Why Warren Buffett is worried about the US Dollar?
America, which is considered to be the most developed country in the world, is facing a banking crisis these days. In such a situation, Warren Buffett, one of the world's top businessmen and well-known American industrialists, also expresses concern about the dollar. What happened that Warren Buffett had to talk about the strength of the dollar?
Warren Buffett is worried about the dollar. The reason behind this is being told that in the recent Berkshire Hathaway shareholders' meeting, a question from a 13-year-old boy forced Buffett to think. This question was related to an issue about which policymakers of Washington are worried. The question was, is the US dollar losing its status as a global reserve currency?
How did Warren Buffett respond to this? Going to tell you, in response to this question, Buffett said that the dollar matters a lot. However, Dollar is not expected to lose its crown of the world's most powerful currency anytime soon. The dollar is the reserve currency. I don't see any other currency replacing the dollar as the reserve currency.
However, Warren Buffett's concern was visible for the dollar. China, Russia, Gulf countries to Latin American countries are looking for an alternative to the dollar. Ever since Russia invaded Ukraine, efforts to find an alternative to the dollar have intensified. On the other hand, China is trying to compete with America on every front. In India too, the rupee has started to be used to pay for import bills.
Recently there was news that the Indian currency is gradually moving towards becoming an international currency. After Russia and Sri Lanka, many countries including four African countries are ready to do business with India in rupee very soon. So far 17 Western accounts have been opened in India to do business with other countries.
Not only this, 64 countries including Germany are negotiating with India for trade in rupees. If India's business with 30 countries starts in rupees, then it will become an international currency. Regarding the measure, it is being said that transactions in rupees from other countries will reduce the risk for business.
According to experts, most of the goods imported including crude oil will be paid through rupee. This will protect against the volatility of billions of dollars every year, thereby reducing the cost of doing business and leading to better business growth. This can improve Indian trade at the global level.
The need to keep foreign exchange reserves, including dollars, will also be less. Due to a reduction in dependence on foreign exchange especially the dollar, India will be less affected by external influences. During all these circumstances, this statement of Warren Buffett has come.
America's current economic crisis is said to be the biggest reason for this. What effect can be seen in the world in the days to come? How did you like the information, do tell by commenting, and don't forget to share.