Signs of a global financial implosion | By Farrukh Saleem

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Signs of a global financial implosion

In 2021, the Federal Reserve System, the central banking system of the United States, printed a colossal $13 trillion. In 2022, the annual rate of inflation in the US hit a high of 9.1 percent, a 40-year high.

In the United Kingdom, consumer prices rose to 10.1 percent, the highest in 40 years. In August 2022, consumer prices in Pakistan rose by a whopping 27 percent year-over-year, the highest in 47 years.

COVID-19 led to huge borrowings by nation-states. By 2022, global debt ballooned to over $300 trillion.

Such a high level of global debt could very well turn into “protracted recessions, high inflation and fewer resources going to essential sectors like health, education and social safety nets, with a disproportionate impact on the poor.” To be certain, developing countries will be hit the most. According to the IMF, “to meet debt payments, at least 100 countries will have to reduce spending on health, education and social protection.”

Russia, Lebanon, Sri Lank, Zambia and Suriname are already in default. According to Reuters, “Argentina, Pakistan, Tunisia, Egypt, Ghana, Belarus, Kenya, Ethiopia, Nigeria and Ecuador” could be next. If a whole host of countries begin to default on their debt obligations the global financial system could implode.

Central banks around the world are jacking up interest rates like they have never done before. Resultantly, home mortgage rates are going through the roof. This could very well end up in a series of housing market crashes around the world. China’s housing market bubble alone is estimated at $7 trillion.

The Russo-Ukrainian War has no end in sight. The US has committed at least $54 billion in overt aid to Ukraine; covert aid could be many times that much. Javelin anti-tank missiles and Stinger anti-aircraft missiles are the weapon-systems of choice.

US arms manufacturers-including Raytheon Technologies, Lockheed, Boeing, Northrop and General Dynamics-are licking their lips. The White House, in the meanwhile, is looking into exporting billions worth of US liquefied natural gas to gas-starved Europe.

In September, the pound sterling went down to $1.03, its lowest level since the UK went decimal in 1971. In early-October, the UK’s bond market crashed.

According to the Bank of England, “pension funds were hours from disaster before it intervened.” In early-October, OPEC Plus announced a cut in oil production which fueled “fears of recession in Europe”.

Benchmark European natural gas prices have soared more than 400 percent. According to Bloomberg, “Rich countries gobble up fuel while poorer nations are stuck with brewing unrest.

Governments across the developing world are struggling to keep energy flowing to citizens frustrated by rising prices, as tight supplies and weaker currencies put some sources out of reach.”

Lo and behold, Pakistan’s state-run LNG Limited failed to get a single bidder to its tender-that means a severe gas shortage in the upcoming winter season.

Credit Suisse, the 166-year old Switzerland-based global investment bank and financial services entity, is now at the “center of market turmoil amid rumors the bank could be on the brink of collapse.”

Is Credit Suisse going bankrupt? Will this be a 2008 Lehman-style global financial crash? Global investors fear a domino effect throughout the global financial infrastructure if Credit Suisse goes belly up.

For the record, Indian banks have one of the highest ratios of bad loans in the world. Indian banks that are on the verge of collapse include Punjab & Sind Bank, Punjab National Bank, Yes Bank and Union Bank of India.

Over the past 4 years, the Reserve Bank of India had to intervene to save at least five failing banking entities.

The US dollar is now the king of currencies. The mighty dollar is crippling currencies around the globe-except for the Pakistani rupee that gained 13 percent over the past 13 days.

Besides the rising rupee, Pakistan’s situation, according to the UN Secretary-General Antonio Guterres, is “going from bad to worse” adding that “Pakistan is on the verge of a public health disaster and severe hunger is spiking.”

High inflation. High rates of interest. A never-ending war in Ukraine. Will Putin push the nuclear button? Rising global debt. A long list of developing countries on the verge of defaulting on their debt obligations.

Gas prices going through the roof. Credit Suisse losing 95 percent of its share value. And, housing markets crashing around the world. These are all signs of a global financial implosion. Are we prepared?

 

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