Trending Now
We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates, including GZERO Media, to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence, and our use of cookies described in our Cookie Policy.
{{ subpage.title }}
United States President Joe Biden makes a statement on the general election.
Hard Numbers: Biden addresses Trump’s win, Earth keeps getting hotter, Starvation imminent in Myanmar, US forgives Somalia’s debt
74: In the wake of Kamala Harris’ loss in the presidential election, President Joe Biden addressed the country from the White House Rose Garden on Thursday, 74 days before he’s due to hand the keys back to Donald Trump.In his speech, Biden stressed that he would ensure a peaceful transition of power, called for unity, and said that he hoped the result would restore Americans’ faith in election integrity.
2.5: For the second year in a row, scientists at the European Climate Agency report that Earth is the hottest it’s ever been, breaking 1.5 degrees Celsius of warming compared to preindustrial averages. While factors like El Niño and volcanic eruptions are playing a part, they say the data clearly shows an unprecedented sequence of record-breaking temperatures that would be impossible without the levels of greenhouse gasses being emitted by humans.
2 million: Two million people in Myanmar’s Rakhine state, which borders Bangladesh, are on the brink of starvation because of trade blockades and violence that have led to a “total economic collapse,” according to the UN. People in the region are seeing their incomes plummet because of the violence while food prices are soaring due to junta-enforced trade blockades, creating a deadly cycle of conflict and economic crisis.
1.14 billion: The US has decided to cancel $1.14 billion of Somalia’s outstanding loans, a quarter of the country’s outstanding debt. The government has suffered under the crippling bill, borrowed under the era of Siad Barre’s military dictatorship, that went unpaid during the three decades of civil war that followed its collapse in the early 1990s. The forgiveness was part of an IMF and World Bank program that aims to relieve the poorest countries of unsustainable debt levels.
IMF Managing Director Kristalina Georgieva speaks to the media during an International Monetary and Financial Committee press briefing on Friday, Oct. 25, 2024.
IMF and World Bank close annual meetings with urgent call for fragile economies
“The world now faces a low-growth, high-debt trajectory,” said Georgieva. Governments in developing countries now face a “trilemma” of needing to increase spending – sometimes by as much as 14% – while being unable to raise tax revenues as they face fiscal buffers exhausted by the COVID-19 pandemic and its aftermath. And she acknowledged that the Fund’s projections include “a severe, but plausible scenario” in which global public debt could exceed the baseline by some 20%.
That risk is compounded by growing political opposition to free trade, which Georgieva characterized as a “retreat from global economic integration driven by both national security concerns and the anger of those who lost out.” Reduced trade will hamper growth and push countries to borrow more to make up the difference.
These pressures pose the highest risk for sub-Saharan Africa, already struggling with high debt and lacking the levels of growth necessary to get ahead. Speaking at a separate event on Friday, the IMF’s Africa Director Abebe Selassie said the region will likely grow by 4.2% in 2025, well below the 6-7% growth rates enjoyed previously. “This pace is not sufficient to significantly reduce poverty or to recover ground lost in recent years, let alone address the substantial developmental challenges ahead,” he said.
So what can be done? World Bank President Ajay Banga gave an introspective prescription at the closing plenary: Simplify, simplify, simplify. “Development delayed is development denied,” he explained while outlining progress on reducing the time the World Bank takes to approve projects from an average of 19 to 12 months, and faster where possible. The Bank has made a substantial improvement — they’re down to 16 months — but time is money, as the saying goes, and more haste will make the Bank’s programs more effective in Banga’s view.
On the IMF’s side (often more concerned with stabilization than development), Georgieva outlined three tools: rebuilding fiscal buffers in vulnerable economies, investing in growth that can ease debt burdens, and taking a cooperative approach across borders.
Of course, much depends on factors outside the control of these development finance institutions. We’re watching how the results of the US election, the roiling debt and property market problems in China, and the conflicts in Ukraine, the Levant, Sudan, and elsewhere affect the outlook.
Skyline von Bangkok Skyline von Bangkok. Panorama von Chinatown. Bangkok, Changwat Bangkok, Thailand, 26.01.2024
Thailand set to hand out $13 billion to citizens
Thai Prime Minister Srettha Thavisin announced Monday that citizens will be able to register for a digital wallet handout starting in August that will give about $275 each to 50 million people. It’s the latest in a series of populist policies put forward by the ruling Pheu Thai party, which cut a deal with the military to take power last year.
The idea is to offer folks an incentive to download the new digital wallet. Digital currencies are issued by a country’s central bank and function just like the fiat money you use every day. There are pilot programs in the EU, China, India, Saudi Arabia, and many other countries.
The government claims this handout, equivalent to roughly 66% of the average monthly income in Thailand, will help grow the economy by about 1.6%. The program is restricted to Thais who earn less than $23,000 a year (about three-quarters of the population) and they’ll have to spend it in small shops near their homes. But the Bank of Thailand has concerns – as do many economists, as it will push the debt-to-GPD ratio past 66% and increase the fiscal deficit.
That may be a risk Srettha is willing to run, considering his approval rate hovers around 12.85%. His efforts to pass popular policy, including a recriminalization of cannabis, and legalization of same-sex marriage, have done little to erase the stain Pheu Thai acquired by siding with the military to push out the Move Forward party, who won the largest share of seats in 2023. We are watching whether handing out cash can reverse his slide.A man walks in the Central Business District on a rainy day, in Beijing, China, July 12, 2023.
China picks a debt whiz to run its finances
Beijing announced that Lan Fo’an, currently provincial party secretary in Shanxi, will succeed Liu Kun at the Ministry of Finance, signaling a commitment to tackling the country’s mounting debt problem. China’s debt-to-GDP ratio has reached 280%, most of it held by local governments who borrowed heavily to fund development projects.
Lan has a reputation for being a whiz at reducing debt accumulation from his time as governor in Shanxi. He was praised by state media at the time for helping the province transform from a coal-mining to a manufacturing- and services-based economy even though Shanxi’s overall economic growth lagged behind the national average.
That’s just the kind of CV they’re looking for in Beijing these days. Lan is likely to continue his predecessor’s efforts to audit local government debt and push them to manage their own problems — but bailouts may be tempting if defaults spike.
One more thing: Don’t confuse Finance Minister Liu’s retirement with the recent ouster of former Foreign Minister Qin Gang and some military figures. Liu is above the normal retirement age for high party officials and was kept on after the National People's Congress session in March to signal policy stability. Lan will probably succeed him at the next National People’s Congress Standing Committee session before the end of the year.
Explaining the long history of US debt (& which other countries are saddled with debt)
Sovereign debt is, simply put, the money a country owes to its creditors around the world. Ian Bremmer explains a few more fun facts about debt on GZERO World.
Good old Ben Franklin once quipped, “Rather go to bed without dinner than to rise in debt.” Well, America didn’t exactly heed that advice, because never in its history did the US hit the hay hungry. In fact, the nation ended the Revolutionary War years about $75 million in debt.
US debt hit the billions by the time the Civil War was over, and was at $22 billion after World War One.
Nowadays, we’re talking trillions with a “T” of course, and public debt was at 115% of GDP last year in America. You don’t have to be an accountant to know…there’s a fair amount of red ink on that balance sheet.
America isn’t alone on Debtors Island. Based on the International Monetary Fund’s 2021 data on the top six global economies in 2021, Japan leads the pack with debt standing at 221 percent of their GDP, followed by Italy, and then the U.S-of A. The UK comes in 4th, followed by France and Germany. China is probably somewhere high in that mix, but the IMF can’t say for sure because, unsurprisingly, Beijing isn’t too forthcoming with their data.
And if the COVID pandemic taught us anything, it’s that when China pretends a problem doesn’t exist, everything works out just fine.
Watch the GZERO World episode: Sen. Mitt Romney on DC dysfunction, Russian attacks, and banning TikTok
- US debt hits record: Should you worry? ›
- Who will cave on raising US debt ceiling (again?) ›
- The state of the global economy is … not good ›
- Welcome to the global economy in 2023 ›
- Podcast: Fix the global debt crisis before it's too late, warns World Bank's David Malpass - GZERO Media ›
- US government shutdown: No end in sight - GZERO Media ›
US debt hits record: Should you worry?
Earlier this week, US gross national debt hit a new high, clocking $31 trillion. Gasp! That’s almost twice what it was a decade ago, and debt is now equal to well over 100% of GDP, hovering at the highest levels since World War II.
Is steadily rising US debt a problem, or is the risk of a financial meltdown overblown? Here’s a quick guide to the debate over debt.
First, what is it? When the federal government spends more than it raises through tax revenue, it runs a deficit. Those deficits are financed by selling Treasury bonds to investors. The US government promises to buy back the bonds by a certain date and repays the interest in the meantime. The total amount of money that the US owes to its creditors is the gross national debt. It rises when the government spends more or has to pay higher interest rates, and falls when the government takes in more revenue — either because of higher taxes or stronger economic growth (or both).
Who holds it? Government agencies hold some of it, but more than three quarters of US debt is held by the public, which includes private investors as well as foreign governments. Foreign governments currently hold about $7 trillion of it, with China ($1.2 trillion), Japan ($970 billion), and the UK ($630 billion) the top three creditors.
Has there always been debt? Yes, the United States first borrowed money (from France) to finance the American revolution! More recently, publicly held debt as a percentage of GDP was relatively low — below 50% — for decades after World War II, as strong growth and high taxes helped offset the costs of the Cold War and the war on poverty.
Tax cuts from the 1980s onwards started to push it up, as did spending for the global war on terror, but the big blow came with the Great Recession of 2009, when emergency stimulus combined with tax cuts set deficits soaring. Trump tax cuts, pandemic stimulus, and the Biden administration’s major spending initiatives pushed it up even further.
And with the Fed now raising interest rates sharply to combat inflation, borrowing costs are rising for everyone — including the federal government. That means the debt pile gets even larger. Today the amount of publicly-held national debt hovers near 100% of GDP, second only to Japan among advanced industrialized nations. But wait, there's more! The Congressional Budget Office has warned that with major government spending programs like Medicare and Social Security set to grow in the coming years as the US population ages, that number could hit 200% by mid-century.
How can the US keep doing this? The strength of the US economy and the fact that the dollar is the world’s most widely used currency mean that people and governments around the world see US treasuries as safe investments.
“The US has an extremely privileged position,” says Claudia Sahm, founder of Sahm Consulting and a former White House economist. “It's debt is the debt that the world wants — when bad things are happening in the world, the US is the safe asset.” There is a reason that the US has a sterling AAA rating from the major credit ratings agencies.
Wasn’t that credit rating dropped at one point? Yes, back in 2011. But that wasn’t because of fears about the US’ ability to pay back debt. It was about willingness: Congress was locked in a game of chicken over the Federal debt ceiling, an artificial limit on borrowing that has existed for almost a century and has been raised more than a dozen times. What ratings agencies started to worry about was whether political risks would interrupt US debt payments, not financial weakness.
Why are some people worried about all this debt? For one thing, the more the government spends on servicing debt, the less it has — in principle — for other spending priorities, like investments in infrastructure, health care, poverty reduction, or the military.
But the bigger — and much longer-term — worry is that the debt will eventually become so high that it could compromise Washington’s ability to pay it back. If that happened, withering trust in the world’s most important currency would send shockwaves through the global economy. Still, that is far, far off in any reasonable scenario, says Sahm. The US is still the world’s strongest and most dynamic economy.
So is that 31 trillion a problem? It’s just a number, says Sahm. As she sees it, the significance of the rising debt is less about scary numbers and more about priorities.
“The conversation shouldn't be about a number, it should be about: what is the government actually doing with taxpayers’ money?”
This article comes to you from the Signal newsletter team of GZERO Media. Sign up today.
- GOP partisanship could trigger first-ever US default - GZERO Media ›
- Senator Mitt Romney on Tiktok: shut it down - GZERO Media ›
- Explaining the long history of US debt (& which other countries are saddled with debt) - GZERO Media ›
- Podcast: Mitt Romney on uncharted US waters, Russian malevolence, & China’s economic ambition - GZERO Media ›
- US debt limit: default unlikely, dysfunction probable - GZERO Media ›
- US government shutdown: No end in sight - GZERO Media ›
The Graphic Truth: Who supports China’s Hong Kong law?
Many countries around the world — mostly democracies in the Americas, Asia, and Europe — have condemned China's recent move to implement a draconian new security law for Hong Kong that in effect ends the autonomy granted to the territory when it reverted from British control to Chinese rule in 1997. However, last week 52 countries expressed support for China's decision at the UN Human Rights Commission in Geneva. Most of these countries either owe China a lot of money or are relatively authoritarian regimes themselves — but not all of them. Here's a look at the China-debt exposure and freedom rankings of the countries that took Beijing's side on the new Hong Kong law.