All articles tagged with #debt levels
Since Trump's tariffs in April caused turmoil in the US bond market, the administration has taken measures to keep yields low and prevent a resurgence of volatility, but underlying concerns about high debt levels and fiscal policy risks remain, making the peace fragile.
A new report reveals that over 28% of car trade-ins in the US are underwater, with the average debt exceeding the car's value at $6,905, driven by rising interest rates, extended loan terms, and falling car values, indicating a worsening financial situation for American car buyers.
U.S. Treasury markets are showing signs similar to last autumn, with rising 10-year yields following a Fed rate cut, driven by concerns over inflation, government debt, and economic stability, which could impact housing and broader markets.
Rich Americans are spending more and experiencing wage growth, while lower-income households face stagnating wages, no spending growth, and rising debt, highlighting increasing economic inequality and potential challenges for overall economic stability.
The Bank for International Settlements warns that the global economy is at a pivotal moment due to rising trade tensions, geopolitical upheaval, and increasing debt levels, which are testing institutional trust and resilience to shocks, amid a backdrop of heightened uncertainty and volatility.
Rising global bond yields, especially in long-term bonds, highlight the bond market's power to influence economies and politics, as they can lead to higher borrowing costs, slow economic growth, and potential fiscal crises, particularly for heavily indebted nations like the U.S. and Japan. The recent surge past key thresholds like 5% in U.S. Treasuries signals increased market concern about debt sustainability and the future of global financial stability.
The European Union has reached a preliminary deal to reform its fiscal rules after Germany and France found a compromise. The reform keeps the 3% deficit and 60% debt targets but introduces changes to how they are met. Each member state will design a mid-term fiscal plan to reduce deficits and put debt on a downward path. The reform includes numerical safeguards based on debt and deficit levels, with automatic procedures for countries exceeding these thresholds. The agreement also includes provisions for a "resilience margin" and a transition period to cushion the impact of rising interest rates. The reform still needs to be negotiated with the European Parliament.
Lawmakers and regulators are pushing for measures to address the rising credit card debt, which surpassed $1 trillion in the second quarter of 2023. Some proposals include capping credit card interest rates at 18% and reducing fees for late payments. However, the success of these measures remains uncertain, as they face challenges in gaining sufficient support and overcoming filibusters. The financial services industry opposes imposing a ceiling on rates, citing potential adverse effects on credit availability and popular card features. Consumers are advised to pay their credit card bills in full and on time to avoid accruing interest charges, regardless of the interest rate cap.
The World Bank has downgraded its growth forecast for developing East Asia and Pacific due to a slowing China and weak global demand. It now expects the region to grow by 5% in 2023, slightly lower than the previous forecast of 5.1%. The bank also lowered its growth estimate for China in 2024 to 4.4% from 4.8% due to elevated debt levels and weakness in the property sector. The World Bank highlighted the significant increase in government and corporate debt levels, which could limit investment and lead to higher interest rates. It also noted high levels of household debt in China, Malaysia, and Thailand, which could negatively impact consumption.
Stephanie Pomboy, founder of Macro Mavens, has warned that the US stock market could plunge 30% and a broad economic downturn could take hold, rivaling the Great Recession. Consumers, businesses, and real estate developers are being hit by soaring interest rates, and debt levels are higher today than before the mid-2000s housing crash. Pomboy accused the Federal Reserve of repeatedly pumping too much money into the economy, boosting asset prices to unsustainable highs, then ratcheting up interest rates and causing painful crashes.