The world’s governments “have rolled out $16trn of fiscal measures to prevent economic collapse during the pandemic”, says Enda Curran on Bloomberg. That has left us with “war-time era” debt levels. The UK’s government debt-to-GDP ratio is expected to hit 113% in 2026, up from 85.2% pre-pandemic, one of the biggest increases among all advanced economies. Ultra-low interest rates on government bonds – the UK’s ten-year gilt currently yields 0.623% – are keeping these debt levels manageable for now, says James McCormack of credit rating agency Fitch. Yet in the longer-term a “fiscal adjustment” (spending cuts and higher taxes) will probably be needed to get global government finances back on track.
Climate change will worsen debt dynamics over the coming decades, say Dhara Ranasinghe and Karin Strohecker on Reuters. “While developing countries are inherently more vulnerable to rising sea levels and drought, richer ones will not escape.” A report by index provider FTSE Russell finds that “Malaysia, South Africa, Mexico and even... Italy may default on debt by 2050”. Many nations could also be heading for climate-induced credit downgrades, leading to higher borrowing costs and more onerous national debts.
As during the 1970s, “the economy looks shaky and society is becoming more fractious”, says Liam Halligan in The Daily Telegraph. “The emerging parallels between contemporary British trends and those weird, dysfunctional years… are stark.” Even the Afghan debacle is reminiscent of “America’s 1975 retreat from Saigon”. By 1976 “a near-bankrupt Britain” was forced to beg the International Monetary Fund for a bailout. This time too, “after years of high borrowing and mass money-printing… a fiscal reckoning... seems inevitable”
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
How retail investors can gain exposure to Lloyd’s of LondonIt’s hard for retail investors to get in on the action at Lloyd’s of London. Here are some of the ways to gain exposure
-
The flaw in Terry Smith’s strategy at FundsmithOpinion Fundsmith has invested in some excellent companies, but it has struggled to decide when to sell, says Max King
-
How retail investors can gain exposure to Lloyd’s of London
It’s hard for retail investors to get in on the action at Lloyd’s of London. Here are some of the ways to gain exposure
-
The goal of business is not profit, but virtueOpinion Serve your customers well, and the profits will follow, according to a new book. It rarely works the other way around, says Stuart Watkins
-
Earnings estimates are a rigged game – especially in the USThe number of US stocks beating earnings estimates tells us only that guidance has deliberately been set too low
-
Why is Britain's industrial base crumbling?Opinion More and more factories in the UK are closing, and the government doesn’t seem to care. What’s going on?
-
Scotland's former first minister Nicola Sturgeon leaves behind a toxic legacyOn the left, Nicola Sturgeon is seen as something of a political hero. That makes sense… but only if you exclude her actual record in office
-
How Trump's dog deals will damage global trade with the USOpinion Some commentators are hailing Trump’s trading savvy. Are they right?
-
Emerging markets must deliver growthEmerging markets have benefitted from the rotation away from the US – but can the rally last?
-
Global equities that should prove resilient to the stock market’s stormsOpinion Alex Illingworth of Goshawk Asset Management highlights three diverse opportunities in global equities despite a turbulent landscape
