“A surge in food and fuel prices is raising pressure on governments around the world to pick up the tab for consumers,” says The Wall Street Journal. “Spooked by protests that have broken out recently from Bangkok to Sicily, many governments have adopted subsidies or tax breaks to shield households and businesses.”
Governments have become used to the idea that ever-higher spending is both “manageable and sensible”, says Mike Dolan on Reuters, thanks to years of low inflation and low interest rates. This assumption will now be tested by a sharp shift in the economic environment.
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
“In a one-two punch, pandemic lockdowns first floored borrowing rates and exploded government borrowing to prop up economies. But a rush to reboot created wild price distortions and supply bottlenecks that appear persistent and have now been exaggerated by an energy and commodity price squeeze since Russia invaded Ukraine.”
Interest rates are likely to rise in response, increasing the cost of carrying so much public debt, says asset manager Janus Henderson. Global government debt rose to $65.4trn in 2021, up 7.8%, with every country increasing its borrowing.
Yet interest costs were just $1.01trn – equivalent to a record low interest rate of 1.6%. In 2022, debts will rise further – to a forecast $71.6trn, up 9.5% – while higher rates will raise interest costs by an estimated 14.5%. The UK will see an especially sharp rise, because inflation-linked bonds account for around 25% of outstanding government debt.
• SEE ALSO: The bond-market bloodbath isn’t over yet
-
Millions of state pension records ‘set to be deleted’ – putting thousands at risk of never getting their moneyThousands of families could miss out on money owed to them if the government deletes historic state pension records.
-
What makes you wealthy in the UK? Could it make you a target in Rachel Reeves’ Budget?Wealthy Brits could be at risk from a Budget tax raid – but how much money do you need to be considered wealthy in the UK?
-
Global investors have overlooked the top innovators in emerging marketsOpinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Investors should cheer the coming nuclear summerThe US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit
-
Healthcare stocks look cheap, but tread carefullyShares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?
-
The Palace of Westminster is falling downThe Palace of Westminster is in need of repair, but the bill is prohibitive, says Simon Wilson
-
'Gen Z is facing an AI jobs bloodbath'Opinion It has always been tough to get your first job, but this year, it's proving tougher than ever. AI is to blame, says Matthew Lynn
-
Should the Online Safety Act survive?The Online Safety Act, a measure to safeguard children, is having unintended consequences
-
The secret behind Sweden’s successOpinion Sweden's stock market is in rude health, says Max King. Why can't Britain follow suit?
-
Prabowo Subianto: Indonesia’s Deng XiaopingPrabowo Subianto, like his Chinese hero, is taking power in his 70s with big ambitions for his country. Yet many view his return to politics with dread
