r/Economics • u/financialtimes • 2d ago
Top economies heading for biggest budget deficits since Covid, IMF warns
https://www.ft.com/content/c877685b-0f4a-4aa8-b52b-33f4babd1acb?segmentid=c50c86e4-586b-23ea-1ac1-7601c9c2476f75
u/PrinnyFriend 1d ago
The world is in a real recession due to the absolute decimation of free trade, resource scarcity and warlike instability.
One country literally destroyed the rule of law. One man literally caused worldwide economic downfall. And in return the world is jumping out of a burning building which is the US bond market, the US military complex and now US services.
The trust and stability is no longer there and America is getting ostracized at a rate never seen before and becoming an isolated fortress with no allies in the Americas, across the Atlantic or the Pacific.....
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u/Feisty-Boot5408 1d ago
Trump sucks and is a disaster for the US economy, but he’s not responsible for the UK and France have dire economic situations.
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u/daviddjg0033 1d ago
Putin is arguably worse for the global economy and inflation as the War is inflationary and the War of choice in Ukraine has eclipsed WWII in time.
We live in the post Cold War world
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u/wastingtoomuchthyme 1d ago
Putin spun up his asset as everything Trump's does benefits Putin.
Like literally everything
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u/Appropriate_Eye3906 1d ago
How is trump responsible for the massive over leveraging of Canada, UK, France and other European countries?
Every one of them has levied large taxes in energy which has fucked their local industry far harder then anything Trump has done.
They have gutted their industrial base to "save the planet" which it won't do and increased their reliance only external sources whilst importing millions of welfare dependents.
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u/xxShathanxx 1d ago
Yep a decade of bad economics he was tamed down his first term. The second term has been an unleashing of terrible economics affecting the global economy. Can’t wait until food inflation starts kicking into overdrive again!
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u/Various-Gazelle4713 1d ago
Most of Europe and Canada have had low/stagnated growth compared to the US since the Great Recession due to poor fiscal policy and half-austerity measures that hurt the economy while costing a boatload, the effects of Brexit, multiple Russian invasions since 2008, etc. It’s like you people can’t accept responsibility for the actions of your own content and are always needing to deflect blame elsewhere.
The vast majority of Europe and Canada’s economic issues have nothing to do with Trump winning a second term.
As for the rest of your rant, none of that is true no matter how badly you wish it. Several countries have divested USD (as they do regularly) and some (like the UK) have increased holdings. The total volume of US bonds is at an all-time high, so you’re just making shit up.
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u/availablefilmruler 1d ago
None of this is accurate.
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u/Various-Gazelle4713 1d ago
The EU was the same size as the US economy as late as 2011. And now it’s 2/3 the size. It’s absolutely accurate.
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u/availablefilmruler 1d ago
Nobody is denying the US economy outperformed the EU economy.
But the US has poorer fiscal policy than the worst performers in the EU like France and it has the worst outlook on fiscal policy of any major economy outside of maybe China.
Most of the gap between the EU and America is down to the dominance of American tech companies and in very recent years American AI companies. It's Microsoft, Apple into Amazon, Facebook, Google into OpenAI/Anthropic now. That's the story of diverging growth and productivity.
Europe is once again talking about trying to move past American technology companies for self-made European options. I have my doubts.
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u/Various-Gazelle4713 1d ago edited 1d ago
The US has worse fiscal policy than France? Their federal debt is very similar in % to GDP as the US with the addition of abysmal growth and far higher tax rates leading to far less fiscal runway and zero control over their currency and interest rates.
You are just making stuff up.
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u/CremedelaSmegma 1d ago
So the political economy is worth mentioning, but in the context the current US executive pulled forward many years of issues already present.
The LIO (liberal international order) as practiced was an alignment relic born out of the Cold War. Once that ended, the system was no longer fit for purpose (that is a chapter book all its own) and never reconfigured. That mismatch has been gaining friction for decades.
Also the economics principles mathed out by Keynes, who was in a post depression era with massive underutilized labor, manufacturing capacity, and natural resources faded over time but the economic models like DSGE kept with their assumptions of infinite market elasticity. All modern economic policy (and credentialed expert understanding) is downstream of this.
To the issue of the OP headline article, these assumptions of continually expanding labor pools and supply elasticity were given an extra lease on life due to globalization and the rise of labor and regulatory arbitrage and aggressive mechanistic export policies by markings like China and others. But that has run its course.
This has lead to many, if not most western nations building their fiscal and monetary regimes on old, outdated assumptions and now their current and future liabilities are growing faster than their economy. And they are finding they can’t print new heart valve transplants. Or will into being dialysis machines and techs. And so on and so on.
What the current admin has done is pull forward all the issues arising from this 5-10 years.
Is that a good thing? Certainly not short term.
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u/financialtimes 2d ago
The world’s leading economies need to take ‘urgent’ action to rebuild public finances, the IMF has warned, as it published forecasts showing leading economies are heading this year for their biggest budget deficits since the Covid-19 collapse.
The outlook finds that while the global economy has proven resilient amid the oil shock, partly thanks to the AI-driven investment boom, sovereign debt risks are rising as global public debt heads towards 100% of GDP later this decade.
Read the full story for free by registering here: https://www.ft.com/content/c877685b-0f4a-4aa8-b52b-33f4babd1acb?segmentid=c50c86e4-586b-23ea-1ac1-7601c9c2476f
Kima — FT social media team
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u/Beneficial-Ad-8127 2d ago
Partly is an understatement. These protest against data centers or being non discreet about the buildouts resource drain, land hog, and environmental destruction wasn’t in their agenda I suppose.
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1d ago
[removed] — view removed comment
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u/Baron-Munc 1d ago
Orange chief of poor strategy is set on recreating the world of 2020 “his favorite”.
By making it more like his pants.
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u/Low_Ability4450 1d ago
An important issue is more than the size of budget deficits : if the governments are using that borrowing to support productive investment or simply to finance current spending is not the same. With higher interest costs and weaker growth prospects room for fiscal manoeuvre becomes more limited
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