Finimize - 💋 The IMF’s kiss of debt

The IMF’s lending more than ever before | The pound plunged against the dollar |

Hi Reader, here's what you need to know for September 27th in 3:03 minutes.

🇺🇸 It’s true, folks: the US has already entered a technical recession. So join abrdn’s Abigail Watt for What’s Next For The US Economy? on Thursday, and find out what that means for you, your bank balance, and the country as a whole. Grab your free ticket

Today's big stories

  1. IMF bailouts have hit record highs as the global economy suffers
  2. Could one little blockchain be the next big thing? – Read Now
  3. The pound plunged to an all-time low against the dollar

Life-Or-Debt IMF Loans Hit An All-Time High

Life-Or-Debt IMF Loans Hit An All-Time High

What’s Going On Here?

Data out this weekend showed that the International Monetary Fund (IMF) is lending more money to hard-up countries than ever before.

What Does This Mean?

The IMF is kind of like a bank for countries, but it’s a bank that few nations get excited about dealing with. As “the world’s lender of last resort”, it’s a worst-case-scenario safety net that countries can rely on when their economies are – well – going to hell in a handcart. Calling in the IMF, then, is a kind of SOS flare that can spook investors and hit a country’s reputation – but the combined forces of the pandemic, the war in Ukraine, and the sharp rise in global interest rates have pushed at least five countries into default and forced dozens more into the IMF’s arms. No wonder, then, that the organization had a record-breaking $140 billion out in loans at the end of last month.

Why Should I Care?

Zooming in: Downhill from here.
This could just be the beginning. Experts think that greater interest rate hikes could push even more countries into dire economic straits, and with 55 of the world’s poorest countries already due to repay almost half a trillion dollars of debt by 2028, the IMF could find its resources stretched pretty thin over the next few years. That might be why some economists are keen to remind us that the IMF’s pockets are only so deep and the day could come when it can no longer dole out emergency checks.

The bigger picture: The outlook’s pretty cheerless.
The OECD isn’t optimistic about the global economy: the organization said on Monday that it expects just 2.2% growth next year, down from a 2.8% forecast in June. That means 2023’s global output is now projected to be a cool $2.8 trillion lower than had been forecasted before war broke out – a sum equal to the entire economy of France (tweet this). (Zut alors!)

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Analyst Take

Could Polkadot And Its Gang Of Parachains Be Ethereum’s Killer?

Could Polkadot And Its Gang Of Parachains Be Ethereum’s Killer?

By Jonathan Hobbs, Analyst

There’s always speculation about which blockchain might someday be the “Ethereum killer”, capable of knocking the No. 2 blockchain off its perch. 

And it seems like Polkadot and its parachain technology are shaping up to be prime suspects.

With its parachain technology, Polkadot is designed to do all the things Ethereum can do, only better.

That’s today’s Insight: is this the blockchain that takes out Ethereum? 

Read or listen to the Insight here

SPONSORED BY WEISS RATINGS

The Dow’s dipping

The Dow is one of the most keenly-watched US stock indexes, and it carries some serious heft.

So it doesn’t bode well that this year’s less-than-idyllic conditions have sent it tumbling down a steady downward slope.

You’ll probably have three big questions right about now: what’s going to happen next, how to protect your income and savings, and how you can use the crash to actually make money.

As luck would have it, you can get all three answers today by watching this quick video by Weiss Ratings.

Get your head around the crash with Weiss.

Find Out More

GBP Takes A Pound-ing

GBP Takes A Pound-ing

What’s Going On Here?

The pound sterling fell to an all-time low versus the US dollar on Monday.

What Does This Mean?

Investors weren’t impressed when the British government unveiled a package of tax cuts late last week – but anyone hoping they’d do a U-turn over the weekend will have been sorely disappointed: since Friday, the government has doubled down on its stance and declared that there’s even “more to come”. That was not what most investors wanted to hear: many worry that the moves could make inflation worse – and with borrowing costs rising, the decision to take on even more debt is particularly risky. The result: investors flocked to the exits on Monday, sending the pound plunging nearly 5% versus the dollar, to trade as low as $1.035.

Why Should I Care?

For markets: Confidence falls further.
At first the pound made up much of its losses, but that wasn’t because any good news broke. See, the currency looked so weak that it sparked rumors the Bank of England (BoE), which raised rates just last week, would have to take emergency action to stabilize it. So when the BoE announced late on Monday evening that it had no plans to make emergency hikes, the news hit the currency market with a thud: within minutes, the pound was in freefall once again, dropping a whole two cents against the dollar. 

The bigger picture: Even more inflation.
When your currency’s in free fall, it’s bad to be a net importer – that is, a country that imports more than it exports. Unfortunately that’s exactly what the UK is – meaning that foreign goods will probably get more and more expensive for Brits. And “goods getting more and more expensive” is a layman’s way of saying – you guessed it – even more inflation.

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💬 Quote of the day

“Big words seldom accompany good deeds.”

– Charlotte Whitton (a Canadian feminist and mayor of Ottawa)
Tweet this

🎯 On Our Radar

  1. Join the club. The cost of living crisis is smothering British nightlife.
  2. Keep up with an unpredictable market. You’ve never seen customer research like this before.*
  3. We all have cognitive biases. Here’s how we can fight them.
  4. AI is getting artistic. Its work, polished with a little human help, has been impressive.
  5. Pompeii’s frescoes hit Bologna. Many have never left Naples since their discovery.

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