A Brief on Customs Brokerage
International trade is regulated through tariffs and trade laws established by the Country’s Federal Governments to control the imports and exports of the country. The Government invests executive powers to the Customs Departments, headed by Custom’s Commissioners to administer the policies and tariffs on all imports and exports into and out of the country. Customs […]
Business Process Improvement – Project Implementation
Business Process Improvement projects are undertaken by Organizations from time to time to improve their internal performance and operational efficiencies. Success of BPI project depends largely upon two factors: First and foremost, the BPI project depends upon its sponsors who should ideally be drawn from the Management and the Business Unit Heads. Sponsorship and facilitation […]
Logistics Service Providers keeps Supply Chain Moving
Procurement Logistics, Manufacturing Logistics and Finished Goods Logistics functions are managed by different independent departments in a company. Though the duties of the departments involve common activities like transportation etc., however, the processes and nature of logistics functions are specific to each function besides the requirements and sensitivities of delivery times, schedules, etc. With the […]
How The Chinese Slowdown Hit Apple?
Apple is a well-known brand since it is the most valuable firm in the entire world! Apple can attribute a large part of its success to being one of the few American firms that have been able to gain a significant foothold in China. However, this foothold could be the very reason that Apple is […]
Why Globalization Succeeds When the Workforce is Young ?
In a previous article, we looked at how globalization benefits the young more than the elderly. This article looks at how a youthful workforce is necessary for globalization to succeed. The reason for this is that when the majority of the workforce is young, there is more number of people who are competing for the […]
A hot topic among investors, economists, and stock market experts these days is the looming fight over the debt ceiling in the United States. Many commentators have been discussing this incessantly pointing to the consequences for the world at large. Before launching into the specifics, it is worth discussing what debt ceiling means. Like a household that has to balance its expenses and income every month, the governments around the world have to balance their budgets every year.
Like many people who borrow the shortfall between their income and expenses, governments have to borrow as well if they are running a deficit. Of course, in the case of the United States, the deficit can be financed simply by printing money since the Dollar is the reserve currency of the world meaning that the Federal Reserve can rescue the US Government by buying up the bonds. India, on the other hand, cannot print its way out of its entire debt since it has to pay for the imports in Dollars and not Rupees.
Turning to the debt ceiling, this term denotes the limit to which the US government can borrow. The US Congress and the Senate has to increase the limit every year and the present fight is over high it can be raised. Unless the legislature increases the debt ceiling, the executive cannot borrow and even if the Fed were to buy up the bonds, the limit has to be raised first.
The next aspect here is the fact that even the Fed cannot go on buying up all the debt issued by the US government since that would lead to rampant inflation and an implosion in the debt markets.
Third, the US government cannot go on borrowing indefinitely (which is the case with India as well where the Fiscal deficit is becoming a matter of concern) because that would be like a household that decides to stop paying its debts and continues to borrow which would ultimately lead to anarchy.
The scenarios talked about are very likely and though one might not see the US defaulting on its debt (which some experts are already predicting); the prolonged uncertainty would lead to market turmoil and mayhem in the financial world. Therefore, one can expect some high stakes negotiations over the next couple of months as both the Democrats and the Republicans lock horns.
The implications for the world is that the United States is simply too big to default without taking down the global economy down with it. Hence, no matter what your position and situation are, chances are that you would be affected by this issue as the world economy is too integrated and too interconnected for you to ignore.
Finally, even in the expectation that the debt ceiling is raised, it means that the future generations have to pay the price, as this would be akin to a household passing on their debts to their children.
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What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade
February 12, 2025
