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- The International Monetary Fund aimed criticism at growing risks in the US economy.
- In a report last week, it called out high debt, banking vulnerabilities, and trade barriers.
- These are important downside risks that could impact the global economy, it said.
The US was the target of pointed criticism from the International Monetary Fund last week, with the organization calling out everything from Washington’s trade policy to its deficits.
In its annual evaluation, the IMF touted a “remarkable performance” in the world’s largest economy and expects further growth to come.
However, some issues are becoming too pressing to ignore, it said.
“The fiscal deficit is too large, creating a sustained upward trajectory for the public debt-GDP ratio,” the summary said. “The ongoing expansion of trade restrictions and insufficient progress in addressing the vulnerabilities highlighted by the 2023 bank failures both pose important downside risks.”
Chronic deficits are leading toward a debt-to-GDP ratio of 140% by 2032, IMF said, a situation that needs to be addressed urgently. By the US’ own estimates, the national debt will balloon to $56.9 trillion by 2034, a steep increase from earlier projections.
In an era of higher interest rates, alarms have started ringing over fiscal stability as Washington will need to finance its debts at elevated borrowing costs. Some of Wall Street’s heaviest hitters have issued warnings of eventual fallout.
To counter this, the IMF pushed for policymakers to find efficiencies in discretionary spending and to raise indirect and income taxes — including on those earning under $400,000 a year.
What’s more, partisan debt ceiling standoffs need to end, it said. The worst instance occurred 2023, when Republicans and Democrats brought the US close to default over funding disagreements.
“These create systemic risks to the U.S. and global economy that are entirely avoidable. Institutional changes should be designed to ensure that, once appropriations are approved, the corresponding space is automatically added to the debt ceiling,” the report said.
But threats to financial stability don’t end there. Domestically, “concrete actions have been lacking” when it comes to strengthening US banking safety, especially in light of 2023’s brief crisis sparked by the failure of Silicon Valley Bank.
The US needs to pursue tougher bank supervision, and lower the pool of uninsured deposits, the IMF said.
While the fund also suggested a need for the US to implement the Basel III regulatory agreement to do this, the proposal has been widely unpopular in the industry.
The legislation would apply larger liquidity requirements on big dealers, which banks have argued as a cut back to their ability to invest.
Meanwhile, Washington’s increasingly protectionist approach to trade is a risk to US and global growth, the IMF said.
The criticism comes soon after President Biden issued new tariffs on specific advanced manufacturing products from China in an effort to boost the US green energy industry.
But the practice goes further back, when former President Trump set off a trade war with Beijing. If the Republican candidate wins the White House again, he has promised to apply universal tariffs on all imports, which economists have warned would be massively inflationary.
“The U.S. should unwind obstacles to free trade and seek instead to bolster competitiveness through investments in worker training, apprenticeships, and infrastructure,” the IMF wrote.
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The author, Jen Glantz.
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- In order to grow my business, I’ve taken on debt, and I wanted to look into debt consolidation.
- I asked a financial analyst about personal loans, 401(k) loans, and balance transfer credit cards.
- Each option has merit for certain people, but for me, a balance transfer credit card is the best choice.
When I first became a solopreneur in 2016, I stayed risk-averse when it came to spending money on my company. I had recently been laid off from my full-time job and was desperate to pocket any extra income my service-based business made. But over the years, I realized I had to spend money strategically if I wanted to scale. I used a personal loan to launch my first product and relied on credit cards to pay for contractors when I needed help with projects. Over the last year, I’ve decided to grow my business even more, which has required capital that I just don’t have.
In order to launch new services and products, I’ve had to take on debt. However, my monthly payments for both credit cards I used now come with over 20% interest. In an effort to consolidate this debt and pay it off faster with a lower interest rate, I looked into three other debt consolidation loan routes and asked a financial advisor for advice on each one. Here’s what I learned.
1. A personal loan
The first option I considered for debt consolidation was to take out a personal loan. A personal loan is cash offered to a person as a one-time payment from a bank or other financial institution. As a borrower, you pay back the amount of the loan, plus a set rate of interest, over a period of time.
Chartered financial analyst Michael Collins said that a benefit of a debt consolidation loan is that often you can find one that offers an introductory rate, as low as 0%, for a set amount of time before climbing back up to its usual rate for the rest of the term.
“This is beneficial for a person who knows they have the cash coming soon to pay off the loan if they can do so before the interest rate rises,” he said. “But if you don’t know whether you’ll have enough money to pay back the loan within that timeframe, you could be paying higher interest with this debt consolidation route than others.”
Collins said this route could help people who don’t have good credit and don’t have other debt consolidation options available.
“But be sure you have an influx of cash coming in to be able to pay off your personal loan within the term,” he said. “If not, you could be hit with interest and additional fees on the overdue loan payments.”
Since I know I’ll need at least 18 months to pay off the debt, I’d be hit with high interest if I took out a personal loan. This would make my debt grow significantly over that time period because of interest payments. Taking out a personal loan didn’t seem fitting for this instance.
2. A 401(k) loan
One option I never thought of was taking a loan from my 401(k). Collins explained that a person can borrow around 50% of their 401(k) balance as a loan.
“You would still pay interest when borrowing this money,” he said. “But usually it comes at a lower rate, around 7%, and interest payments are put back into the 401(k).”
While there aren’t any fees or tax implications for taking a 401(k) loan, Collins said that a person just needs to have the funds available in their retirement account to do this.
Since I’m now self-employed, I have a SEP IRA as my main retirement account, which doesn’t offer these benefits. I haven’t actively contributed to my 401(k) in five years and don’t have enough cash inside of it to take a loan. This option, while viable for others, wasn’t for me.
3. Balance transfer credit cards
Another debt consolidation option was to find a balance transfer credit card that offered 0% APR for at least 18-months. I was able to find quite a few balance transfer credit cards that offered that.
“With this route, you can transfer your debt from your two current credit cards that have high interest to a credit card that has 0% APR for 21 months,” he shared. “This is a beneficial option for someone disciplined to pay off the debt after it’s transferred during that time period.”
However, Collins said that while you’re getting a long term of 0% APR to pay off the balance, there are usually transfer fees to consider.
“Most balance transfer credit cards will charge either a flat fee or 2-5% of the balance you’re transferring,” Collins said. “While this option is still less expensive than going down the personal loan route, those fees are something to consider.”
He also mentioned that this is an option for someone with a good or excellent credit score, as 0% APR rates are usually not offered to someone with a lower credit score.
I do have an excellent credit score and could qualify for a balance transfer credit card. After considering all three options and speaking to Collins, I decided that this option makes the most sense for debt consolidation for my business expenses.
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For centuries these strays have been looked after and respected as part of Turkish culture. Now they’ve been dragged into the president’s culture wars
When I first moved to Istanbul in 2010, knowing almost no one and grappling with an unfamiliar language, it was the local street dogs who first drew me into my new life. Chico, an elderly alsatian, and Herkül, a labrador mongrel, lived on a corner near my apartment where they watched the life of the neighbourhood pass by with a vigilant serenity.
Locals fed them, and I learned to my amazement that some even clubbed together to pay the dogs’ vet bills if they were sick or injured. Greeting them each day became a ritual, and when I first went to a pet shop to buy treats, using my halting Turkish to explain that I was getting them “for dogs, but not my dogs”, the shopkeeper replied: “Ahh, for the street dogs,” as though nothing were more natural.
Alexander Christie-Miller is a writer and journalist, and author of To the City: Life and Death Along the Ancient Walls of Istanbul
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