US Spending Surge Drives the Global Economy
US Trends Impact International Markets
The surge in spending happening within the US is spilling over into the global economy, driving increased investments from companies around the world. Businesses are welcoming the increased demand for goods, but this is driving commodity prices higher and creating shipping delays.
The US is playing the same role China did after the 2008 financial crisis when it became the driver of global economic recovery. China is still seeing strong post-pandemic growth, but that is expected to slow later this year. Meanwhile, Europe is facing a slower economic recovery than the US. The US is being propped up by $6 trillion in stimulus money, which consumers are spending at home and abroad.
Costs and Benefits for Nations Around the World
Some nations benefit from the increased trade. But at the same time, they face the risk of rising inflation, a stronger dollar, and bond yields that are higher. All of these factors can slow economic recovery. For example, the US dollar has been climbing since mid-June. To offset this, central banks in Brazil, Russia, and Turkey, have raised interest rates multiple times.
Emerging Markets May Suffer
For emerging markets, rising interest rates would increase the cost of borrowing money. Debt levels in emerging markets are already high, at over $86 trillion. On the other hand, if the Fed keeps interest rates low it could prompt central banks to tighten monetary policy to prevent potential bubbles, particularly in real estate prices.
The US economy is booming, which is having different effects on countries across the world. For some nations, the growth is a double-edged sword. On the one hand they are facing increased demand for their goods, but it is also resulting in supply-chain shortages and rising prices. It will be interesting to see how the surging US economy continues to impact the world in the coming months.
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