Financial stability within the country does not mean your investments are immune to global developments, especially in the US
debt that the US government is generating. The country has added nearly $600 billion debt in the last month. It adds $1 trillion debt every 45-60 days.
The total debt is about $33 trillion for a GDP of about $26 trillion.
What makes it worse is that this debt is being added during a period of historically high interest rates, creating a vicious circle. I’m not a macro economist and this is not my area of expertise.
However, it’s clear that even among the supposed experts, some are alarmed by this. It’s hard to see anyone who is sanguine about it. You might ask what this has to do with us in India, where the prime concern for most investors is their investments that are mostly domestic.
It does, in fact, have a lot to do with us.
Global economies are interconnected in a way that the ripples created in one country are felt across oceans in another, and what is happening in the US is a lot more than a ripple. Due to its dominant position in the global financial markets, a wave in America can become a tsunami everywhere else. As the saying goes, when the US sneezes, the world catches a cold.
In the current scenario, it might as well be the flu.
It is undeniable that the immediate implication of the mounting US debt and its historically high interest rates can have a cascading effect on the global financial systems. While the going is good for us in India right now, there are several ways in which a deepening external crisis can cause problems for us. The biggest issue is that high interest rates in the US could result in global financial investors earning better returns on their US investments than other countries.
