The United States’ high interest rates can impact countries globally. This is especially true for emerging markets. Because of this big economic moves, it got me thinking about how they affect us worldwide.
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You see, as interest rates rise within America, it spells trouble for other nations, but mostly those considered as emerging markets.
Why?
Majority of these countries borrow money in dollars so when interest rates go up, it becomes more expensive to pay back what was borrowed.
Think about it; you take a loan to purchase something then all over sudden the lending’s interest doubles – difficult right?
Another thing is that, the US can attract investors by giving them more money back (interest on investment) than any other country. This means investment could be moved from other nations to America.
This could be catastrophic for a developing economy because they heavily rely on foreign direct investment (FDI) inflows for economic growth stimulation, particularly among their industries designated as “emerging”.
It would be like everybody stops shopping at your nearby store – they will find it hard staying operational.
It was interesting to me that the International Monetary Fund’s managing director, Kristalina Georgieva said it may not hit Europe so hard. What she means is that the difference of interest rates between the United States and Europe will not cause a huge change in exchange rates. In other words, what she is saying is that Europe might not feel as much affected than other places.
But for counties like Japan and many other emerging markets; they should be more concerned about how these variations in U.S.A rates can influence them. It’s like getting ready for a storm – you need to understand what could happen so that you’re prepared for it.
I believe that countries should cooperate with one another when dealing with these problems. Nobody wants to see economies suffer or people lose their jobs just because something occurred on the opposite side of the globe.
It’s kind of like we are all connected somehow and anything can affect everything else too anywhere
For me, reading this made me realize how complex the world of economics can be. It is not just numbers or graphs – it’s real people and their lives affected by these decisions.
I hope that leaders and policymakers will find a way through these challenges to make the future for all more stable and prosperous.
In the long run, understanding such things and working together can enable us to surmount any obstacles on our way.
Besides aren’t we all in this together?
Always remember to stay happy and curious!
Posted Using InLeo Alpha
Posted Using InLeo Alpha