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Many countries are at risk of default because the Fed raises interest rates

In a recent interview with Xinhua News Agency, Mr. Michael Hudson, professor of economics at the University of Missouri in Kansas City (USA), and president of the Institute for Long-Term Trends Research (USA). ISLET), said that the current trend of tightening monetary policy of the US Federal Reserve (Fed), as well as rising food and oil prices, could push third-world countries into default and have to sell public assets to American investors.

Mr. Hudson said the balance of payments of African and Latin American countries is about to fall into a deficit due to the flight of investment capital, as well as high oil and food prices, and increasing external debt.

Also according to this expert, developing countries with a worsening balance of payments may be forced to resell public sector assets, such as infrastructure, mineral resources, land. … to obtain loans from the International Monetary Fund (IMF).

In addition, Mr. Hudson also emphasized that the gap between rich and poor is widening in the US. He said that since 2008, the standard of living in the US has gone down and almost all the growth in Gross National Product (GNP) and wealth has “fallen” to 1% of the population, a situation that will also increase.

According to him, the economic stimulus program worth trillions of dollars since the outbreak of the COVID-19 epidemic has benefited more than 1% of the US population, monopolies, the real estate industry and corporations. private capital company.

Earlier, on May 4 (US time), the US Federal Reserve (FED) decided to increase the basic interest rate by 0.5 percentage points, in order to cope with the highest inflation rate. within the past 40 years. This move also marked the Fed’s strongest interest rate hike in 22 years.

Specifically, the Federal Open Market Committee (FOMC), the Fed’s policymaking body, raised interest rates by 0.5 percentage points to a target range of 0.75% to 1%.

“Inflation is too high and we understand the difficulties caused by inflation. Therefore, we are acting urgently to contain inflation,” Fed Chairman Jerome Powell said in a press conference after the meeting. .

Along with the move to raise interest rates, the Fed also signaled that it would reduce the size of its balance sheet, currently at $9 trillion. The published plans show that the reduction in the size of the balance sheet will take place in several stages, whereby the Fed will allow a certain amount of bonds to come due each month without being reinvested.

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