Interest rate hikes from the U.S. Federal Reserve and other central banks are likely to worsen a global debt crisis, particularly for developing countries like Nigeria
This is according to a new report from U.K. non-profit organisation, Jubilee Debt Campaign, titled, ”Growing global debt crisis to worsen with interest rate rises.”
The Federal Open Market Committee will meet this week to decide on the next steps in tightening monetary policy in an effort to keep inflation under control. Some analysts predict that in 2022, the US central bank will raise rates from their pandemic-era lows.
What the report is saying
In a report published on Sunday, the Jubilee Debt Campaign highlighted that developing countries’ debt payments rose 120% between 2010 and 2021, and are currently at their highest since 2001.
The average portion of government revenues channelled toward external debt payments increased from 6.8% in 2010 to 14.3% in 2021, with payments shooting up in 2020.
The report stated that sharp increase in debt payments is hindering countries’ economic recovery from the pandemic and rising U.S. and global interest rates in 2022 could exacerbate the problem for many lower-income countries.
“High debt payments are preventing many countries from tackling and recovering from the Covid pandemic. Rising US and global interest rates in 2022 could further intensify the debt crisis many lower income countries are facing,” the report said.
Heidi Chow, Executive Director of Jubilee Debt Campaign, said significant actions need to be taken to rectify the debt crises in developing countries. He said, “The debt crisis continues to engulf lower income countries, with no end in sight unless there is urgent action on debt relief. The debt crisis has already stripped countries of the resources needed to tackle the climate emergency and the continued disruption from Covid, while rising interest rates threaten to sink countries in even more debt. G20 leaders cannot keep burying their heads in the sand and wish the debt crisis away.
He further stated that a debt calculation strategy was needed to address the issue. ”We urgently need a comprehensive debt cancellation scheme which compels private lenders to take part in debt relief,” Chow said.
Jason Braganza, Executive Director of the African Forum and Network on Debt and Development (AFRODAD) stated that the debt problems were aggravated by the pandemic,adding that the current debt relief program wasn’t enough.
He said, “Since before the pandemic, AFRODAD had cautioned on the debt precipice facing many African countries. Covid-19 accelerated an already deteriorating situation and will reverse the socio-economic gains of the past decade. We have consistently said the current debt relief measures aren’t good enough and have called for a truly inclusive debt relief programme with all creditors; and a comprehensive debt cancellation programme. This is what will save African citizens from difficult times ahead.”
In conclusion, the report stated that the G20 created a new debt relief scheme at the end of 2020, called the Common Framework, but none of the countries which have applied for it have yet had any debt cancelled.
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UK Affirms Commitment to Regulate Stablecoins Following Terra Meltdown
The British Treasury Department has affirmed its commitment to regulate stablecoins after the collapse of terrausd (UST) and terra (LUNA). “This will create the conditions for issuers and service providers to operate and grow in the U.K., whilst ensuring financial stability and high regulatory standards,” said an HM Treasury spokesperson.
HM Treasury, the U.K. Treasury Department, is moving forward with plans to regulate payment stablecoins despite a crypto market meltdown last week, The Telegraph reported Saturday.
The affirmation followed the collapse of Terra which saw algorithmic stablecoin terrausd (UST) lose its peg to the U.S. dollar and terra (LUNA) fall to near zero.
A HM Treasury spokesman said:
“This will create the conditions for issuers and service providers to operate and grow in the UK, whilst ensuring financial stability and high regulatory standards so that these new technologies can be used reliably and safely,” the spokesperson added.
Prince Charles delivered the Queen’s Speech last week, outlining the British government’s legislative agenda for the next parliamentary year. Two of the bills put forward specifically mention crypto assets.
The U.K. government unveiled a detailed plan in April to make the country a global crypto hub and “a hospitable place for crypto.” The plan includes establishing a dynamic regulatory framework for crypto, regulating stablecoins, and working with the Royal Mint to create a non-fungible token (NFT) to be issued by summer.
Rishi Sunak, the British chancellor of the exchequer, has said the plan will “ensure the UK financial services industry is always at the forefront of technology and innovation.”
However, the Treasury does not plan to include algorithmic stablecoins in the legislation, saying they do not guarantee stability. Terrausd (UST) is an example of an algorithmic stablecoin.
The HM Treasury spokesperson further detailed:
“We will continue to monitor the wider crypto asset market and stand ready to take further regulatory action if required,” the spokesperson included.
U.S. lawmakers also called for the urgent regulation of stablecoins last week following the fall of Terra. However, Treasury Secretary Janet Yellen believes that stablecoins are currently not a real threat to U.S. financial stability.
What do you think about the U.K. government’s commitment to regulate stablecoins? Let us know in the comments section below.
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Veteran Investor Bill Miller Remains Bullish on Bitcoin — Confirms He Has a Lot of BTC
Famed value investor and fund manager Bill Miller says he has “a lot” of bitcoin and has not sold any despite the recent crypto sell-off. He insisted that investors should put some of their liquid net worth in the cryptocurrency.
Famed value investor Bill Miller is still bullish about bitcoin despite recent price declines. He confirmed in an interview with CNBC Thursday that he owns “a lot” of bitcoin and hasn’t sold any.
Miller is the founder of Miller Value Partners and currently serves as its chairman and chief investment officer. He manages the firm’s Opportunity Equity and Income Strategy funds. Prior to Miller Value Partners, he co-founded Legg Mason Capital Management.
He explained that if bitcoin goes down to half its current price, he wouldn’t be surprised due to its volatility. However, “I would be grim because I own a lot of it,” the fund manager said.
Miller was asked, “Are you selling any [bitcoin], have you sold any?” He replied:
However, he clarified that he sometimes sells “stuff” to meet margin calls. “I’ve sold stuff to meet margin calls because I’m always on margin and the stuff that you sell is the stuff that is very, very liquid, for me anyway,” he explained, without mentioning BTC specifically.
At the time of writing, bitcoin is trading at $30,064, up 1.5% in the past 24 hours but down 15.5% in the last seven days and almost 25% in the past 30 days.
Commenting on investors losing money amid crypto sell-offs last week, Miller said: “If people have lost a lot of money in crypto, they have been speculating on the stuff they don’t know anything about, especially if they are surprised to have lost money because most of the ICOs [initial coin offerings] that came around in 2017 have gone to zero.”
There are currently almost 20,000 cryptocurrencies, according to Coinmarketcap. Miller said: “All except for bitcoin, including ethereum, have competition.” He noted that he does not have the expertise to evaluate all crypto projects but is “comfortable with bitcoin.”
Miller was also asked if he thinks bitcoin is a buy at $29,000. He replied:
He added that it is especially true if you lived in countries like Venezuela, Argentina, Lebanon, Turkey, Nigeria, Iraq, Ukraine, and Russia. The famed investor noted: “Russia lost 50% of their reserves when the U.S. decided it was going to sanction them.” He said in March that this is “very bullish for bitcoin.” Miller previously called BTC an “insurance against financial catastrophe.”
What do you think about Bill Miller’s comments? Let us know in the comments section below.
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