The Fed started raising rates in March 2022, and the effects are clear. Higher costs of capital have pushed more and more companies into bankruptcy. This is the idea behind raising rates: to slow the economy down with the ultimate goal of getting inflation back to 2%. Every day there are companies that cannot get new loans or refinance, and this trend higher in bankruptcies will continue as long as interest rates stay high. Related: A Default Cycle Has Started and Most Global Economies Remain in Disequilibrium, Requiring Policy Action and Furman On Jobs Report
- Date Posted:
- August 11, 2023
In 2022, foreign investors purchased nearly $670 billion of long-term U.S. securities and short-term Treasury bills. Not only were the purchases by China, India, and the Middle East oil exporters in 2022 large compared to those by other countries, they were also sizable when measured against these countries' average purchases over the previous nine years. Net purchases in 2022 were well above average annual net purchases from 2013-2021 in every case. As before, under increased financial fragmentation, one would not expect these countries to be making larger purchases of U.S. assets compared to purchases in previous years.