E Even The U.S. Cannot Claim Immunity From China’s Economic Woes

The current state of the global economic scene has been raising serious concerns for stakeholders. From Wall Street to institutional investors, governments, businesses, down to the pop and mom investors who watch Jim Cramer on CNBC: everyone knows that the global economy is not healthy. A testament to the illnesses plaguing the global economy is the cautious tone of the U.S. Federal Reserve that the current economic climate does not support the further raising of interest rates.

The fact that the U.S. Federal Reserve seems to be less bullish about the economic outlook has increased fears that we might be heading into a financial quagmire. Many analysts believe that the Great Depression of the 1930s was triggered by the inability of the Fed to halt a collapse of the money supply. Now, there exist startling similarities between the economic clime that led to the Great Depression and the current economic situation.

The global economy is currently balancing on ultra-low interest rates and some countries are even adopting negative interest rates. The U.S. has also propped up its economy with low interest rates for almost a decade until Fed raised the rates last year. Additional four rate hikes should have followed this year, but the Fed has revealed its helplessness in the face of global economic headwinds thus it might not go ahead to raise interest rates this year.

OECD urges improved government spending

On Thursday, the Organization for Economic Growth and Development, OECD chimed in on the gloomy outlook in the global economic landscape. The OECD advised that governments in the U.S., Europe, and other parts of the world should take “urgent” step to collectively increase investment spending in a bid to infuse life into the dying economic landscape. 

The OECD noted that governments are in a vantage position to jumpstart economic growth because they can borrow at low rates. A collective effort by governments to borrow at low rates and to use the borrowed funds for infrastructural developments could significantly improve the global economic outlook.