The past week has been a wild ride in economics and finance, with several major developments that are worth reviewing. From the status of the U.S. dollar as the global reserve currency to a significant increase in oil prices, there’s a lot to discuss. Let’s take a closer look at the top news stories.
Former hedge fund manager Scott Bessent told CNBC that the US dollar must remain the world’s reserve currency, fulfilling its role as the primary store of value for foreign central banks.
The United States has maintained its commitment to the US dollar being the global reserve currency. In his prepared testimony, Bessent emphasized the importance of prudent investments and responsible spending over wasteful measures, as well as securing supply chains to address national security concerns.
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5% Yields Fuel Demand for Long-Term U.S. Government Bond Exchange-Traded Funds
Even with bond market losses and rising concerns about the economy, investors are still attracted to the promise of a 5% return, which is fueling a lot of money flowing into long-term Treasury bond exchange-traded funds. Last week, the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) saw a massive influx of $1.5 billion in investments.
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Crude Oil Prices Rise Past $80 Per Barrel, Reaching Six-Month Peak
Gas prices saw a significant increase this week, with West Texas Intermediate oil prices jumping about 4% to over $80 per barrel for the first time since mid-July 2024. This increase in prices occurred even though a truce was announced in Gaza following a 15-month-long war there.
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China’s Economic Growth on Track to Surpass That of the US by the Mid-2030s
Justin Lin Yifu, a Chinese economist, reiterated a prediction he made over 30 years ago, stating that China’s economy is expected to overtake the US economy within the next five to 10 years. Lin attributes this projected shift to the slowing economic growth in the US, which he says is now comparable to China’s sluggish performance in its annual GDP.
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Investor Ray Dalio cautions that the U.S. may potentially bankrupt itself due to an unwieldy rise in debt.
Billionaire investor Ray Dalio, founder of Bridgewater Associates, has expressed concerns that the United States may face severe financial difficulties due to the rapidly accumulating government debt. The country currently holds the largest share of global debt, accounting for 34.6%, valued at a staggering $102 trillion. As the U.S. national debt has exceeded $36 trillion, with interest payments reaching a record high of $892 billion in fiscal year 2024, Dalio has sounded the alarm.
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