[Puffer Fish]

Pakistan Facing Economic Collapse as Inflation at 47%, IMF Deal Stalls & $22BN Debt Repayment Due

PAKISTAN Facing Economic Collapse as Inflation at 47%, IMF Deal Stalls & $22BN Debt Repayment Due, Joe Blogs

Pakistan has 47% inflation and is also in trouble with the IMF. The debts are coming due, and the risk of default is becoming very likely, and they are also facing an economic collapse. Hard times are ahead!

I don't know what corrupt schemes have been going on there, funneling money to people's back pockets, no doubt, but it looks like time is up and it's time to pay the piper. Of course, the people of Pakistan will be the ones who pay with a hard time!

Of course, it's a Muslim-majority country that will resist Western economic ideas, which they will face in spades from the IMF. They've been subsidizing the poor, and they can't afford it. Combined with crippling corruption and gross mismanagement, they have reached the final consequences of their misdeeds.

Somehow I even think that the impossible price increases the poverty-stricken Pakistani citizens face are somehow the fault of the major corruption in that country.


A lot of people in "more privileged" countries (and I am referring to White English speaking and Western European) have a tendency to just discount everything going on in other Third World countries, almost as if it were in some parallel universe and doesn't really matter.

But Pakistan has a population of 231.4 million people, which is 70% as large as the U.S. population, or 9 times larger than Australia.

It's estimated that there are 1.5 million persons born in Pakistan currently living in the U.K. (England).

[Puffer Fish]

I vote we send our fellow member Steve_American as an economics policy advisor to Pakistan to turn all their problems around, and then if they aren't happy with the results they will have his head on a plate.

[Steve_American]

I vote we send our fellow member Steve_American as an economics policy advisor to Pakistan to turn all their problems around, and then if they aren't happy with the results they will have his head on a plate.

MMT can't be used by Pakistan, because it has massive debt in dollars.

IMHO, all this is a result of the West exploiting the Global South for many decades or centuries, and the massive floods that covered 33% of the nation just a few months ago. That must have caused food shortages for example, and others.

The economost, Steve Keen, has been calling for a debt jubliee for many years. AFAIK, the IMF also creates dollars somehow to make loans. Or, someone did and gave the dollars to the IMF. IMO, creaated dollars as loans are much easier to forgive than dollars that were earned and then loaned. See US Student Debt.

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[Puffer Fish]

MMT can't be used by Pakistan, because it has massive debt in dollars.

What do you think's going to eventually happen when the dollar crashes as the world reserve currency?

Pakistan has its own money. Come on, think about this. Why didn't Pakistan borrow in its own money? (rhetorical question)

I'll tell you why one of the big reasons why. Because everyone knows the interest rates would be sky high if they tried to borrow massive amounts of their own money. Who's to say that might not eventually become the case with the dollar in the U.S.?

[Steve_American]

@Puffer Fish,
I live in Thailand, I'm not worried that the dollar will collapse before civilization does from climate change.

I have zero worry that Chinese Yuan will replace the dollar. China has lost a lot of 'face' with how it gave covid to the world. Peter Zeihan says that China will collapse in less than 5 years, maybe 2 or 3. If China starts a waar with anyone, it will be cut off from 50% to 60% of its oil supply, and nu nation can stand losing even 50% without an economic collpse.

I doubt the euro will replace the dollar, also. The EU according to my MMT experts has painted itself into a corner. That is the supply of euros is constrained like gold was. I asked you if you thought that having the constraint of the gold standard had been good for the many nations' economies. You didn't answer. AFAIK, gold was a major factor in the bank panics in the US before the Fed Res Bank was estblished. The money supply was constrained and as a result IIRC, private banks tried to print their own "bank notes". This didn't work well because during the bank panics the bank notes had zero value. Thus, the money supply was not "sound". You think gold means sound money, but historically it wasn't sound. The EU can't produce the interest bearing bonds that make the reserve currency work.

Because I'm a doomer when it comes to climate change, I expect the next 2 years to see a major spike in warming as the next el Nino will takes hold. We may also see the last of the Arctic sea ice melt in Sept. in either of the next 2 years. Either of these will cause droughts, heat waves, and floods that will reduce the world's food supply, so there will be food price inflation and many millions will be starving as there will be no food to send them.

IMHO, for the world to try to change reserve currencies in the middle of this crisis is stupid. But, people are stupid, so who knows?

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[late]

What do you think is going to eventually happen when the dollar crashes as the world reserve currency?

Pakistan has its own money. Come on, think about this. Why didn't Pakistan borrow in its own money? (rhetorical question)

I'll tell you why one of the big reasons why. Because everyone knows the interest rates would be sky high if they tried to borrow massive amounts of their own money. Who's to say that might not eventually become the case with the dollar in the U.S.?

It's not going to happen in this decade.

They're not the reserve currency. The value of their currency goes down quickly in response. Which means the foreign goods they have to buy (like medicines) will get more expensive. It could also set off hyperinflation.

Eventually means just that, if I were to guess, I'd say in a generation.

[Puffer Fish]

IMHO, for the world to try to change reserve currencies in the middle of this crisis is stupid. But, people are stupid, so who knows?

When the world reserve currency is experiencing high levels of inflation, that's going to make it more likely the rest of the world will consider ditching it in favor of something else.

Lucky for Americans, Russia's currency is also experiencing high inflation at this time. But that may not matter because China's economy is almost 10 times bigger than Russia's, and right now the Chinese yuan has been experiencing lower levels of inflation, although I'm not sure the rest of the world really trusts in the Chinese Communist government to always keep their inflation levels down. (China engaged in currency manipulation in the past, encouraging inflation to try to help stimulate their exports)

Still, even if only Russia and China ditch the dollar, that's going to have some trick-down effect and lead to many other countries who do trade with China and Russia to also partially ditch the dollar. I could easily envision the world use of dollars (outside the U.S.) going down 40% from this. Which would bring it closer to a tipping point.

[Steve_American]

@Puffer Fish,
OK, so now you're down to "Well, maybe someday, something bad will happen, but who knows when?"

Do you know that, that has been the economists' assertion about high inflation in Japan since about 1995? So, for almost 30 years economists have asserted that Japanese policies will cause high inflation someday soon, and it has not happened yet.

If it takes 28 years for the dollar to suffer the effects of losing world reserve currency status, then I don't care, because long before then the wolrd wiill be suffering massively from the effects of climate change. Hundreds of millions if not biillions will be starving, with no food to send to them on the earth.

So, lets talk about climate change.
Also, see my recent post in Enviroment & Science on long covid.
These are problems now, not maybe someday.

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