UK Raises Interest Rates

1. Fed has been saying that they will raise interest rates to curb inflation.
2. UK has raised interest rates for the first time in 18 years, since 2004.
3. US will most likely also raise interest rates soon, as they had announced.
4. Once US interest rates rise, borrowing will become more expensive.
5. People will pull back funds from the property, stock, crypto etc markets worldwide.
6. Funds will go back to the US due to a higher interest rate and in anticipation of a stronger Dollar.
7. Including the US itself, the financial markets worldwide will bleed.
8. People lost much money, resulting in lesser purchasing power.
9. Demand for goods and services will drop, causing the production sectors to suffer even more.
10. Workers will be retrenched, creating even lesser demand for goods and services, resulting in a vicious cycle.
11. Countries all over the world will suffer.
12. US will now take their money and acquire core production resources worldwide at a very low price.

Some say this is a conspiracy theory. But I think this is very real. Do use your own discretion when determining its validity. I am putting this down here first.

The only reason why only US could do that is because it controls the USD, the global currency recognised by all countries. That is why countries like China or even Europe as a whole are trying to push their Renminbi / Chinese Yuan or the Euro Dollar. The more countries using your currency to trade, the more power you have to influence the global economy and twist it to your advantage. There is a whole history of why the USD became the global currency, which can be googled easily.

Years ago, US also struck a deal with the Middle East to have all petroleum transactions conducted in the USD. This forced the whole world to buy and hold USD in order to get the oil they needed. Of course there is a whole bunch of dirty politics behind it. As the US grew stronger and the Dollar inspired confidence, weaker countries whose currencies do not have credibility also began to accept the Dollar as well.

But using a tool that which you do not have the overall control of is a very dangerous thing, something which many countries realised but do not have much choice over. In the recent few years however we can see attempts of certain countries to move away from the USD. China has successfully made deals with countries to deal in oil and gas with the Chinese Yuan. The UK has also managed to do so with limited success. But we digress.

With the interest rates hike, we may expect the world’s economy to slow down or even suffer greatly. Be prepared. Save up money, invest wisely (or rather, wait out this period), cut your spending and be ready for the crisis.

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