Former RBI Governor Raghuram Rajan says US economy on cusp of time bomb

Former Reserve Bank of India Governor Raghuram Rajan has expressed his views about the global economy and global economic challenges. He believes that the world’s largest economy, the United States of America, which has recently faced the collapse of three big banks, still has many more challenges ready for it. Rajan stated that he is worried about a simmering time bomb, the domino effect, riskless capitalism, and long-term problems. In a podcast with DBS Bank’s Chief Economist Taimur Baig, Rajan said that the way the US authorities handled the banking crisis was somewhat predictable. Additionally, they had an idea that due to this crisis, it would be difficult to handle the economic situation there and panic could spread, reported The Economic Times. Rajan said, according to The Economic Times, “I think the short-term problem has been dealt with by the implicit insurance of all deposits. But the longer-term problem still exists.” He also stated that Quantitative Easing has also spread there and due to this there have been many changes in the economic scenario which are different from the old times. Banks are already facing the fear of recession and in such a situation, problems are increasing for some small and big businesses and they are facing huge difficulties from repaying their loans to service loans. From the year 2022, the Federal Reserve has increased its interest rates by up to 4.5 per cent and its effect has come on the likes of Silicon Valley Bank and First Republic Bank. Due to the steps taken to control inflation, there was a strong increase in bond yields as well. However, another banking giant, Credit Suisse, was caught in huge financial troubles until the US authorities made efforts to secure depositors’ money in view of the situation. Looking at all these circumstances, Raghuram Rajan believes that whatever efforts are being made to save the banking system from collapse are increasing riskless capitalism in a way and are not a permanent solution. With inputs from agencies Read all the Latest News, Trending News, Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.