Welcome back to World Brief, where we’re looking at the global ramifications of a possible U.S. debt default, increased scrutiny of money laundering in Lebanon, and EU privacy concerns about U.S. tech companies.
Welcome back to World Brief, where we’re looking at the global ramifications of a possible U.S. debt default, increased scrutiny of money laundering in Lebanon, and EU privacy concerns about U.S. tech companies.
U.S. President Joe Biden and House Speaker Kevin McCarthy once again failed to reach a deal extending the $31.4 trillion U.S. debt ceiling on Monday. With less than 10 days until the United States potentially defaults on its debt, countries around the world are bracing for the economic waves that could ripple through the global economy if no deal is reached.
The United States has never intentionally defaulted on its debt, so the exact impact that doing so now could have on the international financial system is unknown. However, most economists predict it would be bad—and widespread. “No corner of the global economy will be spared,” Mark Zandi, chief economist at Moody’s Analytics, told The Associated Press. More than $500 billion in U.S. debt is traded globally every day, and much of that debt is held by foreign governments and investors. A default could see foreign investors charging the United States more money to borrow if Washington becomes a risky investment. Already high interest rates could soar. And some economists even predict a default could create worse conditions than during the 2008 global financial crisis.
But one nation’s economic tragedy is another’s golden ticket. Fueled by fears of U.S. sanctions, both Russia and China have long sought to replace the dollar with the renminbi, reported FP’s Christina Lu, with the so-called BRICS nations considering establishing a common currency to spark de-dollarization. Defaulting on the country’s debt could be enough to convince third-party nations that the United States isn’t trustworthy and that their economies would be better served by investing in Moscow and Beijing.
Defaulting could “risk undermining U.S. global economic leadership and raise questions about our ability to defend our national security interests,” U.S. Treasury Secretary Janet Yellen warned. Since 1960, the United States has raised, revised, or extended the debt ceiling 78 times. Only once did Washington technically default, but that was due to a failure to pay on time. If a default were to happen now, economists predict U.S. stock prices could fall by one-fifth, the economy could contract around 6 percent, and more than 8 million people could lose their jobs.
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The gray list. Lebanon is likely to undergo special scrutiny for failing to curb money laundering and terrorism financing after a regional financial watchdog placed the nation “one mark over the threshold” to be gray-listed. The report, published by the Financial Action Task Force’s Middle East and North Africa section, details Lebanon’s only partial compliance to stopping corruption, and officials familiar with the draft indicated Lebanon’s scoring was lenient at best.
Being added to the task force’s gray list could hurt the nation’s ability to secure a $3 billion International Monetary Fund deal. In 2019, Lebanon’s annual GDP shrank 21.4 percentage points. The country has since struggled to combat rising poverty, high consumer prices, and corruption. In recent months, Beirut has turned toward oil and gas deals—specifically with Israel—as well as other agreements with Iraq and Qatar to grasp an economic lifeline. But how a gray list designation may impact future global partnerships is yet to be seen.
Meta’s privacy battle. A European Union regulator ordered U.S. tech giant Meta to cease its trans-Atlantic flow of user data on Monday, citing privacy concerns. Facebook’s parent company was fined a record-breaking $1.3 billion for transferring EU users’ data to the United States without first establishing a framework to protect EU citizens from U.S. government surveillance. This is the first time a U.S. tech company has ever been ordered to terminate user data flow with the continent.
This is not the first time a U.S. company has faced EU financial repercussions over privacy concerns, though. In 2021, Luxembourg fined Amazon $806 million for violating privacy laws in its advertising campaigns. The Biden administration must now finalize ongoing negotiations with the EU to protect U.S. companies doing business with—and collecting information from—EU citizens.
Pegasus strikes again. Mexican authorities are facing yet another scandal involving the alleged use of Pegasus spyware, this time to target Alejandro Encinas, the country’s undersecretary for human rights. This month, a New York Times investigation revealed the senior official’s phone was hacked in a move likely ordered by the Mexican military, which Encinas was investigating at the time. The military is said to be the only entity in the country with access to Pegasus and has a history of targeting more cellphones with the spyware than any other country in the world.
Although Mexico was the first nation to cement a deal with the NSO Group, the Israeli company that makes the Pegasus software, it is not the only country to use it. Hungary, Poland, and Spain have all used Pegasus to monitor and control politicians and activists. And Indian Prime Minister Narendra Modi suffered his “Watergate moment” when reports emerged that the government was using Pegasus to surveil journalists. The Israeli Defense Ministry must license the sale of Pegasus to foreign governments with the stipulation that the technology can only be used to combat severe crime and terrorism. Since allegations emerged of Pegasus being used to conduct human rights violations, the Biden administration has blacklisted NSO Group.
Hundreds of people in Kyle, Texas, had one thing in common on Sunday: their name. A total of 1,490 people named Kyle traveled to the city in an effort to beat the world record for most individuals with the same name in one place. Unfortunately, the Kyles fell short, needing another 835 people to beat the 2,325 Ivans that gathered in Kupreski Kosci, Bosnia and Herzegovina, in July 2017.
