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Severe US Recession Would Slash Public Wealth By $5 Trillion: IMF

As part of the IMF’s latest global economic forecast, which for the first time since 2016 saw the D.C.-based organization cut its global growth forecasts, the IMF warned that a severe recession would slash US public wealth by about $5 trillion, causing vastly more damage to Washington’s finances than just an increase in debt and deficits.

At the same time, governments around the world, many of which face similar dangers, do not clearly publicize their overall net worths, the International Monetary Fund said in its new report, noting that “Few governments know how much they own” or how they use those assets for the public’s well-being, the IMF explained.

This creates a potential blind spot for policymakers who could use this knowledge to head off economic risks; Knowing what a government owns and how they can put their assets to better use matters because they can earn about 3% of GDP more in revenues each year and reduce risks, all at once according to France24. That’s as much revenue as governments make from corporate income tax receipts in advanced economies. Governments can put this money toward better schools, hospitals, or other priority spending.

Public assets consist of public infrastructure such as roads, bridges, and sewer pipes, as well as the money governments have in the bank, their financial investments, and payments owed to them by individuals and businesses. According to the IMF, “natural resource reserves in the ground are also part of assets, something that is particularly important for natural resource-rich countries. But assets also include state-owned enterprises such as public banks and, in many countries, utilities such as public electricity and water companies.”

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