"Bring your public debt in control". That's what the International Monetary Fund (IMF) states this week to the financial heads of seven of the largest economies, looking at the rising public debt rates globally. Obviously, economic instability needs to be controlled like a wild bull in an arena. But one must not forget, these statements might have an impact on for example stock markets as well. Because in every message, another one is hidden. What do we mean? Investors can understand this for example as a sign of a global crisis heading our way, leading them to hold back. That should leave the market unstable and dropping. Or will the market surprise us against all odds?

What is public debt

Public debt is when a government borrows money by selling bonds, bills, and other securities. The borrowed money is used to finance government spending on infrastructure, education, and healthcare. One advantage of public debt is that it can help a government finance important projects that would otherwise be difficult to fund. This can lead to improved economic growth and higher living standards for citizens. However, there are also dangers associated with public debt. If a government borrows too much money, it can become overwhelmed by interest payments and be unable to repay the principal. This can lead to financial crises and default. In extreme cases, public debt can also lead to hyperinflation when not controlled by ceiling terms or, in this case, the IMF.

Why the IMF turns to the largest governments

Who are these big economies the IMF turns to? Well, it sure is not beautiful Luxembourg, although we have a lovely office there. The IMF told the Financial Times that it concerns large and powerful countries like "Brazil, China, Japan, South Africa, Turkey, the United Kingdom, and the United States". These economies lead in curbing the financial turmoil, according to the IMF.

In lower-budget countries, mostly third-world or second-world countries, the Gross Domestic Product of GDP is less in danger, but they are easy prey to inflation and national debt. That comes because of their credibility for national loans, but also of their investment in growth. The number of inhabitants is mostly higher in third-world countries where the consumer's income, spending, and GDP are lower. First-world economies have larger needs and naturally hit their debt ceiling a lot quicker like the United States recently did. In the West, everything develops at more than double the speed of anywhere else. Breaking this development gives room for money to cool off.

What are the stock market outcomes

Stock markets are always hard, if not impossible to predict. Or else everyone would be a trillionaire or broke. But looking forward to the latest developments on the market, we see a soft recovery which can mean different things we discuss here.

Wall Street jumps carefully in green, as also the European and Asian markets are showing positive numbers. The predicted recession in the past, after one of the worst stock market years since the '80s, did not come to this very day. Last year, the investment climate was dominated by inflation, rising interest rates, an approaching recession, and falling corporate profits. The IMF statement appears to give investors hope about the outcomes. The bear market seems to be over, especially in the region of tech shares which climb the mountain.

Unfortunately, we still have a banking crisis. Credit Suisse, Silicon Valley Bank, and First Republic Bank are all examples of banks that are troubled or fallen. This made investors hesitate to invest in them, and also generally in equities. After all, banks are the ones to make sure money keeps its value and security. If banks don't, who will? Central banks had to intervene strongly in the affected banks to preserve financial stability and confidence. Huge amounts of money were again pumped into the banking system. Liquidity flowed abundantly. Where the money flow was first held back, it's fully open momentarily. This situation is however not sustainable. Markets are assuming that central banks will soon have to end monetary tightening to prevent too much money from lowering currency value.

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