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by Samantha Bunce
WHAT IS INTERNATIONAL DEBT?
1. something that is owed or that one is bound to pay to or perform for another:
a debt of $50.
2. a liability or obligation to pay or render something:
my debt to her for advice is not to be discharged easily.
3. the condition or being under such an obligation:
his gambling losses put him deeply in debt.
International debt is
-- which means that it is purely financial debt. It is the money a sovereign nation owes other governments, international financial institutions (such as the IMF), or private banks.
WHY DOES DEBT MATTER?
There is a reason why some speculate that international debt is destroying the third world. The problem of debt is having a harsh affect on the poor nations of regions such as Africa, South Asia, and Central and South America. Debt is an extremely intricate issue that is not easily simplified; but fortunately, certain repercussions of extreme debt can be: the crushing debt of third world nations is keeping these countries from development -- money that is spent nursing their (unpayable) debt is money that they cannot put back into their own countries. However, debt is not only the problem of developing nations. Europe is full of broke
economies and America recently hit their debt ceiling of 14.3 trillion dollars.
Every country in the world is either in debt or is affected by debt.
Economies play off each other, and with the introduction of globalization, money has never been so connected. The effects of debt are so wide-reaching that it is not just an economic issue, but only that is also deeply political and social.
THE FIRST WORLD DEBT CRISIS.
This first article examines third world debt and its relationship to the richer, first world nations of the world. The article speaks of a concept called "debt migration" and looks at how the world economy is affected by commodities such as oil. The author raises some interesting questions, however, the article was written from a left wing viewpoint and uses some clearly biased language.
IMF APPROVES $40B GREECE BAILOUT.
Following Greece's debt crisis, the International Monetary Fund agreed to put 40 billion dollars towards bailing out the Greek economy in hopes of containing the crisis -- which was part of a larger 140 billion dollar package negotiated with other European nations. The article touches upon the social implications of a country in debt through the example of Greece. That is to say, the social unrest that being so far in debt can create. The article is a short look at what it takes to attempt to stabilize an economy so close to defaulting on its debt.
A NEW KIND OF DEBT BURDEN.
This article takes a brief look at one of the reasons countries rack up debt: war. Although this article looks at the effects of the largest wars in history (those being World War I and World War II), it also relates the current fighting going on in Afghanistan and Iraq and how it affects American debt. (I also chose to include it because of how it could be connected to smaller scale wars and debt, most notably on the continent of Africa, but I digress.) The article takes a look at how entering an armed conflict affects a nation's economy.
This short video adequately manages to explain Europe's debt crisis while remaining pleasantly light-hearted despite the dire nature of the issue being discussed. The main problem of the video is this: how can broke economies lend money to other broke economies? When broke economies are owned by other broke economies, where does the money come from? It's one big cycle of debt, and this video shows how intertwined the debt issue is and how economies affect other economies.
ARGENTINA LAUNCHES NEW DEBT DEAL.
In 2001, Argentina defaulted on its debt. The article looks at how Argentina is attempting to "rebuild its reputation with international investors" after the nation failed to payback loaned money. To do so, Argentina is looking at raising new capital and buying back its bad debt from the bondholders who currently own it. It serves as an example of what happens to a country that defaults.
IMF CANCELS HAITI'S DEBT.
Following the devastation that the 2010 earthquake had on the small nation of Haiti, the International Monetary Fund chose to cancel 268 million dollars of Haiti's debt and offered a 60 million dollar loan to the country. The move was intended to aid the reconstruction of Haiti and bolster the country's international reserves after the earthquake. The loan is set at three years and will be interest free until 2011 -- when the country will have to begin nursing low interest rates.
GOVERNMENT AND PRIVATE DEBT AFTER THE CRISIS.
A short article and interactive map, this link investigates the economies of several countries after the financial crisis. It presents a lot of data in numerous ways -- for example, government debt, as well as financial and non-financial debt (there's also the added bonus of household debt). All the numbers are laid out as a % of the country's GDP.
EU SEEKS TO CONTAIN IRELAND DEBT CRISIS.
A news segment that examines the debt crisis of Ireland and the action being taken by the European Union to control the crisis, much as governments and institutions attempted to control Greece's crisis. As with some of the other article's presented here, the video takes a look at how one country's economy affects another's, and how a healthy economy is in the interest of more than just the relevant nation. The segment is clearly from an American news agency, looking at the situation in Europe from a (North) American perspective.
BEHOLD 2011, THE YEAR OF SOVEREIGN SHOCKS.
This article from late 2010 predicts the future of the coming year in regards to government debt -- sovereign bonds in particular -- and how the economic crisis that occurred in 2010 will affect the next year. It compares the apparent pessimistic and optimistic viewpoints of the world economy that were present at the time, and proposes that governments should look to minimizing the coming "volatility" of sovereign yields. Now, in mid-2011, it is an interesting read.
AMERICA'S DEBT: THE DEBT CEILING AND DEFAULT.
As previously mentioned, America is over 14 trillion dollars in debt. This article takes an in depth view of the American economy and just what so much debt means for America. The article delves into the legal system and its relation to debt and what the Constitution says. Most importantly, it raises a very interesting question: "how can the world's most powerful economy not pay its bills on time?" The article goes on to hypothesis what a brief default would mean (not once has America ever defaulted on its debt), and although hitting the debt ceiling does not mean default, it's still an interesting (and scary) idea to entertain.
THE SOURCE OF DENIAL.
This article examines the unwillingness of many to acknowledge the possibility of a debt crisis or a similar situation -- or rather why patterns are ignored and warnings fall on deaf ears. It's an introspective article written from an American viewpoint about the American economy, but takes the economic troubles of many other nations (most notably European countries) into consideration and applies their situation to America's in regard to debt. It attempts to get to the heart of financial optimism.
THE FIVE STAGES OF DEBT GRIEF.
This article seems to go a step further than the previous one in pondering how people deal with sovereign debt; denial is a basic human defense mechanism against unpleasant circumstances, and the issue of your country being millions upon millions of dollars in debt certainly classifies as unpleasant. This article is like a tiny psychology course applied to debt, and although it is missing much of the economical jargon and numbers found in other articles, it presents an intriguing view of sovereign debt from a more internal perspective.
WHY IS DEBT A WORLD ISSUE?
As aforementioned, every nation in the world is somehow affected by debt -- that certainly makes it global. But debt is also a long term issue; in the beginning of this course, it was specified that a "problem" was short term and with an issue, we were in for a long haul. Debt has a long history and sovereign economic woes are not going to be going away anytime soon (unless we all die in 2012, which, hey). While debt may not be as threatening as the Apocalypse, the state of the world economy is certainly a big issue. History has seen the results of a crash in the economy in even the richer nations of the world with situations like the Great Depression, and when debt can have such crushing and detrimental affects on developing nations, it is not something that should be ignored or explained away to nothing. That having been said, there is most definitely more than one perspective when it comes to debt. While reviewing the articles, it was mentioned that there seems to be either a certain optimism or a certain pessimism in regards to the (world) economy. There are so many opinions about what should be done, either preemptively or in response to a situation, and so many factors to take into consideration that one opinion would be impossible. Debt is a world issue due to it's global scale, the danger it presents, and the number of perspectives it has. Of course, it is also an issue that is constantly changing and evolving -- the markets never stay still for long.
HOW HAS THE ISSUE OF DEBT EVOLVED?
Over the course of this assignment, debt has been looked at from a variety of angles. It has been viewed from the first world and the developing world; we have looked at international financial institutions and the threat of default; and we've examined how people react to sovereign debt and the possibility of a crisis. Through these articles, the issue has taken a somewhat linear path in the sense that the debt issue builds upon itself. The economy is reactionary -- what happens in one country affects another and what happens in regards to resources affects
(here's to looking at you, oil
). The articles even showed how natural occurrences can affect a nation's debt and/or the economy with what happened to Haiti last year. Hopefully, with the European crisis and America hitting their debt ceiling, the issue will continue to evolve and take a more cautionary path than there has been in the past (oh,
THE SIDES OF INTERNATIONAL DEBT.
Answering a question about all the different sides involved in debt is a bit tricky -- after all, there are so many countries, institutions, and people involved. But for the sake of this project, let's take it down to the bare bones and look at three major players in debt. Those three players are governments, international institutions, and banks. Governments and banks are pretty self-explanatory, but in regards to international institutions, both organizations (such as the IMF) and unions of sovereign nations (like the EU or ASEAN) will be included there. These three sides all have their hands in shaping debt and the economy, and each individual entity (within its group) serves its own agenda, if you will.
How is sovereign debt related to the various categories of the interconnected web? Well, for starters, it's obviously an economic issue, so we'll begin there. I have reiterated many times that economies are connected, and so the economies of nations or fiscal policies of government will have an external -- and not just internal -- effect. The state of the economy has a great impact on what life is like within a nation, as has been proved time and time again. The economy affects employment, living style, infrastructure, et cetera. But if we take it back just a second, back to "fiscal policies" and "living style", we get our two other strands of the interconnected web: political and social. A country's government has power when it comes to how they choose to handle their economy and economic situation (whether or not to engage in a planned economy, for example, and how fiscally conservative they may or may not be). Of course, politics is extremely important when it comes to sovereign debt, as there is much diplomacy involved when it comes to the major players mentioned earlier. When you have governments, institutions, and banks involved in the same issue, you can't escape politics. Besides, simply put, government is responsible for sovereign debt. Last, international debt has become a social issue. I stated earlier that the economy and debt affects life within a nation, and this is true for all nations; however, the part of sovereign debt that is social is largely happening in the developing nations of the world, where governments spend so much of what little wealth there is in their country simply attempting to pay off their debt. In many cases, these countries are not even cracking into their actual debt -- they're just paying off the interest every time they make a payment. When debt prevents the development of a nation, it becomes a social issue.
AND SO CONCLUDES THIS ASSESSMENT OF DEBT.
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