Who pays for the third world debt?

The origins and continued development of the massive Third World debt are both surprisingly simple and complex. David McWilliams gives us a quick rundown of how it started and of the various attempts to solve it in the past. He has a particularly interesting take on those who will benefit if and when it is finally paid off.

  • DCB

    Good analysis – doesn’t mention the role of the dollar though.

    Most of the debt was issued in dollars and the dollar rose in the first part of the 80s, making the principal all the more expensive to pay off. Part of the reason why the dollar rose was due to the fed hiking interest rates to combat inflation, and of course this made some of the floating debt more expensive to service and the fixed more expensive to re-fi

    The prop desks of investment banks do have some of the debt but most of it is in hedge funds world. So it’s going to be impossible to cut out any sort of deal

    If you had more liquid and effecient markets then thrid world countries could issue debt in their own currencies and control their own interest rates. Though you also need markets to trust that they won’t devalue their way out of debt. Though nobody seems too bothered about America doing just that.

  • Young Fogey

    Though nobody seems too bothered about America doing just that.

    Not yet they’re not. Give it a bit of time.

  • DCB

    I wouldn’t hold my breath