1/5
All this external debt is definitely storing up future trouble for developing countries, but not just for them. When developing countries borrow money from abroad and spend it domestically, part of it can flow abroad again in the form of rich...
ft.com/content/8ef479…
2/5
people's profits, but most of it must go directly or indirectly to pay for imports from abroad.
This means that foreign borrowing by developing countries effectively transforms useless ex-ante savings into real global demand, something the world economy urgently...
3/5
needs. The problem is that once these countries can no longer borrow, and must begin to pay down the debt, what was once an addition to global demand becomes a subtraction from it: spending on real goods and services must be cut to fund increases in ex-ante savings.
4/5
Developing-country borrowing, in other words, is actually positive for global growth today, but can be negative for global growth tomorrow. This, by the way, is one of the strongest arguments why major lending countries should strongly support debt forgiveness for...
5/5
developing countries: to the extent that it boosts domestic employment, it will cost them nothing in the aggregate. It will mainly transfer income from international investors to domestic workers, producers, farmers and businesses.
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