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FINANCIALCOLLAPSE
INTHE
THIRDWORLD?
by
Michael A. Snyder
A miscalculation could plunge the world into an unparalleled financial debacle.
Will the crisis be averted ? Can the West survive?
N
EVER
have we faced a
world crisis like t his
one. Descending ra p–
idly on us is the specter of a
world debt collapse. Coun–
tries in Latin America, Afri–
ca, Asia and Eastern Europe
have amassed an incred ible
debt of about $700 thousand
million in loans.
And
it
appears they can't pay
them off.
At the time of writing, the over–
heated financia! caldron was threat–
ening again to explode.
For the last year and a half, the
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nternat io nal Monetary Fund
(IMF), the U.S . Federal Reserve
System under chairman P aul
Yolcker, a nd numerous govern–
ment and prívate agencies, have
st ruggled to stave off a major disas–
ter. As one economist told
The
Plain Truth,
a debt collapse could
"plunge the Western world into the
deepest depression in recorded
human history."
The person on the street, if
asked , seems blissfully unaware of
the fiscal dangers. Until now, the
situation has remained relatively
hidden on the financi a! pages of
daily newspapers and fi nancia! peri–
odicals- hardly the daily reading
of the general public. Yet, if major
debtor nations go into default, the
ensuing debacle would engulf econ–
omies that today appear stable.
Economist Eliot J aneway omi–
nously warns: "One official dcfault
is all it will take to stampede the
other busted bor rowers into a full -
November / December 1983
fledged cartel of defaulting debt–
ors."
Continuing, he declared: "The
situation is spinning out of control
and poses a clear and present danger
for the entire internat ionaJ fi nancia!
system comparable to the one pre–
ceding [the] 1929 [depression]."
Mexico, Brazi l, Poland and a
number of other developing nations
have come under sharp
scrutiny- one by one
they have failed t o
make payments on
time. Onl y narrowly
has disaster thus far
been averted. The
stakes are extremely
high! l f a significant
amount of these debts
went into default, sev–
era! U.S. and European
banks would instantly
become
insolvent.
T he nin e largest
American banks have
loaned about
113 per–
cent of their stockholders' equity
to Mexico, Argentina and Brazil
alone (all with overdue payments)!
Couple this with the fact that a
recent rescheduling of payment
from Latín America involved capi–
tal from more than
1,400 separate
banks.
Chairman Volcker warns that
the fi scal and political risks "are
without precedent in the postwar
world.' '
Denis H ealy, former Britis h
Chancellor of the Exchequer,
warns, "The risk of a major default
triggering a chain reaction grows
every day."
Ho w lt Got t o Be This Bad
The burgeoning debt of the major
developing nations in question
nearly exceeds the combined gross
national products (GNP) of Cana–
da, the People's Republic of China
and the United Kingdom.
Spread across the world, this
enormous debt would provide every
Oenis Healy, former British
Chancellor of the Exchequer
"The risk of a
major default
triggering a chain
reaction grows
every day."
man, woman and child alive with
more than $ 150 a person.
In retrospect, it appears incon–
ceivable that normaJiy conservative
prívate banks would have allowed
this situation to develop, much less
crest at today's cris is leve!.
Severa! economists and financial
experts lay the blame squarely on
those American and European
bankers whose loan share has been
roughly 60 percent of the total.
" Ban ke r s were foolish and
greedy," explains one major Amer–
ican newspaper, "and have only
themselves to blame for forcing
money on countries tbat obviously
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