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Unsustainable Debt.

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Introduction

Unsustainable Debt Submitted by: Arif Patel a_patel65@hotmail.com Many ordinary citizens today in developed countries such as Canada acknowledge the abject poverty affecting citizens of various African countries and other undeveloped nations. However, exactly why these countries are in this position appears to be a mystery, despite many cash grants, relief efforts, and aid are delivered to these countries by various Western organizations amidst great media attention. In addition, it also seems natural that such undeveloped countries should have a net flow of capital moving towards them from wealthy industrialized nations such as Canada. On the contrary, a net flow of money has actually been directed towards the industrialized nations and various financial institutions from these impoverished countries1. This fact has failed to achieve much media coverage, if any. Figures on poverty levels of the early 1950's, following the Second World War, do not reflect those found today2. Undoubtedly poverty existed in the world. In fact, both the world's economy and the global GNP figure were far smaller in comparison to present day figures3. However, the fact that poverty existed in many countries did not imply that the inhabitants of those countries lacked basic necessities such as food, water, adequate shelter, and basic health services. ...read more.

Middle

(Payer 55) Hence, the seeds of a worldwide dilemma of unsustainable debt were planted in the interests of US foreign policy. The dilemma did not arise from the simple fact that third world countries received economic aid in lieu of their support of the US and free world interests8. Rather, the dilemma arose from the fact that the economic aid in the form of loans, were of an unsustainable nature. To help illustrate this concept, knowledge of the original Ponzi scheme engineered by Charles Ponzi of Illinois, Ohio in 1919 is necessary. Charles Ponzi, a young man of 19 years of age offered to double the capital of investors in his company. He argued that by purchasing International Postal Coupons and redeeming them in a country with a higher exchange rate, he could provide fabulous returns9. As a result, the initial few investors received just that: fabulous returns on their investment. Unbeknownst to them and later - more unfortunate investors - was that Ponzi was paying the initial investors not from profits derived from the actual business, but from the investments of later investors. ...read more.

Conclusion

1 John Serieux. Journeys Just Begun. (Canada: Renoult Publishing Co. Ltd., 2000) 2. 2 Cheryl Payer. Lend and Lost. (United Kingdom: Zeb Books Ltd., 1991) 9. 3 William R. Cline. International Debt Re-examined. (USA: Institute for Economics, 1995) 34. 4 William R. Cline. International Debt Re-examined. (USA: Institute for Economics, 1995) 35. 5 Cheryl Payer. Lend and Lost. (United Kingdom: Zeb Books Ltd., 1991) 52. 6 Cheryl Payer. Lend and Lost. (United Kingdom: Zeb Books Ltd., 1991) 52. 7 Cheryl Payer. Lend and Lost. (United Kingdom: Zeb Books Ltd., 1991) 54. 8 John Serieux. Journeys Just Begun. (Canada: Renoult Publishing Co. Ltd., 2000) 28. 9 Cheryl Payer. Lend and Lost. (United Kingdom: Zeb Books Ltd., 1991) 27. 10 Roy Culpepper. Journeys Just Begun. (Canada: Renoult Publishing Co. Ltd., 2000) 32. 11 Roy Culpepper. Journeys Just Begun. (Canada: Renoult Publishing Co. Ltd., 2000) 33. 12 Gianni Vaggi. From Debt Crisis To Sustainable Development. (Great Britain: The Macmillan Press Ltd., 1993) 117. 13 UN Economic Commission for Latin America. Debt Adjustment and Renegotiations in Latin America. (USA: L. Rienner Publishers, 1986) 34. 14 John Loxley. Debt Disorder: External Financing for Development. (USA: Westview Press: 1986) 162. 15 John Serieux. Journeys Just Begun. (Canada: Renoult Publishing Co. Ltd., 2000) 29. ...read more.

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