Third World Debt

[DesertShark]

Since the US and the EU are in a huge debt right now, along with a lot of other countries, would it be reasonable to clear the debts of the Third World countries?

Wikipedia has a list of countries by external debt and it appears that all but 5 countries are in debt. This seems ridiculous because if the entire monetary system is created by people, shouldn't we be able to clear everyone's debt and start over?

[Drace]

Can I see the Wikipedia list?

[DesertShark]

Can I see the Wikipedia list?

I don't have enough posts yet to post a link, but if you go to wikipedia and search for external debt, then scroll to the bottom where it says "See also," it's the first link you can click on ("List of countries by external debt").

[Decolonize The Left]

Since the US and the EU are in a huge debt right now, along with a lot of other countries, would it be reasonable to clear the debts of the Third World countries?

Wikipedia has a list of countries by external debt and it appears that all but 5 countries are in debt. This seems ridiculous because if the entire monetary system is created by people, shouldn't we be able to clear everyone's debt and start over?

Here is the list of countries by external debt (http://en.wikipedia.org/wiki/List_of_countries_by_external_debt).

And to answer your question: it is fundamentally impossible for the external debt of third world countries to be cleared within a monetary economic system. I repeat, so long as we maintain a monetary economic system, the debt of third world countries, as well as that of most civilians in the first world, will remain.

You are most certainly wondering, why is this? Why not just wipe the slate clean right? Because you do not understand how the system operates. This is not your fault, you have been conditioned to not understand.

Basically:
The United States Federal Reserve is in charge of the money supply of the US - it is a private institution.
When the US government needs money, it requests dollars from the federal reserve (this is simplifying the situation a bit).
The federal reserve prints this money and gives it to the government on one condition - the government must pay interest on every dollar.
This is why the government is constantly in debt, and must tax the citizens, borrow from other governments, invade foreign countries, impose tariffs on foreign countries, etc...

In other words, money is debt. All of it - everywhere.

The Federal Reserve manages this debt, basically allowing it to control the economy. What this means is that if it calls in the debt, it restricts the money supply, and if it lets the debt run and/or prints money, it can flood the money supply. This control of the money supply effectively controls the value of the dollar.

Hence it is entirely impossible for debt to go away within a monetary system, for if it did, there would be no money.

- August

[benhur]

August, thanks for your explanation. Can you please explain this a bit more as to how the monetary system works? Not federal reserve alone. Are you saying money can exist, only if banks can keep lending it to people? Such as, if X deposits $5 and borrows $10 from the bank, the bank lends $10 which isn't backed by gold (or anything), so it's virtually non-existent money. When the borrower pays back with interest, the bank makes extra money. So money supply is increased. Is this what you;re suggesting?

[Yehuda Stern]

The main problem is that the countries of the world are not equal to each other in terms of their political power. Imperialist countries can get a way with a lot more than third world countries. Israel can occupy Palestine and murder its people for decades and still have the title of "the only democracy in the Middle East," while some aggressive rhetoric by an Arab or Muslim leader earns him the title of "the new Hitler."

This shows in the question of the debt as well. Third world countries, especially in Africa, are in huge debts to the imperialists. This allows the imperialists to force economic reforms in their favor on these countries, in return for canceling some of the debt.

The pro-imperialist leaders of these countries will never be able to repudiate the debt entirely - and even if they will, they will face the wrath of the imperialists, which they will not be able to fight against. That's why the slogan "Repudiate the Debt!" can be considered as a transitional slogan for those countries in debt to the West.

[DesertShark]

Basically:
The United States Federal Reserve is in charge of the money supply of the US - it is a private institution.
When the US government needs money, it requests dollars from the federal reserve (this is simplifying the situation a bit).
The federal reserve prints this money and gives it to the government on one condition - the government must pay interest on every dollar.
This is why the government is constantly in debt, and must tax the citizens, borrow from other governments, invade foreign countries, impose tariffs on foreign countries, etc...

In other words, money is debt. All of it - everywhere.
Is this the same in other countries? How do other countries regulate their money? Are there countries that don't have a system like this?
Taxes on citizens existed before the federal reserve. If the government needs money, why would they go through a private institution that makes them pay interest when they could just tax their citizens out right?


The Federal Reserve manages this debt, basically allowing it to control the economy. What this means is that if it calls in the debt, it restricts the money supply, and if it lets the debt run and/or prints money, it can flood the money supply. This control of the money supply effectively controls the value of the dollar.

Hence it is entirely impossible for debt to go away within a monetary system, for if it did, there would be no money.

- August
How did the federal reserve get this power? Why was this monopoly allowed to be established and continued?

It is still not clear to me why the debt can't be cleared and how you got to the conclusion that that would mean no money.

-DesertShark

[DesertShark]

This shows in the question of the debt as well. Third world countries, especially in Africa, are in huge debts to the imperialists. This allows the imperialists to force economic reforms in their favor on these countries, in return for canceling some of the debt.

The pro-imperialist leaders of these countries will never be able to repudiate the debt entirely - and even if they will, they will face the wrath of the imperialists, which they will not be able to fight against. That's why the slogan "Repudiate the Debt!" can be considered as a transitional slogan for those countries in debt to the West.
Other than imperialist countries losing territory and control over other nations, what do these powers have to lose by canceling the debt? Are the imperialists really gaining that much by holding down third world nations? How did these nations get into debt in the first place?

[Yehuda Stern]

Other than imperialist countries losing territory and control over other nations, what do these powers have to lose by canceling the debt?

You've answered your own question. The debt is a great way for the imperialists to enforce themselves upon the third world, politically and economically.


Are the imperialists really gaining that much by holding down third world nations?

Yes, they do. In fact, the oppression of the third world by the imperialists is probably the second most important thing for imperialism's functioning, after the oppression of the working class. By holding down the third world, the imperialists benefit from the exploitation of its labor power, which is much cheaper than that of the imperialist countries.


How did these nations get into debt in the first place?

Many countries had to recover from various atrocities, civil wars and anti-colonial wars (which are also the fault of the imperialists), and since their leaders were pro-capitalist, they could not solve these problems as revolutionaries would, and instead had to rely on loans from the West, claiming that these loans would allow their countries to build their economies and prosper, and so return the debt. This, of course, was always an illusion, and today all we see is the constant growth of the debt - so much that the imperialists are sometimes willing to cancel some of it, knowing it'll win them favors with the third world countries without really threatening their control of them.

[Decolonize The Left]

Is this the same in other countries? How do other countries regulate their money? Are there countries that don't have a system like this?

I don't know. I imagine that there exist countries which don't engage in the exact system which we do, but our system if fairly common among capitalist states.


Taxes on citizens existed before the federal reserve. If the government needs money, why would they go through a private institution that makes them pay interest when they could just tax their citizens out right?

You fail to understand. There is X amount of money in circulation right now (the government holds Y amount of X, and the people hold Z amount of X). In order for capitalism to function, the people must be able to spend Z amount (or most of it) while regaining some of it for later spending.

If the people were taxed to clear the debt, this would reduce the amount of money available for spending so greatly that it would likely cause the US economy to collapse. Our debt is huge. It cannot be covered by the US citizens without an enormous change in our way of life. Such a change would necessitate a change in the capitalist system which would undermine the fundamental goals of the system. This change is impossible to occur from above.

Furthermore, most of the "money" in circulation exists in the form of credit - keep reading for an explanation as to why this is insane.


How did the federal reserve get this power? Why was this monopoly allowed to be established and continued?

The federal reserve was created by the government. It was allowed because it facilitated the expansion of the capitalist economy by enormous amounts.


It is still not clear to me why the debt can't be cleared and how you got to the conclusion that that would mean no money.

-DesertShark

Ok. I am going to make up some numbers here to provide an explanation, these are not related to actual numbers.
For every dollar the Federal Reserve prints, it places a 10% interest rate upon that dollar. That means that the government receives a dollar, but owes 10 cents. This is what I mean by money equals debt. All money printed has debt attached to it...

Now. At the present moment, the US has 1 billion dollars. But it actually has only 250,000 of this billion in cash. The rest exists in digital terms (credit). Why this credit and no money? Due to the fractional reserve system and the creation of money by banks. They can't actually print money (only the Fed can do this), but they sure can make it up digitally. Remember that this isn't real money. It functions as such, but it isn't backed by anything tangible.

So when the debt is called in, as you say it ought to be, all the current money in circulation (250,000) is called in from the people and government in the form of taxes. But all that other money can't be made real because the Federal Reserve has to print it - which means more debt. So this is why the debt can never go away, ever, so long as money exists.

No debt = no money. Why? Because money is debt.

If this is still hard to understand and you have two hours to kill, watch the movie linked in my signature (Zeitgeist: Addendum).

- August