Lots of debts - one unhappy birthday
By David R. Francis
Ever heard of "unhappy birthday" cards? Thousands of them will be given to officials from the International Monetary Fund (IMF) and World Bank next Wednesday in Washington by representatives of Jubilee USA Network and other nongovernmental organizations.
It's a publicity stunt, of course. They want the two institutions and other key creditors to cancel debts owed them by the world's poorest countries. Their slogan: "It's no time for a party! It's time to drop the debt!" The IMF and World Bank, which mark their 60th anniversary in July, are struggling with that issue and the largest default on national debt in history.
How they and other creditors manage that $90 billion Argentine debt crisis could set a precedent for negotiations with other nations sinking in a sea of red ink. If Argentina actually defaults, rich-country banks and other financial institutions could balk at making loans to developing nations. In some cases, that could hurt their growth.
Nations have struggled with debt for centuries. French kings resolved some debts by chopping off the heads of their creditors (but that's hardly feasible when they're in another nation). In the 1800s, Spain defaulted seven times on its foreign debts, Germany and Austria five times.
Argentina, a middle-income nation, has defaulted four times on its external debt over the past 175 years, Venezuela nine times, Brazil seven times, and Mexico eight times.
Curiously, banks and other creditors never seem to learn their lesson. Sometimes, high interest rates and a portfolio of country loans still provide a profit. So, after a lag, they're again pushing money at nations that have defaulted.
The US occupation of Iraq has brought new focus on that country's debt. Though Iraq has huge oil reserves, it also has huge problems. The lack of security and its unsettled political future has kept foreign investors away. The value of Iraqi bonds has not been rising.
James Baker III, former US secretary of State, visited with key creditor nations last fall and winter to seek an above-normal debt reduction. So far, no firm numbers have been set.
"Its creditors will never get repaid in full," says Kenneth Rogoff, a former IMF economist now at Harvard University in Cambridge, Mass.
Lex Rieffel, a debt expert at Brookings Institution, suspects creditors will take a "haircut" - a reduction in the value of Iraqi debts - of between 70 and 90 percent. But nothing will happen until after the formation of an Iraqi governing council and the appointment later of someone with negotiating authority.
If Iraq is problematic, Argentina represents a hornet's nest. Two years ago, it set off the largest sovereign nation default in history by ceasing payments on its privately held foreign debts. Last September, it defaulted on another $3 billion owed to the IMF - the single biggest default in IMF history.
Subsequently, the IMF has loaned new money to Argentina to enable it to roll over its IMF debts while it talks with 21 private creditor groups. But Argentina's president, Néstor Kirchner, has boosted his popularity by making an extremely tough proposition to his nation's creditors, and insisting there will be no bargaining.
After considering interest on the debt, creditors would get about 10 to 12 cents on the dollar. That compares with about 70 cents on so-called "Brady bonds" - bonds that replaced some sovereign debts at the end of the 1980s after a debt crisis lasting years.
"We are at a crossroads," says Ted Truman, an economist at the Institute for International Economics. If Argentina gets a bargain, other debtor nations - perhaps Uruguay and Brazil - will want to follow that pattern.
That suits economist Mark Weisbrot fine. He notes Argentina has suffered a deep depression, and says lenders should not be bailed out.
But it is a tough balancing act between financial justice for creditors and mercy for debtors. As with settling the debts of bankrupt individuals and companies, the resolution of the debts of "bankrupt" nations tends to be a long, messy process.
Why are human labor and wage so central to life and debt? Have the human race lost all sanity to preserve its dignity and worth as a sacred life? IS there any morality at all in not appreciating and empathizing the suffering and misery of fellow human beings at all? As the Good Lord said, "what does it profit a man if he (tries to) gain the whole world only to lose his soul?"
And the most important question of all: Why does the world think and come to hold as sacred that there is no other alternative to capitalism as the only means to satisfy man's misery and craving for a life of contentment?
These are some of the questions that will make us think about the way we think - metacognition. Call it critical self-evaluation. Sometimes we may not realize we are heading the wrong way unless we stop to reexamine our own actions. By self-evaluating, we began to see the world in its entirety and come to appreciate the universal picture of humanity as something that is so sacred that even self-imposed ideals and ethics of our own way of life must give way to this overall humanity picture.
There is no reason why a few stinking rich should hold to ransom the lives of millions because of structural imbalances and lack of appreciation of otherness. Those few stinking rich are only humans and should self-evaluate themselves and reorient their consciousness towards the bigger picture of humanity. Why would writing off a debt come as a very painful experience if such action does not even threaten a life but would set free a million lives? Why do the few stinking rich cling so desparately to their idiosyncratic ideologies of property as more valuable than life and then embark on enterprises about global trade liberalism and competition when they themselves are so protective of their own kind and fearful about otherness?
Truly, there is no way humanity can move forward because personal prejudice and the fear of venturing out and trusting others not of our own kind are two major factors contributing to all the inequalities and imbalances the human race faces today...