The international debt crisis-causes, consequences, and remedies Research Paper

The international debt crisis-causes, consequences, and remedies - Research Paper ExampleA nation usually runs a surplus in the capital chronicle when it runs a current account deficit. A capital account surplus is an inflow of the foreign capita in the nation which is often advantageous to a country. The main mind that is posted by critiques is where these monies go and their role in the growth and development of the economies. If it is used for consumption, it will non have any injections and therefore more debts. It will be more stress to the country as opposed to when it is invested.It is unarguable that debt crisis is a challenge to a design of countries across the globe. In a proceeds of economies, the crisis started during the mid-1970s when a number of the Organizations of Petroleum Exporting Countries (OPEC) managed to amass wealth and banks were willing to lend billions of dollars. A number of developing economies borrowed huge sums of money at floating and low interes t rates. Due to the irresponsibility of the debitor governments and the creditors, the money borrowed was not used in the productive purposes, i.e. investment rather it was used for immediate consumption. Consequently, these countries could not generate enough finances to repay the loans. The incidences of adjustable interest loans increased during Reagans administration in the United States to reduce inflation through the enforcement of stringent rules. (Madura, 2012) During this time, the prices of the raw materials collapsed, meaning that a number of pathetic countries did not have enough money to repay the debts. Most developing countries failed to pay their debts and have intemperately relied on the International Monetary Fund and the World Bank. There was however a condition those countries were to pursue economic structural adjustments. The government of the affected countries was forced to cut costs on education, health, and other affable services to be able to repay the debts. In Latin America, the per capita of most countries plummeted, the GDP stagnated and