The origins of the contemporary debt crisis are usually traced to the imprudence both of creditors and borrowers in the years of the petro-dollars recycling feast. The debt ‘bubble’ burst through an ‘external shock’: the 1979–80 shift in the monetary policy stance of the international monetary regime’s hegemonic power. As a result interest (floating) rates bearing on most of the stock of debt shot up; world output and trade declined sharply; prices of primary commodities which account for most of the exports of indebted developing countries suffered a steep and prolonged downfall. The bankers stopped lending — with a lag — and the debtors were forced to adjust severely through demand policies which sank their economies into deep recessions, great monetary, fiscal and price upheavals, and huge capital flights.
KeywordsDepression Europe Amid Income Explosive
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