Hi lorne,
First, as has been the past pattern for excessive levels of third-world debt, I believe (and likely they believe as well) that much of this debt principal is already toast. And if Y2k comes close to messing things up in the third world as predicted, this debt becomes burnt toast. The last time the major banks screwed up this bad they got their heads handed to them. Thus, the groping for a "solution", and that "solution" had better materialize soon.
In terms of bank shareholders, third-world debt bondholders, and their related, hapless bailbondsmen-taxpayers, there will be much gnashing of teeth. On the plus side, if these countries are let off the hook, new loans can safely be made again -- sort of like how a bankrupt sometimes finds it easier to get new loans from certain lenders (though often at substantially higher than market rates) after all his past obligations are discharged.
So, the old lenders are hosed and the new lenders are sitting pretty, unless they screw up later on, too. That's why we continually see this "roll over and add to the principal so that the interest payments can stay current" syndrome. The old lenders know they're at a disadvantage if they let go and take the hit, opening a clear path for the competition, such that it is. However, looming events would appear to limit continuing along the rollover path.
It's really not clear what the IMF gold sales would accomplish in this regard. The gold sold won't amount to enough to make much of a difference. The proceeds will go from the IMF to the lending banks, which are connected back to the IMF through their respective central banks, so the whole thing is just the IMF bailing out itself and the lending banks using assets mostly pledged by the taxpayers of the countries of their respective central banks. The rest of the loan balance will come out of the hides of the lending bank shareholders, the securitized debt holders, and the taxpayers of the countries where the lending banks operate. It's largely a transfer from first-world citizens to certain third-world citizens because the central banks, IMF, and lending banks have overreached, as usual. This overreaching is made possible because there is barely any practical limit on the amount of money that can be created because it's not backed with anything of real value and therefore self-limiting supply.
Apparently, those cheap imports may turn out to be not so cheap after all, sort of a "principle of conservation of value" at work. |
