"Reckless lending and borrowing by banks can cause booms in assets such as house prices, increasing inequality, followed by busts resulting in unemployment and higher government debt. This map shows the total foreign debt owed by a country’s private sector, not taking into account the debt owed to it. Many countries, particularly more impoverished ones, do not monitor these debts at all, and no figures exist for them. Money can flood in and out of the country at will, potentially fuelling tax avoidance, corruption and financial instability. The total foreign debt owed by the private sector can dwarf that of governments, for example in Spain, Ireland, Iceland and the UK. To some extent these debts can be matched by debts owed to banks and others from abroad. But even if this is the case, the total amount of money owed makes a country highly vulnerable to financial instability. Private sector borrowing led to the East Asian financial crisis in the 1990s, which crashed economies and pushed people out of work and into poverty. In Thailand, poverty increased by 40 per cent."
Posted on: Tue, 03 Sep 2013 09:06:20 +0000
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