Foreign Debt
Categories: Bonds, International, Forex
See: Foreign Bond.
Foreign debt is just what it sounds like: debt that is foreign. When one country owes another country money, you’re staring in the face of stone-cold foreign debt. While foreign debt is often country-to-country, the World Bank and similar international organizations function as a way to provide good loan rates to developing countries.
The U.S. has a lot of foreign debt. Like...a lot. But many economists argue that that’s actually a good thing, since it means that all that debt equals current value to Americans. Just as when you take a mortgage, sure...having it kinda sucks...but hey, it’s worth it because now you have your house!
Because the dollar is strong and used as a neutral currency abroad, many economists think the U.S.’s large foreign debt is a-okay. The modern era: Enjoy now; worry later. Or let another generation worry. Yeah, we are oh so not The Greatest Generation.
Other economists point out that times are changing. While everything used to bear “Made in China” stickers, more and more factories are moving from China to Africa. China is on the uptick, where quality of life and GDP have been increasing. Rather than the US and European nations running everything, China is starting to come into its economic own.
For instance, China is a huge (the hugest) funder of African development. America pumped economic value into and from China, and China is doing the same to Africa now. There’s even a name for it: the “Sino-Africa friendship.” Others call it a “debt trap,” since Africa is now severely indebted to China.
Friendship or exploitation? Maybe a lil' of both.
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Finance allah shmoop what is a yankee bond We're safe
We're sound we're saying at least that's how we look
financially when you know the u s has compared with
most of the rest of the world that's why a
bunch of countries issue their own bonds denominated in u
s dollars you know countries like panama el salvador micronesia
and macron asia Well ours is ah hard currency and
that we don't or at least haven't historically created massive
ten percent a month inflation to deflate the value of
our own currency and well that would make it super
easy for our government to pay off its ludicrously high
death but we don't do that We respect the people
who loaned money to us including our own citizens So
we have a hard currency It just kind of stays
where it is Yes there's inflation Yes we raise the
rates a little bit here and there defended but generally
just kind of does its thing So we fight hard
to keep that trust that the rest of the world
often values more than well trust in their own governments
or at least their own government's ability to manage their
currency when they issue say argentinean bonds payable in u
s dollars Well then that's a yankee bond And we 00:01:14.819 --> [endTime] are the banker And well they are the yankee