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Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. If the economic situation suffers a downturn which is likely in the coming years , we might witness a number of bankruptcies of the private banks of developing countries, just like the financial crises which hit Mexico in , the countries of South-East Asia and South Korea in , Ecuador in and Argentina in Hence, the need to control private sector indebtedness.

The same applies to the sector of hydrocarbons and minerals. Private petroleum, gas and mineral companies, take out loans in order to increase their production capacity and profit from the current high prices of raw materials. If the prices drop, the investments made through borrowing might not be profitable and the debt would become impossible to repay.

Emancipating the Banking System and Developing Markets for Government Debt - ProQuest

It is imperative to limit and control this indebtedness. This is six times more than the amount sent in the context of Development Aid. Foodstuff versus biofuel Throughout , the price of food has increased everywhere. This increase has direct repercussions on the budget that households have to allocate to food in order to survive. Globally, it is mainly women who suffer the brunt of the increase in food prices, as they are most often in charge of feeding the family. An analysis based on gender and class is required to understand the changes.

This is an example of the devastating effect of free-trade treaties. Once NAFTA was in place, US agro-business flooded the Mexican market with cheap US maize, selling it at a price that was below the cost of production of the small Mexican farmers, thousands of whom subsequently lost their jobs and have since tried to emigrate to their rich Northern neighbour.

Since , the price of maize exported by the US has largely increased because of demands linked to the production of ethanol. Consequently, the price of food went up in Mexico since maize is the main staple food. The Mexican peasants that used to produce the maize are not there anymore to respond to the demand. They have either sold their land and emigrated to the cities or the US, or they are crippled by debt and have difficulties in getting back into maize production.

A second phenomenon has worsened the food situation of the poorest. In and in the big grain companies, based in the most industrialized countries with temperate climates, reduced the area planted with cereal food crops Food crops Crops destined to feed local populations millet, manioc, etc. This means they took the risk of creating food shortages in Africa and other continents which, over the last forty years, have become net importers of cereals due to the fact that institutions such as the World Bank have encouraged them to prioritize the cultivation of tropical products cocoa, coffee, tea, groundnuts, etc.

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The driving forces of capitalism are trying to profit from this situation to strengthen the domination and control of multinationals over agricultural production. They placed Kofi Annan at the head of their project, who had already created cronyism with the big multinationals through the creation of Global Compact in when he was general secretary of the United Nations. The environmental effects are equally disastrous especially soil and groundwater salinisation.


The solution in sub-Saharan Africa does not lie in the green revolution but in the radical reduction in cash crops for export, so as to free up land for the production of cereals and other essential food crops. A public policy of support and protection of African peasants is needed. On a planetary scale, the dramatic increase in the price of food crops represents a strong argument in favour of implementing food sovereignty policies and radical agricultural reform, including rejecting the production of biofuels. Governments must take strong measures to guarantee that healthy, non-genetically modified food is available for the citizens of their countries, by favouring organic crops produced by small and medium scale farmers under different forms of organization and ownership: smallholders, cooperatives, public companies, and traditional communities.

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China, a capitalist country of the modern style China is presented from the angle of its economic success, in terms of GDP growth and increased exports. GDP growth may well be impressive, but in fact, China has chosen a capitalist model of development, implying increased exploitation of Chinese workers, mass redundancies, privatisation of many public companies, radical reductions in State spending on education, health, social security, and unbridled productivism with total disregard for nature and public health.

It is true that China is a net creditor with regard to the United States but it has accumulated a colossal internal debt. Worse still, social inequalities are growing at a horrendous speed. A severe economic slowdown in the United States may not make too much impact on the economic health of China, as it exports more to Europe than to North America.

Banking Explained – Money and Credit

The rise of internal debt both at government level and in companies, the accumulation of unsafe debts in banking, the creation of speculative bubbles on the property market and the stock exchange are some of the factors that could lead to an economic crisis, sooner or later.

Not to mention the powder-keg of glaring social inequalities. With few exceptions, the media fail to report on the changes in living conditions for the majority of Indian citizens. India has a high number of working poor. In the fight against famine, India lags behind other Asian countries such as Pakistan and China. In a ranking of countries, Cuba and Libya figure among the first while China comes 47 th, Pakistan 88 th and India 94 th.

According to other sources, between and more than , small farmers committed suicide, most of them for reasons of over-indebtedness. This translates as one suicide every 45 seconds. In Mumbai, a city of 14 million inhabitants, where trading Market activities trading Buying and selling of financial instruments such as shares, futures, derivatives, options, and warrants conducted in the hope of making a short-term profit.

Here we have a perfect example of the fallacy of the trickle-down effect, whereby economic growth is supposed to be automatically beneficial to the poor. What will be the effect of the doubling of the price of milk in India in ? In this case Chinese billionaires will outnumber Indian billionaires, ousting India from first place. But this is of little matter here. What is certain is that rapid growth in India and China is producing more and more rich people, and at the same time more and more poor people.

Those countries where inequality is most on the increase are, in order, China, Bangladesh, Nepal and Sri Lanka. Banks and hedge funds Hedge funds Unlisted investment funds that exist for purposes of speculation and that seek high returns, make liberal use of derivatives, especially options, and frequently make use of leverage. The main hedge funds are independent of banks, although banks frequently have their own hedge funds.

Hedge funds come under the category of shadow banking. It brought together 40 Indian microfinance institutions among them SKS Microfinance, Share, Spandana and Basix and major international private equity Equity The capital put into an enterprise by the shareholders. Microfinance is a fast-growing sector that is attracting more and more foreign investors, big banks and hedge funds. In India, Who was it that said microfinance was a real alternative? Bush and Kofi Annan, of course.

They were not entirely wrong if they were thinking of a profitable investment for bankers and private equity Private equity Private equity or investment capital designates a specific form of institutional investment in private companies with the goal of financing their development, transformation and expansion.

The most common forms of private equity are venture capital, which refers to investments in the creation and development of innovative start-ups, and Leveraged Buy-Outs.

Emancipating the banking system and developing markets for government debt

These calculations take into account only US expenditure; if one were to add the cost of the destruction caused by invasion and occupation in Iraq and Afghanistan, as well as the money spent by US allies, the figure would be far higher. Not counting the number of human lives lost and the number of wounded and war-traumatized. Paul Wolfowitz, who, with Donald Rumsfeld, fabricated the lies that served as a pretext for the invasion of Iraq the existence of weapons of mass destruction and collaboration between Saddam Hussein and Al Qaida , was forced to resign because he had been found guilty of favouritism towards his girlfriend a World Bank employee.

Rodrigo de Rato, managing director of the IMF, resigned from his post, thus triggering a new election.

The US president alone designates the candidate for the World Bank presidency and the WB governors simply ratify this decision. Beyond this denial of democracy, the two institutions are going through difficult times: IMF resources have dried up, since, apart from Turkey, no other major developing country owes it large amounts of money the IMF lives off the sums refunded by its clients and the World Bank is having trouble proving it is fulfilling its mission in the fight against poverty.

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  • Many clients are trying to pull out of the Bank as other sources of financing become available on more favourable terms. Among these are the loans granted by China and other developing countries. Vulture funds Vulture funds Vulture fund Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books.

    Download PDF Download. Under a Creative Commons license. Abstract The breakdown of the financial markets in and the ensuing debt crisis in the EU has produced enormous mistrust in financial products and the monetary system. Key words capital funding. Palabras clave Fondeo de capital. In this paper, we argue that over the last three decades, governments and central banks have failed to implement countercyclical fiscal and monetary policies.

    This has increasingly limited the scope for policy reactions in crisis periods. Interest rates have fallen towards zero and governments have accumulated debt levels comparable to those after World War II. Since the start of the recent crisis, serious doubts about debt sustainability have revealed the necessity of fiscal adjustments. Just like at the end of World War II, governments have to find ways to correct expenditure-revenue misalignments in order to prevent a possible debt crisis, as is currently being experienced in some European countries.

    Therefore, the USA and the euro area have more or less explicitly returned to financial repression to reduce debt-servicing costs. Building on previous literature, we argue that on top of the "safe haven capital effect", the Federal Reserve represses US government bond yields and assists in financing the state budget.