Developing Economies Drowning In Debt
The last 3 years have been an absolute shit show for the world's economies, which have already been approaching the brink of collapse after years of fiat exploitation. While powerful G7 nations like the US, Canada, Australia, the UK, and The EU deal with their own problems and fallouts, developing economies are looking worse for wear and our time is slowly running out.
You see the thing with economic collapse is no one cares as long as you're not at the bottom of the totem pole. Argentina, Sri Lanka, Venezuela, Lebanon, Turkey, Greece, and Cyprus have all had either bailouts, bail-ins, soft defaults, or actual defaults, and who gets stuck with the bill?
Not the governments taking out the debt, oh no, it's the currency holders, the citizens of the country.
Living beyond your means
Countries have always been living beyond their means, issuing bonds or taking out loans as the backing for new currency supply that governments would funnel into projects and services they think are worthwhile each year. Each year they create a deficit as tax receipts don't cover the growing shortfall for new projects and obviously the debt repayments along with interest.
As you or a company can delay forclosure should you be able to access lines of credit, as long as citizens and investors have faith in a currency it can delay foreclosure by issuing new currency units.
Supply shortage and supply chain issues
As we come out of an economic lockdown and into a war that affects a large portion of the world directly, we've seen many businesses fail. When businesses fail, it creates supply shortages and blockages in supply chains.
To get these supply chains running again and get people to re-open businesses to meet the growing demand takes time and in that time, the goods and services that are affected will drive up in price as people bid to acquire them at any cost.
We're seeing inflation run rampant in my countries around the world, and while the US and a few countries can deny it, I think every country in the world is sitting with double-digit year-on-year inflation.
Developing economies take the pain first
The world economic forum while not the arbiter of truth has stated that they think 107 countries are facing 1 or more of the following 3 issues, while 69 countries face all 3 at the same time.
- Rising food
- Rising energy prices
- Tougher financial conditions
Of the 69,
- 25 countries are in Africa
- 25 countries are in Asia
- 19 countries are in Latin America
If we look at Africa, where I am based, it looks like Ghana, Ethiopia, Kenya, and South Africa are all racing ahead to obliterate what goodwill they had with their citizens, what value is left in their currency, and what is left of their industry.
As all these countries approach debt to GDP ratios of 80% and more, it becomes harder to service that debt and it starts to weigh down the economy. As the economy slows, it makes the debt burdens even harder and it becomes a vicious cycle of fighting deflation.
Governments do not want deflation as it makes their debts harder to service and their exports less competitive, so to counteract it, it's all about creating new currency units and extending lines of credit to keep the ball rolling in a direction that ends in hyper inflation.
For those who don't like to read
If you're tired of my rants and don't feel like reading my drivel, here's a summary of the economies hitting the debt wall.
You don't buy insurance when your house is on fire
The fact that others aren't pricing in these events doesn't mean you shouldn't consider it. If you're not thinking about taking chips off the table and have an insurance policy against this growing likely scenario then I have no idea what you're thinking and how you price risk.
Bitcoin is going to become more important not because people want to speculate but because people will have very little choice. As I always say, you can either choose bitcoin out of curiosity or out of poverty, the choice is yours.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, "I am a Jessie."
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Dear @chekohler, I agree with you!
In the world I live in, the number of unemployed is skyrocketing because of the collapse of manufacturing caused by Chinese products.
The price of oil has risen because of the war in Ukraine, and both real estate and prices are rising.
I felt the state was transforming into a communist economy like China, monitoring individuals' deposits, real estate, property, and transactions all.
Your bone to pick with Chinese products is misguided in my opinion, any creation of products that the market wants is a creation of value and is in fact deflationary, which is a good thing. You're focusing on the wrong issue here, China can produce as much as they want, the issue here is that through currency manipulation they can remain competitive, all countries are doing the same thing, they just do it better
The state has to devolve into communisim now as they cannot allow for leakages out of their system as they rob you to cover the debts they've created
The industrialized countries in East Asia, including SK, used the dollars they earned from exporting cheap industrial products produced with cheap labor to the US to import oil, resources, food, and grain.
However, all of their manufacturing industries are collapsing because of China's cheaper labor costs.
As you know, the manufacturing industry has the greatest impact on the livelihoods of the lower class. The collapse of the manufacturing industry is creating a situation in which the lower classes are forced into the streets as unemployed.
The state promotes service industries instead of manufacturing, but the situation is getting worse.
I already felt that my world had become an economic colony of China. The East Asian world is increasingly dominated by Chinese-style communism.
If it becomes known that I am having these conversations with foreigners like you, the state may impose a prison sentence on me.😆
Yes I agree with you on the symptoms, it's unfortunate the idea that a service based economy is how you modernise and offset carbon and so people follow this hollowing out of their country, but we cannot blame other countries for our own countries stupidity
Dear @chekohler , At least I don't think South Africa will face the risk of a nuclear war.😂
The East Asian world is currently in the midst of a nuclear war.
Why do you say that?
Dear @chekohler, Sorry for the late reply as I found your question today.
https://www.usip.org/publications/2022/05/our-next-unthinkable-crisis-nuclear-war-asia
It seems to me that the crisis will hit developed economies more painfully than developing ones. but, with the only difference being. that it will move with less inertia, but everyone will feel its heaviness. In developing countries, people have long learned to survive in difficult conditions, and those who are used to traveling to resorts twice a year will find it difficult to come to terms with the fact that they may have to cook food on a fire.
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Yes developing countries can't compete with the purchasing power of other nations for goods and services so they have to suffer, and live without it, they have to live in survival mode, and drag on. It's a great time to try and decouple from the dollar something I hope a few nations will do
While individuals will need to focus on the basics and try to weather the storm
Of course, this is a bad recipe, which I will now express, lol, but it seems to me that in order for them to survive, they need to feel what a person feels on a desert island who sets out to get off it.
There is an ideal solution and it was shown by Japan, in the post-war years, its experience of hyper-jumps in the economy, something similar is needed for developing countries.
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