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Started in the 1970s and continuing to the present Started in the 1970s and continuing to the present During an “economic slowdown” (recession) During an “economic slowdown” (recession) Oil prices sky-rocketed Oil prices sky-rocketed http://www.apachecorp.com/Resources/Upload/PrevArticleFiles/images/5-Oil-Price--Demand-Plots1.jpg
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Middle Eastern countries that export a lot of oil Middle Eastern countries that export a lot of oil G8 Countries: USA, Canada, Japan, France, UK, Germany, Italy, Russia G8 Countries: USA, Canada, Japan, France, UK, Germany, Italy, Russia Developing Third World Countries Developing Third World Countries http://newsx.com/files/images/G8%20Logo230x230.jpg
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To modernize, developing nations had to build new communication and transportation systems (like satellite dishes and airports) To modernize, developing nations had to build new communication and transportation systems (like satellite dishes and airports) Most of the nations did not have enough money to invest in these projects, so they borrowed money from the western banks Most of the nations did not have enough money to invest in these projects, so they borrowed money from the western banks In the 1970s, the price of oil soared In the 1970s, the price of oil soared Oil-rich Middle East nations put their money in western banks Oil-rich Middle East nations put their money in western banks The banks wanted to earn interest on the money they received, so they encouraged developing nations to borrow money for their projects and oil The banks wanted to earn interest on the money they received, so they encouraged developing nations to borrow money for their projects and oil Then the interest rates rose in the 1980s, and many of the nations could not pay the money they owed to the bank Then the interest rates rose in the 1980s, and many of the nations could not pay the money they owed to the bank Inflation helped produce the steep rise in interest rates Inflation helped produce the steep rise in interest rates A recession made the debt crisis worse A recession made the debt crisis worse Some lenders and borrowers worked out ways to ease the debt such as agreeing to lower interest rates and to cancel parts of the debt Some lenders and borrowers worked out ways to ease the debt such as agreeing to lower interest rates and to cancel parts of the debt
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It has been difficult for countries to repay loans and break the debt spiral because loans must always be paid in hard currency and the value of a country’s export goes down It has been difficult for countries to repay loans and break the debt spiral because loans must always be paid in hard currency and the value of a country’s export goes down The debt crisis is a developing cycle due to the fact that as the country’s personal currency drops, their debt, in western currency, will rise The debt crisis is a developing cycle due to the fact that as the country’s personal currency drops, their debt, in western currency, will rise The value of the country’s exporting product needs to be greater than the amount of debt they owe, or else they will not move anywhere in their debt The value of the country’s exporting product needs to be greater than the amount of debt they owe, or else they will not move anywhere in their debt Some countries have refinanced, which is borrowing money to pay off debts, but this process just presents the country with new debt to replace the old debt Some countries have refinanced, which is borrowing money to pay off debts, but this process just presents the country with new debt to replace the old debt The IMF (International Monetary Fund) is a special committee formed by the UN whose goal is to stabilize the World Economy The IMF (International Monetary Fund) is a special committee formed by the UN whose goal is to stabilize the World Economy It is debatable whether this new committee is effective to reduce the debt of countries or not because some people say that countries are in debt due to the policies of the IMF It is debatable whether this new committee is effective to reduce the debt of countries or not because some people say that countries are in debt due to the policies of the IMF Since debt is an endless cycle, almost all of these countries are still in debt and will be in debt in the foreseeable future Since debt is an endless cycle, almost all of these countries are still in debt and will be in debt in the foreseeable future
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Reschedule the debt Reschedule the debt The conditions of the debt are modified, and more time is allowed for repayment The conditions of the debt are modified, and more time is allowed for repayment Cancel the debt Cancel the debt Make the debt no longer exist Make the debt no longer exist Swap the debt Swap the debt UNICEF's Debt for Child Relief is an example of how an organization aided some countries in their debt problems. UNICEF and international banks made a deal. Some of the money that Third World Countries owed the banks was not paid to the banks but was paid to UNICEF. Instead of the money, the banks received tax deductions (the lowering of taxes). UNICEF collected the repayments of the debts and then spent this money for programs to help children in the U.S. UNICEF's Debt for Child Relief is an example of how an organization aided some countries in their debt problems. UNICEF and international banks made a deal. Some of the money that Third World Countries owed the banks was not paid to the banks but was paid to UNICEF. Instead of the money, the banks received tax deductions (the lowering of taxes). UNICEF collected the repayments of the debts and then spent this money for programs to help children in the U.S. http://www.basecon.com/graphics/unicef2007.jpg
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