DEBT IS THREAT

Debt is Threat



Debt is Threat

Introduction

Currently, we're looking at deficit levels at around 10 percent of gross domestic product, and that for the United States is quite high, relative to the post-war levels. They haven't really been that high since the Second World War. Those levels are expected to come down in the next few years. As the economy comes back, we're going to get more in tax revenues; we're going to be spending less on things like unemployment insurance. So just without doing anything, those levels will probably come down to around 5 percent of GDP.

Debt is a political issue of relevance to both develops and developing countries and it bring a lot of effects for both of them. Right now, debt has become a threat to the populations of developed and developing countries. First, debt threatens citizens of developed countries, whose continued prosperity depends on a stable, default -free global economy. Second, debt is a threat to persons in poorer indebted countries because it diverts national budget resources that can be used in important social needs and improve the severe economic crisis in case of a default. Also, debt is a threat to the future of humanity for poorer indebted countries, because those governments that overexploit natural resources to repay debts contribute to global environmental degradation.

In 2005, Noreena Hertz published her book “The Debt Threat: How Debt Is Destroying the Developing World.” to explain justifications why people urgent need to address the global debt problem, and debt is a threat for both debtor and creditor countries. In 2009, Dr, Wolassa L. Kumo published article “The Threat of a New Debt Crisis in Developing Countries” (Kumo, 2009), agree with Hertz's ideas that debt is crisis for developing countries. Both of them think debt brings negative effects for the global economic, and developing countries is a most serious victim in the situation. However, Juan Kornblihtt wrote an article “Argentina: The Problem is Not the Debt.” to against both Noreena Hertz and Wolassa L.Kummo's ideas. He finds that debt is not the only reason that causes developing countries face the economic threat (Noreena, 2005).

Debt Threat and Problems Associated with it

Noreena Hertz's The Debt Threat shows three justifications for people urgent need to address the global debt problems. First, creditors have responsibility for the accumulation of unsustainable debts, and they cannot ignore the effects of high indebtedness on the global economy. Second, under unsustainable debt, developing countries doesn't have ability to guarantee the basic rights of their citizens. Third, debt has become a collective threat for both creditors and debtors, and conflict already happen between creditors and debtors. Depend on the three justifications, Hertz summarizes that debt is a threat for developing countries, and it can destroy the developing world. And, she suggests that debt should be canceled or at least stop does not charge interest until the debtor restore solvency.

Is Debt a threat for Developing World?

Noreena Hertz's The Debt Threat gives four main reasons to explain why debt is ...