The International Debt Problem

Several points should be made when considering the current international debt problem. First, I discuss the role of oil shocks, the most common explanation of the problem, and argue that the oil shocks do not explain why some countries are unable to make the interest and principal payments on their international debt. Second, I look at a more credible explanation of the problem, the policies chosen by particular debtor countries, and discuss some consequences of those policies. Next, I consider the proper method of evaluating a debtor's financial position. Finally, I briefly discuss some alternative solutions