. The accumulated external debt of the world's richest country, the United States of America, is equal to $2.2 trillion. This is almost the exact amount owed by the whole of the developing world, including India, China and Brazil - $2.5 trillion.
. In other words, three hundred million people in the US owe as much to the rest of the world, as do five billion people in all of the developing countries. . Or to put it differently, every American citizen owes the rest of the world $7,333 while every citizen of all the developing countries only owes the rest of the world $500. . Moreover, while developing country economies are bled dry through debt service repayments totalling more than $300bn per year, the US must only pay $20bn per year to service an almost equivalent amount of debt. . Americans have been engaged in a consumer binge, which has led to the largest current account deficit in history, a staggering $445 billion or 4% of US GDP. This deficit has been increasing by 50% a year in recent years, and economists predict it will rise to $730bn by 2006. . Given this daily defecit of up to £2bn, plus capital outflow of $2bn, the US in effect has to borrow $4bn from the pool of world savings every day. . The US deficit is financed by a) the thifty savers of East Asia, in particular Japan, China and Singapore; but also b) by surpluses built up by countries like France and Switzerland. . More disturbingly, the US deficit is being financed by the poor through a) capital flight from poor countries and b) the forced holdings of high levels of dollar reserves. . To build up reserves, poor countries are borrowing hard currency from the US at interest rates as high as 18%; and lending this back to the US (in the form of interest on US Treasury Bonds) at 3%. . Asian and African countries are forced, by the financial instability caused by globalisation, to maintain dollar reserves, at 14% and 7% of GDP respectively. The US in contrast holds only about 1.3% of her GDP in reserves. . The cumulative cost for developing countries of holding such high dollar reserves may be as much as 24% of GDP over ten years; which represent a significant drag on growth rates. . Inflows of capital into the US and UK: a) help to lower interest rates and therefore borrowing costs for the people of these countries and b) inflate the value of their currencies by about 20%. This enables rich countries, therefore, to purchase imports from the rest of the world 20% cheaper than they would otherwise have been able to. . If it were not for capital flight, at least 25 African countries would be net creditors, not debtors. . Countries like Argentina find that their governments are borrowing hard currency, only to find it promptly leaves the country (in the form of "capital flight") for Wall St., London, Zurich or Madrid - a legitimate process under capital liberalisation. . However the poor in these countries are then saddled with huge public debts. Argentina's total external debt of $150 bn is almost exactly equal to unrecorded "capital flight" of $130bn. Source: http://www.jubilee2000uk.org/analysis/reports/J+USA7.htm
