Show Voice of o business Con Can a count country go bankrupt Icy Ity Arch Booth president of or orthe the Chamber of Commerce of the United States Can a country go bankrupt The answer to that question depends on what you mean by byba ba bankrupt As members of oC the world economy countries earn money by exporting their products and spend money to buy imports The relationship between these two figures outgo and Income is is called the balance of trade MONEY ALSO AISO flows into and out of a country in the form Corm of private investment loans and government aid including military expenditures When this flow Clow of oC money is added to the balance of trade the combined figure is called the balance of oC payments When a country finds that it must spend more for imports than it is able to earn from its exports or aid or investments then it does docs what you or I might do under similar circumstances circumstances circumstances cir cir- cir cir- It borrows to cover the difference The loans may come from private sources but they are more likely to come from other governments If a country seems unable or unwilling to correct a chronic balance of oC payments deficit eventually it will exhaust its international credit At that point the country could be considered bankrupt Devaluation However unlike a bankrupt business a bankrupt country does not sell off its assets to pay its creditors It devalues its currency That is its money becomes worthless in terms of oC the money of oC other countries After devaluation a country's exports become cheaper for other countries to buy Conversely imports become more expensive for citizens of the devaluing country The effect obviously effect obviously is to boost exports experts and reduce imports to get the country back into a position of living within its income WHAT HAPPENS inside the bankrupt country First the citizens have to get along with fewer imports because they now cost more to buy Second more of the country's productive resources are channeled Into making exports The shift of resources to export markets Is likely to erea create te shortages on the domestic market which in turn will tend to raise domestic prices Bankrupt is much too strong a term to use for an economy as strong as that of oC the U. U S. S But nut we have devalued our currency and we have experienced the two effects Ive I've mentioned Imports cost more now and our exports are more attractive to foreigners who buy more from us which leaves less for us which raises prices here Food is an excellent example HOW ARE we doing now Our balance of oC trade showed a slight surplus in October However it did not do so well for Cor most of oC the rest of the year For the first 10 months of 1974 we spent 23 billion more for foreign goods than we earned on our exports The larger figure the balance of payments has registered a deficit through Sep September ember latest figures available although it is improving That is we are not going in the hole as fast as we were earlier in the year The Oil Problem The source of our problem is not hard to spot Oil imports cost us billion in the first 10 months of this year compared to 78 billion for all of oC 1973 That's why President Ford wants us to cut down on our use of petroleum products Its It's also why we must develop the fuel resources we have wi within thin the U.S. U.S. U.S. U. U S. S OTHERWISE we will face continuing devaluation of oC the dollar with resulting higher prices for nearly everything Our balance of trade problems are small in inc c cb comparison to those of countries with smaller economies and greater dependence on Arab oil however Italy for example is currently being carried by emergency loans from other western nations No one knows how long that can continue and no one dares stop since the collapse of oC one major western economy could trigger a chain of oC rela related ted disasters |