The Scale of Debt Crisis

INTRODUCTION

Nowadays, there are two things i.e. Debt settlement and debt help in demand. Both are reducing the financial burden of the consumers. One of the easy and convenient ways of getting out of the financial difficulty is online debt settlement. Many Debt Help are launching to reduce the debt. Debt Reduction Help may help you to find out solutions and get you out of debt trap, if you are drowning in debt and feeling helpless. By adopting this help, you can cleverly manipulate of your funds and also free of debts within the shortest time possible. Everyone knows that debt disturbs the mental stability of the humans. If anyone has debt, then its liability keeps one under huge pressure. Debt problem is increasing day by day and it becomes a global issue.

Loans are borrowed by people from the financial institutions and are not able to pay because of the overspending and variety of other reasons which has form a part of life. The unpaid amount is rising because the due amount is unpaid. The lenders in turn want immediate payment of their loan amount. Many debt settlement companies are established through which consumers can get debt help. During their financial crisis, these are the organizations which help the consumers. Various debts settlement programs are offered by such companies to overcome from this problem. These organizations advice their customers and even recommend them ways of conquering.
A huge interest of the unpaid loans is reduced by this process. The dues also get reduced up to 50 to 60%.Nowadays; everyone wants fast alternatives and solutions at finger tips

According to J W Smith

The size of the debt trap can be controlled to claim all surplus production of a society, but if allowed to continue to grow the magic of compound interest dictates it is unsustainable. One trillion dollars compounded at 10 percent per year become $117 trillion in fifty years and $13.78 quadrillion in one hundred years, about $3.5 million for every man, woman and child in the Third World. Their debt is 50 percent greater than this and has been compounding at twice that rate — over 20 percent per year between 1973 and 1993, from $100 billion to $1.5 trillion [only $400 billion of the $1.5 trillion was actually borrowed money. The rest was runaway compound interest]. If Third World debt continues to compound at 20 percent per year, the $117 trillion debt will be reached in eighteen years and the $13.78 quadrillion debts in thirty-four years.

Instead of developing the Third World, it is clear that the Third World dependency is a policy of the major powers, and the world leaders insist on restricting consumer buying power in the Third World as a price for what is an essentially maintenance loan. Meanwhile, these same leaders easily agreed that West Germany must put $1 trillion into the former East Germany to simultaneously build industry, social infrastructure, and markets. And when the relatively poorer countries of Greece, Portugal, and Spain wanted to join the Common Market, these leaders “implemented a 15-year plan which included massive transfers of direct aid, designed to accelerate development, raise wages, regularize safety and environmental standards, and improve living conditions in poorer nations.”... Emerging former colonies receive no such care for their economies to become viable

EFFECTS

The debt crisis of 1982 was the most serious of Latin America's history. Incomes dropped; economic growth stagnated; because of the need to reduce importations, unemployment rose to high levels; and inflation reduced the buying power of the middle classes.
In response to the crisis most nations abandoned their import substitution industrialization (ISI) models of economy and adopted an export-oriented industrialization strategy, usually the neoliberal strategy encouraged by the IMF, though there are exceptions such as Chile and Costa Rica who adopted reformist strategies. A massive process of capital outflow, particularly to the United States, served to depreciate the exchange rates, thereby raising the real interest rate. Real GDP growth rate for the region was only 2.3 percent between 1980 and 1985, but in per capita terms Latin America experienced negative growth of almost 9 percent. Between 1982 and 1985, Latin America paid back 108 billion dollars. The debt crisis is one of the elements which contributed to the collapse of some authoritarian dictatorships in the region, such as Brazil's military regime and the Argentine bureaucratic-authoritarian regime.

CONCLUSION:-

It is concluded that In order to achieve such a partitioning, there has to be a consistent set of accounts linking the deficits (flows) with the debt (stocks). In calculating the real rates, the authors use the implicit price deflation for GDP at market prices. The interest rate on government debt is calculated by dividing interest payments during a financial year by the stock of liabilities outstanding at the beginning of the year.

REFERENCE:-

www.wikipedia.org
www.globalissues.com