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ANTH 227
Tobias Rees

11/16/12 (Rding 16)  Oil and Debt Crisis -Mid East produces 60% of oil -US=#1 consumer, then China -oil crisis debt crisis (diagram in coursepk) -lender: charges borrow ‚interest‛ on a % of the outstanding loan each yr (private banks, public institutions, IMF, World Bank) -borrower: pays back part of $ borrowed, ‚principle‛ plus interest -Concessional lending: loans at below-market rates of interest or interest free loans & grants to poorer countries -development theory, for infrastructure or stabilization, FDI from MNCS to set up businesses doesn’t create debt -BACKGROUND: 1960s-70s -giant production and consumption -baby boomers -economic activity and growth -Western banks invest little in poorer countries (get concessional lending, ex. IMF, World Bank) -small amts of $, strict conditions, fixed interest rate -wealthy ecos amass surplus $ - low price of oil stability -period of buildup of Eurodollars in West European banks -Oil Price shocks -1970s OPEC cartel decreases oil supply  inc. in oil prices -OPEC revenues skyrocket (‘petrodollars’) -OPEC surplus $ is deposited in Western banking sys -some $ ends up in unregulated offshore banks -Origins of the debt -to recycle Eurodollars & Petrodollars, banks pour loans into OECD ecos -then banks pour loans into NICs & LICs -here, some loans are used for necessary imports/eco expansion BUT.. -some invested poorly ex. military projects (dictatorships?)/luxury goods -Debt Crisis Begins -OECD incomes plunge (are oil consumers)  OECD goes into recession  demand is down for exports from NICs & LICs (don’t need to import as much raw mats) -aid flows dec. to NICs / LICs (global recession, affecting
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