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Lecture 8

sosc1910 - Lecture 8

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Social Science
SOSC 1910
Nadiah Habib

Lecture8 the oil shocks The oil shocks and the debt crises The oil shocks of the 70s and their aftermath Debt CrisisThis is how the DEBT TRAP came aboutIn 1972 the universal currency standard changed from gold to the US dollar This change prompted a response by OPEC Organization of Petroleum Exporting Countries cartel to substantially raise the price of crude oil per barrel The OPEC cartel did this twice in 1973 and 1979 these are known as the oil shocks of the 70s Globally nations were paying more for oil These shocks precipitated some consequences worldwide All nations had to pay more for oil This was partly to blame for an economic recession in OECD Organization for Economic Cooperation and Development countries mostly 1st world But OPEC had a great deal of savings surpluses from the increase in oil pricesThe oil producing nations were making a great deal of money They needed to make their money work for them The demand for credit by OECD countries declined Commercial banks began to turn their attention to other regions of the world rdand saw a particularly good opportunity in the 3 world and to some extent in Eastern EuropeAs a result commercial and official lending grew substantially in this period And because so much rdmoney was available it was lent at very low interest rates3 world countries were encouraged rdto take advantage of this situation3 world countries were also in desperate need of funds because they were rapidly losing their export markets and had a mounting import bill rdAs a result 3 world countries
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