This research examines the international debt crisis. International debt is the external debt owed by a country either a country's government or entities within that country. An external deficit develops for a country when the claims of foreign entities on the country's economy exceed the claims of entities in that country on the economies of other coun tries. A country's external debt is comprised of loans to both government and private sector organizations in the country. Loans to government entities involve sovereign risk, while loans to all other entities involve enterprise risk.
Loans involved in a country's external debt are extended by other governments, by international organizations (primarily the International Monetary Fund and The World Bank), and by private sector lenders in other countries (primarily banks, but also by investors who buy bonds and other debt obligations). The International Monetary Fund (IMF), however, plays a special role in this loan activity, because it, for the most part, establishes the rules of the game for all parties, as well as extending loans on its own.1
1R. Grosse, and D. Kujawa, International Business (Homewood, Illinois: Richard D. Irwin, Inc., 1988), 174.1
The world's press provides a continuing stream of reports relative to the external debt of developing countries. Little has been reported, however, on (1) the emergence of the United States (US) as a debtor nation in 1985,2 (2) the growth of the American external deficit to the point where the US has the largest external deficit of any country,3 and (3) the potential for the US external deficit to either equal or exceed that of all other countries combined by some point in the early 1990s.4 Because of the significance of the American external deficit for the US, and because of the importance of the American econ omy within the international economy, the American external debt is considered in this examination of ...