Debt politics after independence: the funding conflict in by Thomas Millington

By Thomas Millington

Tracing the origins of modern Latin American debt difficulties to the monetary politics of the rapid post-independence interval, Thomas Millington argues that the failure of Latin American states to fund their inner bills made them depending on international credits. destructive political and social results stay at the present time, he says, and means that debt administration may still movement towards a funded debt aim and clear of the floating debt framework that's endemic in Latin the US. He makes use of the investment event in Bolivia to demonstrate his thesis.

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By Thomas Millington

Tracing the origins of modern Latin American debt difficulties to the monetary politics of the rapid post-independence interval, Thomas Millington argues that the failure of Latin American states to fund their inner bills made them depending on international credits. destructive political and social results stay at the present time, he says, and means that debt administration may still movement towards a funded debt aim and clear of the floating debt framework that's endemic in Latin the US. He makes use of the investment event in Bolivia to demonstrate his thesis.

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They were made negotiable for paying off state and clerical taxes and for buying state-owned properties. The main difficulty with short-term loan bonds was that the emergency outlasted the running times on the bonds and the states were pressed to pay off the principals before the emergency drain on revenues had passed. In contrast, the purpose of long-term debt was to organize large portions of the population into a voluntary savings program. Whether a state's creditor class should be composed of holders of shortterm debt, with the attendant speculative and commercial uses, or of a larger cross section of the population whose savings habits are being cultivated by the state, depends among other things on the state's credibility.

Parliament's authority was required for the raising of loans and for earmarking duties and taxes to meet the interest on a debt that was becoming permanent. Before the first funding legislation in 1693, Parliament's involvement in public borrowing had been sporadic, mainly because most of the debt was floating. 7 But the British experience in funding differed in one crucial respect from the Latin American situation. The British state was able to rely on its central bank to cash out its floating debt paper (mostly Exchequer bills) and to accept from the state annuity payments for the amount of capital retired.

Adams did not accept the argument that funded debt was any more progressive than nonfunded debt. In fact, funded debt was worse because it added the problem of big government bureaucracy, which he saw as antidemocratic; funded debt smacked of a European statism that was inimical to the needs of a "commercial democracy" such as the United States. We will return to some of Adams's arguments in chapter 5 in the light of the foregoing analysis of the Latin American funding experience. 4 The question of whether the domestic holders of state debt paper are concentrated in certain sectors of society or whether they are broadly distributed depends, in the first place, on whether they are competing with foreign holders for the state's debt.

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