The Whale That Exploded - Waiting for the Last Straw

The articles:

1) http://www.primeeconomics.org/articles/when-will-the-next-financial-crisis-start-what-straw-will-break-the-finance-sectors-back 

2)  http://www.primeeconomics.org/articles/545z2v5l4fms3cvfp99ozq62vdc8p7

3)  http://www.primeeconomics.org/articles/is-brexit-moment-a-lehman-moment-fear-factor-in-financial-crises 

4) http://www.primeeconomics.org/articles/its-the-private-debt-stupid  

5)  http://www.primeeconomics.org/articles/bad-bank-proposal-for-india 

6)  http://www.primeeconomics.org/articles/debts-that-cannot-be-paid-will-not-be 

7)

http://www.primeeconomics.org/articles/did-this-straw-break-the-finance-sectors-back

8) http://www.primeeconomics.org/articles/are-we-heading-towards-a-synchronised-global-slowdown 

9) http://www.primeeconomics.org/articles/thus-spoke-the-bond-market

10) http://www.primeeconomics.org/articles/the-end-of-super-imperialism  

11) http://www.primeeconomics.org/articles/dealing-with-the-overhang-of-non-financial-private-debt 

12) http://www.primeeconomics.org/articles/triggering-a-global-financial-crisis-covid-19-as-the-last-straw

I was interviewed on Imran Kahn's international appeal to foreign creditors

My answers are in black.

This week Pakistan's Prime Minister Imran Khan issued an international appeal asking the developed countries to wave off debt of struggling economies such as Pakistan. He says that the impact of the coronavirus will make things difficult for developing countries in coming months. 

I've been asked to write a story, which briefly explains if this is even possible.

It is not only possible but also a must. There is no alternative. TINA!

Is there any precedent for something like this where the developed countries have deferred or waived off part of their debt to poor countries in wake of calamity?

History is full of examples. Just  look at West Germany as one example. How do you think West Germany has become one of the wealthiest countries after what happened to her during World War II? At the time, Germany was one of the largest debtors to foreign creditors. Leaving aside massive cancellations (about 90%) of domestic debts as part of the German Currency Reform of 1948 which made West German citizens and corporation to start from an almost clean slate, the London debt agreement of 1953 relieved West Germany from 51% of her foreign debt.

The London debt agreement between West Germany and 20 external creditors wrote off 46% of her pre-war debt and 52% of its post-war debt. The remaining was converted into long-term low-interest loans with a five-year grace period before repayment. Furthermore, Germany had to repay its debt only if it ran a trade surplus, and all repayments were limited to 3% of annual export earnings. Then came the economic miracle of West Germany. Why can we not do something similar for poor countries under current conditons? We must.  

What would happen if countries like Pakistan which are dependent on exports to EU and US see a slowdown? What if remittances from the middle east go down?

Isn't answer to these questions obvious? Horrible things would happen. Imran Kahn explained to the foreign creditors what would happen very nicely. What more can I say?

Do you think Khan has a strong case here?

He has a very strong case. All developing countries should line up behind him and ask for debt relief from their foreign creditors including official creditors such as the IMF and the World Bank. Not only their public debts to their foreign creditors, but also the foreign debts of their non-financial private sectors must be restructured and large parts of all these debts must be written-off. As Michael Hudson always says, debts that cannot be paid will not be, so we better cancel those that cannot be paid.