Just an econ/debt question. Can a country like the US lower its debt held by another country by providing relief aid in a crisis?

National or government debt is generally in the form of bonds, a form of I.O.U with an expiry date and a fixed rate of interest. These instruments are bought and sold on the free market usually at a discount to their face value.

Should a government provide aid to another country in which some of the capitalist owners of these debt instruments make their home, should they be forced to forego the money owed them by that government?

If my neighbour goes on welfare should my bank forgive my mortgage payments?

Just an econ/debt question. Can a country like the US lower its debt held by another country by providing relief aid in a crisis?

"Why, we'd be happy to provide you with medical supplies. All we ask in return is... Kyoto".

And if this sounds like a semi-reasonable idea in desperate times: "That's a nice oil rig you have in front of your shore. Would be a shame something were to happen to it. Care to purchase some insurance?"


So general answer is no, though I don't think it's impossible, just very hard to implement in practice.

Can a country like the US lower its debt held by another country by providing relief aid in a crisis?

Well... kind of, sure. If, for instance, Japan needed $1 million worth of portable generators (a common need after many natural disasters), rather than simply donating the generators, the US could sell them at cost, thereby recouping $1 million which it could later use to cover a bond issue to Japanese investors. Nothing new there.

Of course, the US would be spending $1 million on those generators, so it wouldn't be particularly useful from an economic standpoint. Putting the money aside to collect interest would be more effective.

The only economics-based way to capitalize on the situation for debt reduction would be to captitalize on current market inelasticity. If the US were the only country capable of delivering $1M worth of generators within a short period of time, rather than selling them at-cost, they could instead sell them for closer to Japan's valuation -- say, $20M. That is, they could resort to price gouging. It's illegal in the US -- and, presumably, Japan as well -- but as far as I know there's no international law prohibiting it.

I doubt that's what you were getting at, though.

"I'm sorry, I can't give you CPR until you let me off that £10 I owe you..."

In theory it's possible, but wait until the International Community lays into you, and from a moral point-of-view you're then 'profiting' from someone else's misfortune.

"I'm sorry, I can't give you CPR until you let me off that £10 I owe you..."

In theory it's possible, but wait until the International Community lays into you, and from a moral point-of-view you're then 'profiting' from someone else's misfortune.

the more realistic way it would happen is probably like this:

"As a surgeon, I will gladly perform surgery on you for only the cost of the plane ticket and cost of medication, but I will pay for that now, and rather take the equivalent cost in an equal value percentage of your life savings to be collected or paid at a later date."

So really using the generator example, we'd sell them generators at cost, but instead of paying cash we have them pay in government bonds or some other sort of investment material rather than straight money.

Sure it's possible, if the investing government agreed to it. I think it's unlikely to happen though.

The opposite has happened, in Haiti for instance, we canceled some debt they owed us to aid the country.

Of course it's possible, and it's a brilliant socialist idea. Labour for $$$, seems fair. Maybe Obama's not such a goofball after all.

I tweeted about this thread. Do you have a Twitter @ID?

National or government debt is generally in the form of bonds, a form of I.O.U with an expiry date and a fixed rate of interest. These instruments are bought and sold on the free market usually at a discount to their face value.

Should a government provide aid to another country in which some of the capitalist owners of these debt instruments make their home, should they be forced to forego the money owed them by that government?

If my neighbour goes on welfare should my bank forgive my mortgage payments?

That's a very roundabound and tangential way to disagree with my question. But since I'm [color="#ff0000"]not saying that: if Japan gets assistance from the US, then China forgives Argentina's debt. Then I guess ....no(?).

Of course it's possible, and it's a brilliant socialist idea. Labour for $$, seems fair. Maybe Obama's not such a goofball after all.

I tweeted about this thread. Do you have a Twitter @ID?

No. I don't do twitter.