10/YOUR MONEY OR YOUR LIFE!
was transformed to the benefit of the North's private banks, with
the complicity of the governments in question. This was done
through the joint intervention of US government officials (the
Baker and Brady Plans), the cartel of private lender banks (the
London Club), the IMF and the World Bank. The banks signifi
cantly reduced the burden of these debts in their portfolios. They
protected themselves from bad debts by taking advantage of
various tax exemptions and cuts granted to them by most
governments of the North for the bad part of their portfolios.
Since the beginning of the 1990s, the North's private banks only
make short-term and high-interest loans, when they loan at all.
Indeed, much like other players in the financial markets
(pension funds, mutual funds, insurance companies, and so on),
they primarily purchase bonds and other paper issued by some
of the biggest debtor countries (Mexico, Brazil, Argentina and
Turkey) and guaranteed by the governments in question. This
phenomenon has been labelled the 'securitisation' of debt (see
glossary). As a result, private financial players can part with
debt paper as soon as risk appears, or when they feel their
investment can yield more in another sector or in another
country altogether (Chapters 5, 14 and 16). In the wake of the
East and Southeast Asian crisis, the big private financiers and
the IMF have obliged the governments in question to nationalise
a significant proportion of the debts of their private companies
and to issue government bonds on international financial
markets. They have been forced to do this in order to ensure the
repayment of emergency loans made by the major credit insti
tutions under the auspices of the IMF. Broadly speaking, the
Asian crisis is being handled in the same way as the 1980s Latin
American debt crisis. The process of 'securitisation' has been
given a major boost as a result. The adjustment now being
imposed on the peoples and economies of East and Southeast
Asia is just as brutal as what was done in Latin America, if not
more so. If you look specifically at the pace at which privatisa
tion is meant to take place, at the huge leap in unemployment
and at the partial loss of national sovereignty, it becomes clear
that the 'adjustment' is taking place much more swiftly than at
the beginning of the 1980s in Latin America.
3 7. The net result is that debtor countries are much more vulnerable
than before; their debt can be easily sold off. Overnight, these