1. Windfall oil profits cycled through Wall Street and industrial-world banks, combined with unilateral US refusal to honour its debts under the gold standard, the substitution of its nationally controlled dollar as the world’s exchange-value base, and the rise of the external “Eurodollar” currency market, vastly escalated money supplies;

2. Decoupled money tides of unproduced wealth were then released into the world to be lent and leveraged to approved third-world dictators for their luxury, US armaments to repress their people in favour of foreign investors, and expatriation of the loaned money back (including rising narco fortunes) to the Wall Street and private transnational financial sectors which encouraged the loans; and

3. Debt-service charges far exceeding the borrowed sums were from then on extracted from the world’s poor societies locked in dictatorial poverty - with their citizens seeing little or nothing of the debt money that they have been forced to pay back since at compounding interest up to over 20% annually.

Two central facts in particular are repressed here which nullify the legitimacy of the debts and their continuing “service charges”. The first is that the debt-service payments have typically already exceeded the loaned sums. The second is that the US’s own post-Spanish War doctrine of “odious debt “ and the principles of national sovereignty it self justify the legitimate repudiation of debt contracted under oppression or against the will or the consent of the people indebted The combination of these two general facts - already repaid debt and odious debt to begin with - more than justify complete debt repudiation by the governments so affected. Collective debt repudiation by highly indebted third world countries is not something Wall Street and the US financial empire would like. But over 90% of the rest of the world would, with the vast majority uplifted. No armed invasion could reverse such a tide of international public opinion. It is time to stop feeding the Beast.

John McMurtry, FR. S. C. Prof of Philosophy, University of Guelph

1. “G-8 Locks World’s Poor into Debt Crisis”, China Daily, August 4, 2001.

–from Economic Reform, September 2001

A Conference to Tame Financial Speculation

Robin Round

This October in Vancouver, leading members of the academic, non-governmental, trade union, institutional and political communities from around the world will gather to talk about tax shifting. In an age of financial market instability, they’ll be talking about a means to help stabilize exchange rates and prevent future crises. At a time when poverty is on the rise globally and donor fatigue is rampant, they’ll be talking about a significant new source of public finance for world development. They’ll all be talking about currency transactions taxes.

In 1978, Nobel prize-winning economist James Tobin proposed that a small world-wide tariff (1%) be levied by major countries on all foreign exchange transactions in order to “throw some sand in the wheels” of speculative financial flows.

A primary difference between speculative and legitimate trade transactions is the speed at which they occur. Investors in the productive economy have medium to long time horizons. Speculators, on the other hand, are profiting by the daily, hourly and minute to minute fluctuations in interest rates and currency values. Over 80% of all speculative transactions occur within 7 days or less; 40% occur in two days or less. Tobin’s tax would automatically penalize the short-horizon exchanges by eliminating the small margins speculators profit from, while negligibly affecting the incentives for longterm capital investments.

Further, by making crises less likely, the Tobin-type tax could help avoid the social devastation wrought by them.