Coleman Church

strict austerity because how did they get themselves in those problems in the first place right um a certain a distinct lack of austerity living beyond their means correct so you know that's not that's not uh it's not particular to emerging markets countries all sovereign all sovereigns do that right everyone in the west is doing that as well now right um living beyond their means

But some of us like the United States are able to run what's called counter-cyclical monetary policy because we have a reserve currency.

So we have a special privilege to be able to maybe be somewhat more profligate than others, but the money runs out a lot faster in emerging markets countries when you can't finance your debt and you have a dual crisis of both your currency and your interest rates

running out of control.

And at that point, you've got nowhere to go other than to your friends in DC or Brussels and ask for the backstop.

But in return for the backstop, you need to make some promises about how you're going to conduct your business going forward.

And as you can imagine, cutting expenses, raising interest rates, slowing the economy doesn't generally get people reelected.

Exactly.

That's probably a little more euphemistic than I would say.

Yes, that's one factor, but there are other factors at play as well.

I mean, there's hard bailouts and soft bailouts, so I couldn't really put a number on it.

How many are running an IMF program right now?

It would have to be in the dozens.

How many strict bailouts?

I really don't know off the top of my head.

I mean, we can go through the, we can go through obviously Mexico, Argentina, excuse me, Argentina, um, in the, in the, in the Asian crisis, there were a whole host of Asian countries that had to post up.

Um, so there's, there's the hard bailouts and then there's like the softer bailouts are sort of coming back, staying on the, staying on the, the teat, so to speak.

Who makes money from this?

uh who makes money from this so the imf theoretically makes money uh from the interest on the loans but it's typically below market loans so it's it's not a real profit motive um banks make money from this from facilitating the debt so the trading of it the issuing of it the fees of issuing of it um

investors make money um from higher interest rates obviously um and then there's a subset of investors like distressed debt investors that will um buy a bunch of defaulted uh defaulted paper sit on it and then do workouts like the most the most