International indebtedness, interest rates and inflation

P. MANES

Abstract


The work establishes that international indebtedness, as well as domestic government and corporate indebtedness, tend to degenerate, and then become self-feeding, when interests cannot be paid out of the return on the capital employed but are paid out of new borrowings. Furthermore, such a degeneration can be the farther extended, the greater the bank intermediation in medium and long term lending and the more fully the banking system is integrated. The author concludes that the outcome of this process must be inflation, which cannot be overcome through high interest rates since they feed higher indebtedness.

 

JEL: F34, E31, E43


Keywords


International indebtedness, interest rates, inflation

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DOI: https://doi.org/10.13133/2037-3643/10745

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ISSN 2037-3643


Reg. Tribunale di Roma n.377/2009 del 19/11/2009