Word: defaulting
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...concern that pervaded a meeting qf the TIME Board of Economists held in New York City last week to survey the economic outlook for the remainder of 1982 and 1983. Dominating the discussion was the precarious state of the world's finances and the damage that a loan default by Mexico, Poland or any of a dozen other large borrowers might do to the international banking system. The economists worried about whether those countries could pay their debts, and also what impact their shaky positions might have on growth and inflation...
Greenspan was afraid that domestic politics might eventually compel an economically struggling borrower to default on all its loans, encouraging other countries to follow suit. That, in turn, would confront Western finance officials with a cruel choice. On the one hand, the lenders could wipe the worthless loans off their books and invite a worldwide financial contraction because of dwindling monetary reserves. On the other hand, central banks could attempt to avoid such a massive depression by buying up the defaulted loans. That would keep the international financial system functioning, but it would also cause a wild new burst...
...while none of the moneymen faced the immediate prospect of hanging, a few must have wondered whether they were in for a bit of financial drawing and quartering. For, as unsubstantiated rumors of everything from a cash squeeze on a major West German bank to a possible pending loan default by Bolivia swirled about, the somber-spirited financiers found themselves wrestling with the difficult task of trying to shore up sagging confidence in the world banking system...
Knowing that a Mexican default could destabilize the entire global monetary system, the central banks of the leading industrial countries last week announced a new short-term loan of $1.85 billion. Continued unease about Mexico's finances and a rumor that Argentina is also close to default helped send the price of gold in London up $50 in two days last week...
American banks hold almost a third of Mexico's foreign debt. Should Mexico go into default, several institutions would be hard hit, including Citibank and Bank of America, which each loaned the Mexicans as much as $2.5 billion...