Chapter 1532 - 49: Set Up

Chapter 1532: Chapter 49: Set Up

"However, this compromise is more about East Africa fulfilling its responsibility as a global power. Thus, the debt cannot be eliminated, but the terms and scale for repayment can be relaxed."

East Africa’s "betrayal" instantly triggered an explosive reaction from the Americans. Smith nearly pointed at Gers’s nose, saying, "You East Africans are actually traitors!"

After all, to both the United States and East Africa, European countries right now are like a bunch of "debtors". As creditors, the two nations should unite, yet East Africa has made concessions to these European debtors on its own initiative, clearly placing the United States in an awkward position.

Indeed, East Africa purposely played the United States. Although East Africa is also a creditor nation, the debt Europe owes to East Africa is almost negligible.

The logic of debt between East Africa and Europe can actually be described with ’borrow early, repay later’. Before World War I, East Africa borrowed heavily from Europe, with little consideration for economic principles back then, borrowing as much as possible based on capability. After the war broke out, East Africa repaid its debts to European countries through goods and industrial products, completing a leap in industrialization.

The United States, however, had a different scenario. Although they owed Europe quite a bit before the war, a large portion of it was reflected by European investments in the United States.

During the war, due to the advanced and mature financial system of the United States, European countries were able to borrow smoothly from the U.S., to the extent that East Africa became a de facto subcontractor for the United States. European countries borrowed from the U.S., which would then pay deposits to East Africa to procure goods directly shipped to Europe.

This is one crucial reason why the United States could become the world’s leading creditor nation post-war. Simply put, under the free market, the U.S. could ignore the risks and keep operating, while East Africa, due to a less mature financial sector and tighter governmental regulation, could effectively hit the brakes.

In reality, East Africa’s later external lending primarily focused on regions like South America, rather than the then most profitable Europe.

During the war, European countries sought ultimate victory, leading them to indiscriminately and heavily borrow from abroad. After all, compared to borrowing, dying would be meaningless.

Undoubtedly, their total borrowed amount exceeded their repayment capacity, ensuring that many European countries would become debtors post-war.

Clearly, East Africa and the United States could not "arm-twist" Europe for debts. Thus, in the latter stages of the war, East Africa realized Europe’s debt issue was a massive headache, while American financial institutions had no such worries.

After all, commerce and finance have always favored the bold. To pursue wealth, the merchants and financial institutions in the free-market would plunge ahead fearlessly.

Such an approach can’t be deemed wrong. After all, each successful big enterprise is built upon many failed startups, with success trailing a path of downfalls.

In this respect, East African merchants are not as pure as American ones. But this is understandable, given that East Africa’s complete market liberalization happened only a decade ago, lacking a stable long-term commercial environment.

In summary, the United States faces the biggest headache dealing with Europe’s debt issue. There was once a German named Adolf like the Russian Labor Party who refused to repay debts, choosing instead to eliminate creditors, but the ending was ugly.

Yet if all of Europe were to emulate Adolf’s approach, considering Europe’s current overall strength, there truly isn’t a single country that could stop him.