What Was Learned from the Latin American Debt Crisis?
INTERVIEWER: We talked a bit about the Latin American debt crisis. When did you first grasp the full significance of that? PAUL VOLCKER: This had been building up over a period of time. It followed the first and second oil crisis, when the oil producing countries had a lot of money and the poorer countries were particularly hard hit. The banks were flush with cash in the ’70s because the oil-producing companies gave them cash. They were looking for places to lend. They decided Latin America in particular, but other developing countries, [too, were a] good outlet for money. There was a lot of competition in lending money and a great laxity in credit standards. And you could see this building up, but it was hard to do something about it. The political climate was not such that you could take any drastic action. This was generally considered good; it promoted economic development in the developing world. But you worried about it. Arthur Burns, one of my predecessors, worried about it a lo
