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# System prepended metadata

title: What should central bank do when national debt is high

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# Introduction (300-400 words)
1. what is debt crises (alone with definitions) 
3. In 21st century, many country has suffered in debt crises 
5. This essay is to discuss why it apppear and what central bank can do to prevent and alleviate the problem. 
# Methodology (300)
use a variety of artical and essay 
why use data, 
read and evaluate other essays writing about debt problems 
look at debt crises in the history and apply conclution in modern situation.

# First, why debt crises appear (1500)
1. theoretically, entities borrow money for investment, and use the interest that it generate to pay back the interest of borrowing (ep. building public school, since external benefic can help firms and indivigual earn more money, and pay more tax)
2. however, some governments borrow money to deal with emergency, or to increase welfare payments (with little external effect) these money cannnot be used to generate more money and pay back loan. These debt will accumulate and finally lead to debt crises. 
3. There are also cases where **Foreign** central bank (Fed. Reserve, ECB or BoJ) dramatically increase their interest rate, leaving country with massive foreign debt unable to pay back load and lead to debt crises (Ep. 1982 Maxico Sovereign default)
# Second, what central bank can do to (2000)
## Ideas for solving debt problems
Debt are debt, they will not disappear, so basically, what can be done is either let lenders receive less money (using negative real interest rate or default) or borrowers pay back the money (by distributing debt to later years or cut cost). Practically, there're 2 kinds of solution to solve the debt problems, the firsk kind is to reduce spending, or deflationary fiscal policy, but  usually it is hard for second-world countries to do so. The second kind is to print money(Quantitative easing) or reduce interest rate, the so-called reflationary monetary policy. But a balance between debt control and inflation control. 
## Specific plan

### For interenal debt 
1. enable governments to pay back load they borrowed from internal banks
* Printing out money may result in inflation, lowering interest rate may also lead to inflation
* Try to use math to find a better point. 

### foreign debt 
1. Reduce trade deficit --> so the sovereign can save some foreign currency for paying off debt
* better using moneytary policy to devalue currency, as import restriction may result in heavier losses (ep. pakistan)
* (To avoid being list as currency manipulator, the government can swap currency with another (poor) country and both country sell off currency they get from swap (However, WTO are more 'permissive' to third world countries and they are somehow allowed to manipulate their exchange rate))
* reduce interest rate can also devalue currency. (keep it short as already stated in alevel)
~~2. Letting IMF help usually cannot solve the problem(if I can reasoning that)~~

# Third, Case Study: Turkey (1000)
![From https://data.tuik.gov.tr/Bulten/Index?p=Consumer-Price-Index-May-2023-49654](https://i.imgur.com/NTISPkZ.jpg)




