After reading about the reserve system and the burden of debt, I am struck by the amount of financial risk that countries and private creditors undertake financing projects. The Stiglitz reading suggests that the IMF puts countries in a worse position overtime through some miscalculated advice. Critics often site that IMF conditions for debt relief are ill suited for the particular country and essentially worsen any economic downturn or depression. Furthermore, the structure of the IMF and the international loan-able funds market allows debt contracts to be strongly influenced by fluctuations in interest rates and exchange rates. Additionally, Stiglitz states that countries should rely more on their own savings to finance capital accumulation and infrastructure investment, by encouraging a higher national savings rate.

Those points seem to be well justified by the evidence but is it not true that when countries invest in other countries either through loan-able funds or direct investment, that everyone will benefit creating a market suitable for trading based on the idea of comparative advantage. Developed countries need the developing world to sell their products and the developing world needs the developed world to help finance their development. Nonetheless this idea has recently come under assault by extremist groups wanting isolationist type policies in their respective country/region. (ARTICLE) This article summarizes how currently China is coming under attack for its increased investment in Ethiopia. This is because Chinese companies and the government of China have been investing in projects and regions where there is an on going physical struggle between ethnic and religious groups. Now not only are the Chinese facing a financial risk on their investment but also a physical risk. The saying that the countries that “trade together won’t go to war with each other,” might be true for now. However with nations that are partitioned along racial and ethic divides could change this policy. This is because these groups propagate violence within the region and will caused developed countries to think twice about investing in unstable regions.