New on FinoLib · Volume I: Global Economy
My latest article is now live on FinoLib, the free finance library I write: Sovereign Default, Safe Havens and the Great Financial Cities, from Volume I: Global Economy. Read the summary below for the substance of the topic, then continue to FinoLib for the complete treatment.
9.4 When Countries Go Broke — Sovereign Default and the IMF
The idea in plain words
A sovereign default is usually a foreign-currency problem: a government can print its own money but not the dollars it owes, so falling reserves, a sliding currency and fleeing lenders reinforce one another. Sri Lanka’s 2022 default shows the sequence.
Key points
■Sri Lanka’s causes stacked up: chronic twin deficits, heavy commercial and Chinese borrowing, a 2019 tax cut that gutted revenue, COVID’s destruction of tourism and remittances, a fertilizer ban and the 2022 oil spike.
■Reserves fell to days of imports, the rupee halved, inflation hit about 70%, and in April 2022 Sri Lanka defaulted for the first time in its history.
A closer look
A sovereign default is almost always a foreign-currency problem. A government can always print its own currency (at inflation’s price — chapter 0.9: How Currency Is Created Today — and How Much Is Too Much’s hyperinflation), but it cannot print the dollars needed for oil, medicine, and external debt. The crisis mechanics are self-accelerating: reserves (chapter 1.7) drain → the currency slides → imports and dollar debts cost more in local terms → reserves drain faster → foreign lenders flee, and refinancing becomes impossible. Argentina (a serial defaulter across three centuries), Greece (via the euro’s special trap), Zambia, Ghana (both in Section 9.7: The Rest of the World: Capital-Flow Stories from Emerging Markets), and Pakistan’s repeated near-misses all rhyme.
Recap
A sovereign default is usually a foreign-currency problem: a government can print its own money but not the dollars it owes, so falling reserves, a sliding currency and fleeing lenders reinforce one another. Sri Lanka’s 2022 default, IMF program and restructuring show the sequence, with creditors taking haircuts while conditions bite.
9.5 The Safe Havens — Why Small, Stable Countries Hold the World’s Money
The idea in plain words
Small stable countries export trust: Switzerland’s secrecy has given way to automatic information exchange, Luxembourg domiciles funds and Singapore hosts family offices.
Key points
■An estimated $10 trillion-plus sits offshore.
■Switzerland’s 1934 Banking Act made revealing a client’s identity a criminal offense; the secrecy era ended through the 2008–09 UBS case, America’s FATCA law and the OECD’s automatic exchange of information from 2017–18, which now covers over 100 countries including…
A closer look
Everything this guide has said about money reduces to trust — and trust, it turns out, can be a national business model. The recipe is consistent: centuries of political stability, courts that enforce contracts against anyone (including the state), policy continuity regardless of which party governs, neutrality in conflicts, skilled multilingual professionals, and — historically — discretion. Countries rich in this recipe attract the world’s nervous money: families in unstable economies, entrepreneurs fearing expropriation, corporations pooling global cash, and, inevitably, those with something to hide.
Recap
Small stable countries export trust: Switzerland’s secrecy has given way to automatic information exchange, Luxembourg domiciles funds and Singapore hosts family offices. Tax havens add shell companies, and the legal lines between tax avoidance, tax evasion and money laundering stay sharp. India’s black-money debate and its automatic data from over a hundred jurisdictions show how this world touches it.
9.6 The Great Financial Cities — A Map of Where Money Lives
The idea in plain words
Finance clusters in a relay of cities because talent, counterparties, law and trust compound together, so somewhere the market is always open. Each city has a specialty.
Key points
■New York prices capital, with the largest stock markets and the deepest bond market; London trades currencies, Singapore and Hong Kong bank Asia, and Dubai bridges East and West.
■London handled about 38% of global FX turnover in April 2025 (BIS), despite losing its EU passporting rights after Brexit.
A closer look
Money is weightless, yet it clusters in a few square kilometers of a few cities — because finance runs on talent, counterparties, law, and trust, and all four compound where they concentrate. The result is a 24-hour relay: as New York closes, Asia opens; as Asia lunches, the Gulf and Europe wake; as London winds down, New York is mid-session. This is the same follow-the-sun logic as the delivery centers of chapter 10.6: From BPO to GCC — India’s Global Delivery Economy — finance discovered it first.
Recap
Finance clusters in a relay of cities because talent, counterparties, law and trust compound together: New York for capital, London for foreign exchange (about 38% of turnover in April 2025), Singapore and Hong Kong for Asia, Dubai as the East-West bridge. Hong Kong’s slide toward Singapore shows that a center’s real asset is confidence in its institutions, which GIFT City must earn.
What the full article covers
In the full article I take you through these sections:
■9.4 When Countries Go Broke — Sovereign Default and the IMF
■9.5 The Safe Havens — Why Small, Stable Countries Hold the World’s Money
■9.6 The Great Financial Cities — A Map of Where Money Lives
It includes a recap, a reveal-on-click quiz and the official sources behind every figure.
Volume I: Global Economy
Read the full article on FinoLib
The complete article, Sovereign Default, Safe Havens and the Great Financial Cities, with every worked example, diagram, quiz and source, is free to read in Volume I, Global Economy on finolib.com.
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