The pegging of a country’s public debt to another currency, currently practically to the USD or EUR. The purpose of the measure is to provide security to domestic and foreign subscribers in the event of high inflation or devaluation of the domestic currency. However, if (as in Brazil in 2002) the holders of such indexed bonds have doubts about the government’s ability to meet its obligations in the foreign currency (xeno currency), they sell their bonds en masse. This depletes the state’s currency reserves and drives it into national bankruptcy; the financial system as a whole collapses. – See Crash, Run, Sovereign Debt, Effects, Sovereign Debt-Interest Rate Relationship.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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