Reference no: EM132258410

Please paraphrase this paragraph

"As the reference value rises and falls, so does the currency pegged to it. Many developing economies and some emerging markets use this system today. For example, China pegs its currency to the value of a basket of currencies, and Belize pegs the value of its currency to the U.S. dollar. To maintain the peg, the governments of these countries intervene in currency markets to buy and sell dollars and other currencies, in order to maintain the exchange rate at a fixed, preset level. A foreign debt crisis arises when a national government borrows an excessive amount of money, either from banks or from the sale of government bonds. For example, China's total foreign debt now exceeds $200 billion. However, the debt is manageable because China has a huge reserve of foreign exchange. By contrast, Argentina's foreign debt has reached roughly 150 percent of the country's GDP. In an effort to pay its debt, Argentina must use financial resources that it might have invested instead in important national priorities. Indebted governments draw huge sums out of their national money supply, reducing the availability of these funds to consumers and to firms attempting to finance business activities ".