Hoarded cash is king.

PRINCETON The process of official forgiveness of Greek debt has begun.

Germany is determined to resist any debt write offs.

Prime Minister Mikhail Kasyanov, indeed, journeys to Berlin next week in search of support for an interim deal now under negotiation.

Russia's case for relief is strong.

We have met all of the conditions asked by the international community to start the debt relief process, but creditor countries have not yet agreed on the financing.

Most of this is accumulated interest on loans borrowed by rapacious dictators of the past.

Multilateral lenders have long understood the importance of debt relief to poverty reduction.

Spiritual values created and accumulated over centuries were destroyed and erased in a short period of time.

This is hardly the first time I have stressed the need for wholesale debt write downs.

Yes, inflation is an unfair way of effectively writing down all non indexed debts in the economy.

And the accumulated knowledge of microbial physiology and genetics allowed foreign DNA to be introduced into a cell and made to function there.

Germany would do well to remember that it has benefited from debt write downs three times in its history.

Once again, Greece s creditors put the cart before the horse, by insisting that the new loan be agreed before any discussion of debt relief.

At the same time, we must ensure that low income countries use debt relief and aid efficiently.

In 2005, President George W. Bush s administration made it far more difficult for households to declare bankruptcy and write off debt.

New bond issues, following a big debt write down in 1924 (the Dawes Plan), enabled Germany to borrow the money to resume payments.

In such cases, all creditors would be better off with a debt write down than with dissolution.

But it soon turned out that the managers had little time to spend on Nordbanken s core banking business, because they had to focus disproportionately on handling an enormous variety of assets. And every quarter brought new write offs that ruined efforts to rebuild the bank s reputation and its employees morale.

Europe s debt problems should, in fact, still be quite manageable provided the requisite write downs and debt restructurings are implemented.

And every quarter brought new write offs that ruined efforts to rebuild the bank s reputation and its employees morale.

What the Kirchners have done well is to use the wealth gained from exports to strengthen the economy and improve conditions for the middle and lower classes.

Japan, for example, is starting to experience a huge retirement bulge, implying a sharp reduction in savings as the elderly start to draw down lifetime reserves.

Since all of the accumulated debt is denominated in euros, it makes all the difference who remains in charge of the monetary union.If Germany left, the euro would depreciate.

But, despite its new vigor, the benefits of recovery could prove to be short lived unless a sustainable and cooperative growth path is found.

Europe s debt problems should, in fact, still be quite manageable provided the requisite write downs and debt restructurings are implemented.

We have met all of the conditions asked by the international community to start the debt relief process, but creditor countries have not yet agreed on the financing.

This lifted manufactured exports around the world and kept inflation down, which in turn boosted demand for energy and raw materials from the developing world, pushing up commodity prices and benefiting many poor countries. The savings generated in East Asia and the major oil exporters have increased global liquidity, helping to finance the US current account deficit, which has now reached unprecedented levels.

In the Greek case, creditors have yet to accept the need for write offs, and European governments have provided them with no incentives to do so.

Third, it can complete the process of debt relief for countries that have not received it, and help protect poor countries from predatory commercial creditors.

The second major shock came with Argentina's currency collapse of 2002 3, after which Argentina's government demanded an extremely large debt write off.

America has a special procedure for corporate bankruptcy, called Chapter 11, which allows a speedy restructuring by writing down debt, and converting some of it to equity.

The level of debt relief will be even greater once the World Bank and the African Development Bank finalize their own programs in the months ahead.

The debt GDP ratio was expected to top out at 150 absent the substantial write down of privately held debt, which was deemed unnecessary, the ratio would have been close to 250 .

The endgame is far more likely to entail a wave of debt write downs, similar to the one that finally wound up the Latin American debt crisis of the 1980 s.

Another post, published in July, explicitly challenged the BoE s official view that as the economy recovers, we can expect non financial companies to begin to run down their cash balances to fund investment.

Even as their country s economy crashed, Greece s new government remained adamant in demanding debt relief without austerity that is, until mid July, when they suddenly agreed to the creditors terms.

If Greece remained in the euro, no relief would be granted a proviso consistent with the German position that debt restructuring for eurozone countries would be illegal.

The People s Bank of China and the Bank of Japan as well as other central banks in Asia are in trouble. They have accumulated vast foreign exchange reserves, estimated at more than 2 trillion.

Their write offs were 2.0 , 4.2 and 2.8 of GDP, respectively, which corresponds to 11 , 16 and 22 of the aggregate equity stock of their banking systems.

But Russia is seeking further relief from the so called Paris Club (made up of western governments) on nearly 40 billion of inherited Soviet debt to those governments.

This spring will show the necessary write offs in the annual balance sheets, but the full truth will not become known before the 2008 balance sheets are published in the spring of 2009.

Another priority is to ensure that low income countries that are striving to meet the MDG s, and which have large financing requirements, avoid a new spiral of indebtedness. The gains from MDRI debt relief will amount to precious little if low income countries emerge from their debt burdens only to start the cycle anew by amassing fresh debt.

In 1919, Keynes produced a grand plan for comprehensive debt cancellation, plus a new bond issue, guaranteed by the Allied powers, whose proceeds would go to victors and vanquished alike.

The gains from MDRI debt relief will amount to precious little if low income countries emerge from their debt burdens only to start the cycle anew by amassing fresh debt.