What happens if a country goes bankrupt
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16-09-2012, 06:03 PM
RE: What happens if a country goes bankrupt
This article explains it really simple with less big words http://www.npr.org/2011/10/09/141195893/...s-knocking

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16-09-2012, 06:30 PM
RE: What happens if a country goes bankrupt
I'd imagine they'd just print more money.
In failing to do that I guess just default on payments and stop paying creditors.
The currency would lose all value. Nobody would lend money to them, business would get out of dodge. I'd be a disaster, I would think the whole country would have to effectively start from scratch.

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16-09-2012, 06:35 PM
RE: What happens if a country goes bankrupt
(16-09-2012 06:30 PM)earmuffs Wrote:  I'd imagine they'd just print more money.
In failing to do that I guess just default on payments and stop paying creditors.
The currency would lose all value. Nobody would lend money to them, business would get out of dodge. I'd be a disaster, I would think the whole country would have to effectively start from scratch.

NO! printing more money leads to inflation and it's even worse than no paying at all... the second part is what actually happens Sad

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16-09-2012, 06:42 PM
RE: What happens if a country goes bankrupt
(16-09-2012 06:35 PM)nach_in Wrote:  
(16-09-2012 06:30 PM)earmuffs Wrote:  I'd imagine they'd just print more money.
In failing to do that I guess just default on payments and stop paying creditors.
The currency would lose all value. Nobody would lend money to them, business would get out of dodge. I'd be a disaster, I would think the whole country would have to effectively start from scratch.

NO! printing more money leads to inflation and it's even worse than no paying at all... the second part is what actually happens Sad

Yea I know it leads to inflation but sometimes it may be best to have a little bit of inflation then risk defaulting on debt payments.
Plus, inflation going up half a percent or whatever looks better all round (and especially to voters) then defaulting on debts.

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16-09-2012, 06:52 PM
RE: What happens if a country goes bankrupt
(16-09-2012 06:42 PM)earmuffs Wrote:  
(16-09-2012 06:35 PM)nach_in Wrote:  NO! printing more money leads to inflation and it's even worse than no paying at all... the second part is what actually happens Sad

Yea I know it leads to inflation but sometimes it may be best to have a little bit of inflation then risk defaulting on debt payments.
Plus, inflation going up half a percent or whatever looks better all round (and especially to voters) then defaulting on debts.

I guess it may depend on the importance of the debt and the overall economic situation, the US dollar may afford some inflation in order to pay the US debt I guess.
In here the default was actually asked for and welcomed by the population, in general we felt cheated (and actually managed to successfully repudiate part of our debt because it was illegitimate) so we wanted to send to hell the IMF and the world bank. Also, in a country with an economic crisis the currency is (usually) already devalued so printing money isn't a viable solution and turns out it complicates things even more.

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17-09-2012, 08:03 AM
RE: What happens if a country goes bankrupt
Thanks for the replies. Smile

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17-09-2012, 08:56 AM
RE: What happens if a country goes bankrupt
(16-09-2012 06:42 PM)earmuffs Wrote:  
(16-09-2012 06:35 PM)nach_in Wrote:  NO! printing more money leads to inflation and it's even worse than no paying at all... the second part is what actually happens Sad

Yea I know it leads to inflation but sometimes it may be best to have a little bit of inflation then risk defaulting on debt payments.
Plus, inflation going up half a percent or whatever looks better all round (and especially to voters) then defaulting on debts.

If you print more money, the money you are printing becomes less valuable. It doesn't solve anything.

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17-09-2012, 02:12 PM
RE: What happens if a country goes bankrupt
(14-09-2012 09:52 AM)Vosur Wrote:  I was wondering about what would happen to the USA and any country basically, if they go bankrupt and they still have to pay the money back?

I think it is possible that because the USA is such a large and complex economic superpower that the government could default without restitution. However, it has to be understood that when a country, or any other political district goes bankrupt, it is just like any other organization that fails, and the primary problem is the social agreement (constitution, charter) that organizes the government.

So when the people of the USA realize that the government is economically inefficient because the constitution is inefficient, and that the ultimate solution is not by changing the political faction ideology, but a complete overhaul of the organization and decision making, then we will experience corrective change.

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17-09-2012, 02:18 PM
RE: What happens if a country goes bankrupt
(16-09-2012 06:30 PM)earmuffs Wrote:  I'd imagine they'd just print more money.

That would be QE3, as commenced by Chairman of the Federal Reserve Ben Bernanke last Friday morning.
(16-09-2012 06:30 PM)earmuffs Wrote:  In failing to do that I guess just default on payments and stop paying creditors.
The currency would lose all value. Nobody would lend money to them, business would get out of dodge. I'd be a disaster, I would think the whole country would have to effectively start from scratch.
That would be a new constitution - right???

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17-09-2012, 04:17 PM
RE: What happens if a country goes bankrupt
(17-09-2012 08:56 AM)Logica Humano Wrote:  
(16-09-2012 06:42 PM)earmuffs Wrote:  Yea I know it leads to inflation but sometimes it may be best to have a little bit of inflation then risk defaulting on debt payments.
Plus, inflation going up half a percent or whatever looks better all round (and especially to voters) then defaulting on debts.

If you print more money, the money you are printing becomes less valuable. It doesn't solve anything.

Yes I am aware of the definition of inflation.

Quote:it has to be understood that when a country, or any other political district goes bankrupt, it is just like any other organization that fails

Well not exactly.
When a business fails it goes out of business, that's it, the end. Workers lose their jobs and go else ware.
When a government fails the government can't go any ware in the sense that you can't have a country without a government and so it simply continues to operate.

That countries economy may now be in the crapper, but the government is still there.

Quote:That would be a new constitution - right???

No, all that sort of thing would remain (though it may change). I'm saying economically it would need to start again. It would need to rebuild trust, rebuild trade etc..

Like take Iceland for example. Nobody is going to want to do business with Iceland because they went tits up. But slowly and surely as confidence in the Icelandic economy increases business and investment will pick up.

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