Results 1 to 13 of 13

Thread: What does it mean when a country 'goes bankrupt'?

  1. #1
    Senior Member
    Join Date
    Sep 2003
    Posts
    434
    Thanks
    0
    Thanked
    5 times in 3 posts

    What does it mean when a country 'goes bankrupt'?

    Greece's dire financial situation has been in the news a lot recently.
    If the country 'goes bankrupt' what does it mean to the Greek people? Does it mean that public employees won't get paid? I realise it would mean that Greece couldn't pay back the money it has borrowed, but what then? Does the borrowed money get 'written off'?
    Have any other countries gone bankrupt in recent years? What about Iceland, what happened there? And Zimbabwe?

    Lots of questions here highlighting my total ignorance of world monetary affairs. If anyone can explain these matters in simple terms I would greatly appreciate it.
    Last edited by Ceefer; 03-05-2010 at 05:09 PM. Reason: sp.
    *
    Intel Core 2 Duo E8400 Socket 775 (3.0GHz), stock cooler, Gigabyte GA-EP43-S3L iP43 Socket 775, OCZ 4GB (2x2GB) DDR2 1066MHz/PC2-8500 Gold Memory, PowerColor HD 4870 1GB GDDR5 Dual DVI HDTV Out PCI-E Graphics Card, Seagate 1TB Hard Drive SATAII 7200rpm 32MB Cache, Arctic Power 500W PSU, Hann-G 19" widescreen
    Kitchen Table Browser: Dell XPS M1330 laptop
    On the Road: Alienware M14X laptop

  2. #2
    Senior Member
    Join Date
    Sep 2006
    Location
    Copenhagen, DK
    Posts
    1,882
    Thanks
    64
    Thanked
    99 times in 79 posts
    • Barrichello's system
      • Motherboard:
      • Asus P6T Deluxe
      • CPU:
      • Intel Core i7 D0 920
      • Memory:
      • 6GB Corsair DDR3
      • Storage:
      • 2 x 1TB Samsung F3 Spinpoint
      • Graphics card(s):
      • Gigabyte GeForce GTX 460 Super Overclock 815MHz 1GB NVIDIA
      • PSU:
      • Corsair 750HX
      • Case:
      • Fractal Design Define R4
      • Operating System:
      • Linux/Win 7
      • Monitor(s):
      • 24" Samsung Syncmaster 245b
      • Internet:
      • 50mb YouSee (cable)

    Re: What does it mean when a country 'goes bankrupt'?

    Quote Originally Posted by Ceefer View Post
    Greece's dire financial situation has been in the news a lot recently.
    If the country 'goes bankrupt' what does it mean to the Greek people? Does it mean that public employees won't get paid? I realise it would mean that Greece couldn't pay back the money it has borrowed, but what then? Does the borrowed money get 'written off'?
    Have any other countries gone bankrupt in recent years? What about Iceland, what happened there? And Zimbabwe?

    Lots of questions here highlighting my total ignorance of world monetary affairs. If anyone can explain these matter in simple terms I would greatly appreciate it.
    IMF will step in before a country gets to such an advanced stage. Like what is happening in Greece. Deals are hammered out, and yes public employees will still get paid but new conditions will be applied etc (austerity measures) For example instead of 12 monthly pension payments, Greeks currently get 2 extra "bonus" payments on top, they are looking at suspending this.

    Unlike say personal bankruptcy like we have in the UK when as a person you cant just write off what you owe. A country which required aid at some stage will always be held to account. Greece will still pay this money back, it is still a loan that needs to be repaid.

  3. #3
    jim
    jim is offline
    HEXUS.clueless jim's Avatar
    Join Date
    Sep 2008
    Location
    Location: Location:
    Posts
    10,726
    Thanks
    546
    Thanked
    1,446 times in 1,151 posts
    • jim's system
      • Motherboard:
      • Asus Maximus IV Gene-Z
      • CPU:
      • i5 2500K @ 4.5GHz
      • Memory:
      • 8GB Corsair Vengeance LP
      • Storage:
      • 256GB Crucial M4 + 500GB Seagate Momentus
      • Graphics card(s):
      • EVGA GTX 570
      • PSU:
      • Corsair AX650
      • Case:
      • Silverstone Fortress FT03
      • Operating System:
      • 7 Ultimate x64
      • Monitor(s):
      • 2 * Dell U2212HM
      • Internet:
      • 60Mb Cable

    Re: What does it mean when a country 'goes bankrupt'?

    Quote Originally Posted by Barrichello View Post
    Unlike say personal bankruptcy like we have in the UK when as a person you cant just write off what you owe.
    I don't know about that... if you're a nation then you can effectively do whatever you want. There's not really any "international law" beyond "my army's bigger than yours". I accept that because they're part of Europe and so on then that changes things, but a nation can write off its debts if it wants to - who's going to stop them? Effectively, the only thing the creditor can do in response is declare war, or these days impose restrictive economic barriers - but if you don't care about either of those, then there's nothing to stop you.

    The only example that springs to mind at the moment was when Spain wrote off their debts to the UK in around 1840 because they thought Britain was to blame for their Civil War - I accept that it happened a very long time ago, but it's not hugely different now.

    Desktop (3XS): 7 Ultimate, Silverstone FT03, Corsair AX650, Maximus IV Gene-Z, 2500K @ 4.5 GHz, 8GB RAM, GTX 570, 256GB M4, 500GB Seagate Momentus, 2*21.5" U2212HM, Tannoy Saturn S30
    Desktop 2 (Self-built): 7 Ultimate, CM RC-341, OCZ 400W XStream, GA-MA785GM-US2H, Phenom X4 9600 BE, 4GB RAM, 2TB HD204UI, 128GB Crucial M4, Acer P206HLbm
    Laptop (HP Pavilion DM1): 7 Ultimate, SU2300 1.2 GHz, 2GB RAM, Kingston 64GB SSDNow V
    Server (Self-built): Server 2013, Fractal Design R4, 580W be quiet! BN198, GA-F2A85X-D3H, AMD A8 5500, 16GB RAM, 120GB Samsung 840, 6*4TB Seagate

  4. #4
    Senior Member kalniel's Avatar
    Join Date
    Aug 2005
    Posts
    24,530
    Thanks
    949
    Thanked
    2,217 times in 1,809 posts
    • kalniel's system
      • Motherboard:
      • Gigabyte X58A UD3R rev 2
      • CPU:
      • Intel i7 950
      • Memory:
      • 12gb DDR3 2000
      • Graphics card(s):
      • AMD HD7870
      • PSU:
      • XFX Pro 650W
      • Case:
      • Cooler Master HAF 912
      • Operating System:
      • Win 7 Pro x64
      • Monitor(s):
      • Dell U2311H
      • Internet:
      • O2 8mbps

    Re: What does it mean when a country 'goes bankrupt'?

    Yeah they basically don't pay other countries they owe money to, which results in no-one lending them any more money for a while (or at least, only doing so at incredibly high interest rates).

  5. #5
    Senior Member
    Join Date
    Feb 2006
    Posts
    1,374
    Thanks
    75
    Thanked
    55 times in 49 posts
    • pp05's system
      • Motherboard:
      • MSI 880GM-E41
      • CPU:
      • AMD Athlon II x2 250
      • Memory:
      • 2GB DDR3 1333mhz Module
      • Storage:
      • Kingston
      • Graphics card(s):
      • AMD 880G chipset
      • PSU:
      • Seasonic S12 330W
      • Case:
      • Lian Li PC-60 MIDI Tower
      • Operating System:
      • Windows 7 Home Premium 32bit

    Re: What does it mean when a country 'goes bankrupt'?

    Quote Originally Posted by Ceefer View Post
    Greece's dire financial situation has been in the news a lot recently.
    If the country 'goes bankrupt' what does it mean to the Greek people? Does it mean that public employees won't get paid? I realise it would mean that Greece couldn't pay back the money it has borrowed, but what then? Does the borrowed money get 'written off'?
    Have any other countries gone bankrupt in recent years? What about Iceland, what happened there? And Zimbabwe?

    Lots of questions here highlighting my total ignorance of world monetary affairs. If anyone can explain these matter in simple terms I would greatly appreciate it.
    There is no bankruptcy procedure at international level. At best debt is usually carried forward, or continuosly serviced so that they stay in perpetual slavery.

    Worst that happen is their credit rating is lowered and their access to credit dry up or at higher rates.

    Most recent examples of default were Argentina. That is to say... they held their hands up and said.. we cannot service this debt 80bn+, feeding our people is more important. This is what the west have always done when the debt got too high. Walk away and start again - It is only way to start again. This is what say the US will do at some point in the future.

    This is what African nations should be doing. But despotic leaders are promised a few mercedes and a swiss account if they keep this circus going.

  6. #6
    Senior Member
    Join Date
    Sep 2006
    Location
    Copenhagen, DK
    Posts
    1,882
    Thanks
    64
    Thanked
    99 times in 79 posts
    • Barrichello's system
      • Motherboard:
      • Asus P6T Deluxe
      • CPU:
      • Intel Core i7 D0 920
      • Memory:
      • 6GB Corsair DDR3
      • Storage:
      • 2 x 1TB Samsung F3 Spinpoint
      • Graphics card(s):
      • Gigabyte GeForce GTX 460 Super Overclock 815MHz 1GB NVIDIA
      • PSU:
      • Corsair 750HX
      • Case:
      • Fractal Design Define R4
      • Operating System:
      • Linux/Win 7
      • Monitor(s):
      • 24" Samsung Syncmaster 245b
      • Internet:
      • 50mb YouSee (cable)

    Re: What does it mean when a country 'goes bankrupt'?

    Quote Originally Posted by Barrichello View Post

    Unlike say personal bankruptcy like we have in the UK when as a person you cant just write off what you owe.
    whoops that sentence didn't make sense, what i meant to say is "unlike the UK where you can just declare yourself bankrupt and wipe out your debts"

  7. #7
    Senior Member
    Join Date
    Sep 2006
    Location
    Copenhagen, DK
    Posts
    1,882
    Thanks
    64
    Thanked
    99 times in 79 posts
    • Barrichello's system
      • Motherboard:
      • Asus P6T Deluxe
      • CPU:
      • Intel Core i7 D0 920
      • Memory:
      • 6GB Corsair DDR3
      • Storage:
      • 2 x 1TB Samsung F3 Spinpoint
      • Graphics card(s):
      • Gigabyte GeForce GTX 460 Super Overclock 815MHz 1GB NVIDIA
      • PSU:
      • Corsair 750HX
      • Case:
      • Fractal Design Define R4
      • Operating System:
      • Linux/Win 7
      • Monitor(s):
      • 24" Samsung Syncmaster 245b
      • Internet:
      • 50mb YouSee (cable)

    Re: What does it mean when a country 'goes bankrupt'?

    Quote Originally Posted by pp05 View Post
    Most recent examples of default were Argentina. That is to say... they held their hands up and said.. we cannot service this debt 80bn+, feeding our people is more important. This is what the west have always done when the debt got too high. Walk away and start again
    Indeed Argentina was a complete mess. They did go to the IMF to restructure its debt, as they are considered a privileged creditor, and they have paid back about $10 billion to them last i heard.

  8. #8
    Efficiently lazy shadowmaster's Avatar
    Join Date
    Oct 2006
    Location
    London
    Posts
    3,233
    Thanks
    397
    Thanked
    310 times in 208 posts
    • shadowmaster's system
      • Motherboard:
      • Gigabyte GA-890FXA-UD5
      • CPU:
      • AMD Phenom II X4 965 @ 3.6Ghz
      • Memory:
      • 4GB Corsair XMS3
      • Storage:
      • Kingston SSD V series 64GB + Samsung F3 1TB
      • Graphics card(s):
      • XFX 5870 1GB in Crossfire
      • PSU:
      • BeQuiet 1200W Dark Power Pro
      • Case:
      • Coolermaster Stacker 832 SE
      • Operating System:
      • Windows 7 Home Premium 64bit
      • Monitor(s):
      • 3 x BenQ G2222HDL 21.5inch 1080p
      • Internet:
      • BT Infinity 2

    Re: What does it mean when a country 'goes bankrupt'?

    Ah the IMF, they give with one hand and take with two

  9. #9
    Senior Member
    Join Date
    Sep 2003
    Posts
    434
    Thanks
    0
    Thanked
    5 times in 3 posts

    Re: What does it mean when a country 'goes bankrupt'?

    Where does the IMF get all these mega-billions from?
    *
    Intel Core 2 Duo E8400 Socket 775 (3.0GHz), stock cooler, Gigabyte GA-EP43-S3L iP43 Socket 775, OCZ 4GB (2x2GB) DDR2 1066MHz/PC2-8500 Gold Memory, PowerColor HD 4870 1GB GDDR5 Dual DVI HDTV Out PCI-E Graphics Card, Seagate 1TB Hard Drive SATAII 7200rpm 32MB Cache, Arctic Power 500W PSU, Hann-G 19" widescreen
    Kitchen Table Browser: Dell XPS M1330 laptop
    On the Road: Alienware M14X laptop

  10. #10
    Efficiently lazy shadowmaster's Avatar
    Join Date
    Oct 2006
    Location
    London
    Posts
    3,233
    Thanks
    397
    Thanked
    310 times in 208 posts
    • shadowmaster's system
      • Motherboard:
      • Gigabyte GA-890FXA-UD5
      • CPU:
      • AMD Phenom II X4 965 @ 3.6Ghz
      • Memory:
      • 4GB Corsair XMS3
      • Storage:
      • Kingston SSD V series 64GB + Samsung F3 1TB
      • Graphics card(s):
      • XFX 5870 1GB in Crossfire
      • PSU:
      • BeQuiet 1200W Dark Power Pro
      • Case:
      • Coolermaster Stacker 832 SE
      • Operating System:
      • Windows 7 Home Premium 64bit
      • Monitor(s):
      • 3 x BenQ G2222HDL 21.5inch 1080p
      • Internet:
      • BT Infinity 2

    Re: What does it mean when a country 'goes bankrupt'?

    Quote Originally Posted by Ceefer View Post
    Where does the IMF get all these mega-billions from?
    They are high level loan sharks so a lot of their money is from the very high interests loans they give out.

  11. #11
    Senior Member
    Join Date
    Feb 2006
    Posts
    1,374
    Thanks
    75
    Thanked
    55 times in 49 posts
    • pp05's system
      • Motherboard:
      • MSI 880GM-E41
      • CPU:
      • AMD Athlon II x2 250
      • Memory:
      • 2GB DDR3 1333mhz Module
      • Storage:
      • Kingston
      • Graphics card(s):
      • AMD 880G chipset
      • PSU:
      • Seasonic S12 330W
      • Case:
      • Lian Li PC-60 MIDI Tower
      • Operating System:
      • Windows 7 Home Premium 32bit

    Re: What does it mean when a country 'goes bankrupt'?

    IMF is the worse case scenario. You do not want the IMF/world bank stepping in at all. I dont know a single country who prospered under the IMF bail out along with their conditions.

    But western government /instituitions will do anything than to allow default because it is they who feel it most. So they should!

    They have no problem lending in full knowledge the countries cant pay them back. But their very existence is too lend so ethics dont matter.

  12. #12
    Actuary & Gamer
    Join Date
    Nov 2008
    Location
    Sussex
    Posts
    631
    Thanks
    21
    Thanked
    43 times in 40 posts
    • Champman99's system
      • Motherboard:
      • Aus P8P67 Pro
      • CPU:
      • Intel SB Core i5 2500K @ 4.4ghz
      • Memory:
      • 8GB Corsair Vengeance @ 1600mhz
      • Storage:
      • Samsung 830 256GB SSD, Samsung F1 500GB
      • Graphics card(s):
      • AMD/ATI Radeon 7970 3GB
      • PSU:
      • Coolermaster RealPower 1000W
      • Case:
      • Corsair 600T Graphite (White Edition)
      • Operating System:
      • Windows 7 Pro 64bit
      • Monitor(s):
      • 3 x Dell U2412M (Eyefinity)
      • Internet:
      • Sky Broadband Unlimited (No FUP!)

    Re: What does it mean when a country 'goes bankrupt'?

    Well most national debt is issued in government bond, (sometimes called T-bonds after US Treasury bonds). a £10,000,000 1 year bond might be priced at ~£9,500,000. The government sells a "promise" to repay 10,000,000 after 1 year for the price, the difference being the interest. When the debt "matures" after a year, the government has to pay it off.

    So for the UK which still controls its money supply, because the debt is actually issued in pounds, can just "print" pounds to pay it off. Of course you will have rampant inflation and probably wont be able to issue any bonds for ages (noone will trust you, you have paid them back with worthless currency) but it could be better than the alternative, depending what the alternative is.

    This is sometimes known as "devaluing" which is a bit misleading as it implies a fixed exchange rate rather than a floating exchange rate, (you might have heard of the devaluation on Black Wednesday, which was slightly different as the government was following a semi-fixed exhcnage rate in the ERM)

    Greece does not have that option, because it does not control the supply of euros, and yet its debt will have been issued in euros.

    Although I am a fan of the EU in general, the Euro is crazy at the moment. Monetary policy and fiscal policy (taxes and spending) need to be conducted together. You cannot seperate one from the other in my opinion. So there either needs to be more binding fiscal rules, some fiscal unity, or no currency union.

    A country going bankrupt is pretty similar to anyone else going bankrupt. The lenders took a risk when they leant you money that you might not be able to repay - if you end up not being able to pay future lenders will not be interested. So effectively I beleive were it to come to bankrupcy you would have a situation where Greece would not be able to raise any money on the markets - this doesnt just mean it would have to operate a balanced budget but also has severe implications for flexibility. Tax revenue may come in in big chunks at the end of the tax year, but public services need to be funded constantly. Even if you are operating a balanced budget you need the facility of borrowing simply to smooth out incomings and outgoings.

    I dont really beleive Greece will go bankrupt though, well not officially. (To be honest, its already bankrupt, it cant pay back its next lot of debt each time they mature) Most of its debt seems to be owed to european banks so the other EU governments dont want to see it wiped out.

  13. #13
    Mostly Me Lucio's Avatar
    Join Date
    Mar 2007
    Location
    Tring
    Posts
    4,916
    Thanks
    391
    Thanked
    389 times in 316 posts
    • Lucio's system
      • Motherboard:
      • Gigabyte GA-970A-UD3P
      • CPU:
      • AMD FX-6350 with Cooler Master Seldon 240
      • Memory:
      • 2x4GB Corsair DDR3 Vengeance
      • Storage:
      • 128GB Toshiba, 2.5" SSD, 1TB WD Blue WD10EZEX, 500GB Seagate Baracuda 7200.11
      • Graphics card(s):
      • Sapphire R9 270X 4GB
      • PSU:
      • 600W Silverstone Strider SST-ST60F
      • Case:
      • Cooler Master HAF XB
      • Operating System:
      • Windows 8.1 64Bit
      • Monitor(s):
      • Samsung 2032BW, 1680 x 1050
      • Internet:
      • 16Mb Plusnet

    Re: What does it mean when a country 'goes bankrupt'?

    I think the best explanation I can give is it's like one giant game of Mornington Crescent.

    (\___/) (\___/) (\___/) (\___/) (\___/) (\___/) (\___/)
    (='.'=) (='.'=) (='.'=) (='.'=) (='.'=) (='.'=) (='.'=)
    (")_(") (")_(") (")_(") (")_(") (")_(") (")_(") (")_(")


    This is bunny and friends. He is fed up waiting for everyone to help him out, and decided to help himself instead!

  14. Received thanks from:

    Salazaar (05-05-2010)

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Similar Threads

  1. Opinions on '*The* Country'
    By Stewart in forum General Discussion
    Replies: 9
    Last Post: 24-10-2005, 07:34 PM
  2. Poll: The Monarchy
    By Kilrov in forum Question Time
    Replies: 115
    Last Post: 01-12-2003, 03:06 PM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •