Country going bankrupt - what does it mean?

prydey · 04-10-2011, 09:53 AM

Hi guys, i don't get involved in politics and what not, and don't want this thread to get political. obviously greece is in financial trouble again, and without being specific toward greece, i was wondering what happens if a country goes bankrupt? can someone put it into laymans terms for a simple fellow?

**Polyal** · 04-10-2011, 09:57 AM

Well I think usually their currency becomes worthless (hence why other euro's are annoyed) and then they struggle to get funding for investment because they cant pay back the debt..much like someone going bankrupt personally but on a massive scale.

Investment drops, employment goes up..then riots.

debts get written off and then the people (countries) that borrowed them the money also get hurt.

Im sure its alot more complicated than that but in a nutshell perhaps?

prydey · 04-10-2011, 10:04 AM

when a business goes bankrupt, they can just close the doors and stop trading and that business is gone. can't exaclty do that if you are a country.

sarrge2001 · 04-10-2011, 10:23 AM

Exactly.

But if they couldn't do that, they would have to fund everything out of turnover because they wouldn't be able to borrow money. So they would reduce spending first up.

Same with a country. Taxes will have to go up because the government will be unable to borrow money for infrastructure (or i suppose they could just put in a heap of speed cameras).

Government spending will have to decrease so you are looking at reductions in social security, health, road funding, police etc etc.....

Unemployment increases as the Government cuts jobs and decreases spending in the private sector.

Not a nice scenario.

Luckily, we have a fiscally responsible government here.............oh

Spudz27 · 04-10-2011, 10:50 AM

I am not sure what happens if a country goes belly up, but I can't imagine it is going to be good for anyone. Greece, should be a lesson to the Euro zone, don't put all your eggs in one basket, if it wasn't for the Euro, most likely they would have been left to fail.

Jim Goose · 04-10-2011, 01:18 PM

What happens is that the world bank gives them huge loans and the country then belongs to the bank..... assets are sold off, gov employees sacked, money worthless....

Serial_Fool · 04-10-2011, 01:23 PM

Breakdown and balkanization.

The government can't maintain it's obligations, keep order or defend the country. It's prime time when coups or revolutions happen and people are most willing to sacrifice their freedom for the promise of rations.

Think of the Soviet Union or what was formerly known as Rhodesia for recent examples.

capriv8 · 04-10-2011, 01:59 PM

I have had the pleasure of spending some time in Greece just recently and you would not know of any kind of crisis that may be happening there. Everyone I dealt with was very positive in regards to the future.
I did notice there is a massive difference in the news medias reports in Greece and what is reported in Australia, seems to be at opposites

xtremerus · 04-10-2011, 08:03 PM

Quote:

Originally Posted by capriv8

I have had the pleasure of spending some time in Greece just recently and you would not know of any kind of crisis that may be happening there. Everyone I dealt with was very positive in regards to the future.
I did notice there is a massive difference in the news medias reports in Greece and what is reported in Australia, seems to be at opposites

They are just like the frog in a pot that is being heated.
They still have that nice warm happy feeling.

But it is going to boil soon.

Geez Louise · 04-10-2011, 02:17 PM

Can't wait for all the financial experts to jump on this thread and kill it....

It is a good question and one that many people do not understand but polyal's post generally sums it up!

Your countries currency generally tends to lose value and that countries stock market goes into chaos! Unemployment goes up...and things become really hard for the people who live in those countries. Their government then gets a loan from another country (gets charged interest and penalty rates) is given a certain amount of time to pay it back. If they can't pay it back within the time frame, then more interest penalties are imposed and then someone higher up the economic food chain ( I believe it is the Monopoly man or Scrooge McDuck), steps in and values that countries money and works out a rescue package.

However, if no-one comes to the rescue of that country - it is put on Ebay with a starting bid of 0.99c

**Polyal** · 04-10-2011, 02:21 PM

Quote:

Originally Posted by Geez Louise

However, if no-one comes to the rescue of that country - it is put on Ebay with a starting bid of 0.99c

As long as its not advertised as:

"Greece going cheap - may interest buyers of spain/france/russia/germany"

Geez Louise · 04-10-2011, 02:26 PM

They wouldn't put it on like that polyal...

I am sure it would be listed as Idealic Meditteranean Country, slightly used. Comes with 400,000 goats - No Reserve.

z80 · 04-10-2011, 08:16 PM

What generally happens is that services are cut, health, education,transport,police etc.

Then they print money and inflation equalizes everything.

People dont accept pay cuts, but by stealth inflation slowly allows them to buy less, and thats how it works.....BUT

Greece cant just print money, it's a part of the Euro system, and thats the
problem....they can't be allowed to fail.

The single biggest problem is their banks...they dont have enough money to pay out all the people that have put money in as deposits.

It causes a domino effect if one bank slides under...they all borrow and interact with each other.

A government will do anything to prevent a run on the banks.

MYVYSS · 04-10-2011, 08:41 PM

Greece the new Nigeria.....

IDT · 04-10-2011, 08:48 PM

One option is war, either internal (civil) or external. But simply put the masses rise against the government (lots of examples) or the government rises against its neighbours (germany circa 1939) or both. Everyone will blame everyone else. That is a given!

BHDOGS · 04-10-2011, 09:00 PM

what will really happen is germany and france or as there known the euro lets be honest there the main two will continue to bail out greece and forgive there debts till there solvent again greece has relied to long on civil servants paying tax then getting government money and around and around it goes now its crashed all there really doing is bringing it back to a normal level that was unsustainable in the first place not to mention the amount of greeks who dont pay tax or avoid it at all costs then complain there all going broke

Keepleft · 05-10-2011, 09:26 PM

France isn't that healthy, but 'better off' than say Spain, Portugal, Ireland, Italy. Should one of these fail, the Euro Central Bank will unable bail em, let alone IMF. Some EU banks are vulnerable.

Euro derivatives= eek.

Was watching Richo on SkyN tonight, I feel he and his guest are a little over confident re China and growth (as saviour of the west). Reckoned we were doing well at paying off our personal debt, say on credit cards. At the GFC 2008 AUS folk owed 46billion to CC's, dropped to 43billion as folk paid em off, but has risen to 49billion now. That tells me many folk are paying mortgages with their CC's. But AUS is the place to be nonetheless.

Mean no offense.

rjk74 · 05-10-2011, 09:43 PM

Argentina went bankrupt 20 or so years ago, theres info on Wikipedia about it.