A national bankruptcy is a country's inability to repay its debts or maintain normal foreign exchange reserves, resulting in impaired international credit and inability to obtain funds or commodities from the international market.
This is not uncommon, and in recent decades, in addition to Argentina, countries such as Iceland, Greece, and Russia have experienced bankruptcy crises. “
The word "bankruptcy" sounds terrible, but it is not actually the end of the world, it just means that a country's economy is in serious difficulties and needs to be solved by some measures.
If the country is microsized, in fact, there is no difference between the life of ordinary people, and the debts owed by a country can be divided into two kinds, one is domestic debt, that is, the money borrowed from banks or financial institutions in the country, and these money are usually deposited by the people of the country or provided by domestic investors.
The other is external debt, which is money borrowed from foreign banks or financial institutions, usually in foreign currency or Special Drawing Rights (SDRs).
Domestic debt is relatively easy to deal with, and the more irresponsible ** directly raising the inflation rate can be easily solved, and if the money is not enough, let the mint work overtime to print some money, and any problem is sprinkled with water. Of course, there is a cost to doing so, which may lead to inflation or fiscal deficits, which will affect the country's economic stability and development.
For example, Japan's government debt to GDP ratio is as high as 240%, which is the highest level in the world, but fortunately, Japan's central bank also has strong monetary policy power, and can maintain the sustainability of government bonds by buying government bonds and implementing negative interest rates. Of course, there are risks that this may lead to currency depreciation or economic stagnation, affecting the country's international competitiveness and people's livelihood and well-being.
External debt is more complicated because a country cannot repay its external debt by issuing more foreign currency, but needs to earn foreign exchange by exporting goods or services, or by attracting foreign investment or aid. If a country's external debt is too large, or the interest rate on its external debt is too high, or the maturity of its external debt is too short, or the currency of its external debt is too simple, then the country is vulnerable to an external debt crisis, that is, a situation in which it is unable to repay its external debt. At this point, the country will need to seek help from the International Monetary Fund (IMF) or other countries or institutions, or negotiate with creditors to seek an extension, relief, or restructuring of the external debt.
Of course, no country will willingly be in arrears, and the debtor country will most likely be forced to accept some unfavorable conditions and demands, which will affect the country's political and social stability and development.
Argentina's central bank does not have strong monetary policy capabilities, and it is simply unable to control the scale and cost of foreign debt by regulating the amount of money and interest rates.
There is also a more fatal problem, Argentina's external debt is mainly issued by private institutions, not by ** or multilateral institutions, which means that Argentina's external debt is more difficult to be reduced or restructured, and it is more vulnerable to market volatility and speculation.
When Argentina is unable to repay its foreign debts, it needs to seek help from the IMF or other countries or institutions, or negotiate with creditors, but these processes are difficult and painful, and are often met with opposition and resistance at home and abroad, leading to a long-term economic and social crisis in Argentina.
So, what are the consequences of a country's bankruptcy for a country?Although some countries have gone bankrupt, they have been able to adopt some measures to regain their economy and credit, reintegrate into the international community, and even achieve some reform and development. However, after the vast majority of countries go bankrupt, they will fall into long-term difficulties and turmoil, unable to get rid of the trouble of debt, and unable to achieve economic and social stability and progress.
Iceland is a country that has managed to recover from bankruptcy. Iceland erupted in 2008 with a severe financial crisis that led to the collapse of its three major banks, a foreign debt of more than 10 times the size of GDP, a virtual depletion of foreign exchange reserves, a sharp depreciation of the currency, a sharp contraction in the economy, soaring unemployment, and social unrest.
Iceland is facing a huge amount of foreign debt, mainly borrowed from British and Dutch depositors, who have opened so-called "Icelandic accounts" in Icelandic banks and enjoy high interest rates. As a result, more than 90% of the population voted against paying the debt, and Iceland was declared bankrupt.
This trick is enough to "rely on", but the "lai" is particularly legal, and all of a sudden creditor countries such as Britain and the Netherlands have no resort, and they also threatened to take various sanctions and lawsuits against Iceland at first. What is terrible about Iceland, there is no industry in the country, geothermal resources are quite abundant, and there is no energy crisis, so the conditions are directly put forward for negotiation.
If you don't agree, I will always be in debt, and the creditor country will see that there is nothing to do, and finally reach a more reasonable debt repayment plan, only repay the principal without interest, and there is a long grace period. Iceland's economy quickly returned to growth after the bankruptcy, even exceeding its pre-bankruptcy levels, and Iceland regained the trust and respect of the international community.
But Argentina can't be compared with Iceland, people in Iceland have an excuse to be affected by the subprime mortgage crisis, but Argentina is an "old gun" who has gone bankrupt nine times!
Argentina's debt problem stems mainly from its unstable politics and economy, it often undergoes coups and **, which leads to frequent changes and discontinuities in policy, and it also often suffers from external interference and sanctions, leading to the shrinkage and isolation of the economy.
Most of Argentina's creditors are international financial institutions and private chaebols, and they do not have much tolerance and sympathy for Argentina's debts, they only care about their own interests, and it is inevitable to recover Argentina's debts through legal and financial means, and even do not hesitate to seize Argentina's overseas assets and **, so that Argentina will fall into a deeper predicament.
In order to deal with the debt crisis, Argentina has also taken various measures, such as monetary reform, fiscal austerity, structural adjustment, debt restructuring, etc., but these measures are often ineffective or even counterproductive, making Argentina's economy worse, people's lives more difficult, and social dissatisfaction and ** more intense.
Argentina's debt problem has not yet been fundamentally resolved, it is still burdened with huge debts, it is still facing recovery and sanctions from creditors, and it is still difficult to get out of the shadow of bankruptcy.
In the final analysis, there is not much difference between the national economy and the lives of ordinary people, but the country wants to turn ashore, and there are more measures and means that can be taken.