What happens when a country can not pay it debt?

Question

Does the country go into foreclosure and the repo-guy comes put a padlock on the border and kicks every citizen out? - just kidding

Honestly, what happens to that country and it government and people?

Answer 1

When a country defaults on its debt, its currency tanks. Russia, Argentina, Mexico, etc.. Everything they used to import is now a fortune and impossible to buy. Their economy suffers and they have to restart their economy all over again.

Eventually once markets have confidence in the remodeled country, money will begin flowing back in. But its a devastating economic event. Just ask the Argentines...

Answer 2

Not at all, they don't 'close down the country' or anything. Seeing as EVERY country is in some form of debt at the present, the problem is in how large the debts get and how well and promptly returns are made. Often the parties for whom repayment is due will allow extensions or other forms of 'relief' with added constraints attached, but a compromise is always reached. However, if such a difficult situation were to come about, this makes it more and more difficult for a country to request aid, etc. again.

Answer 3

well unlike what other contributors have said here are some facts:

China holds over 2 trillion dollars in debt to the US (as in the US owes that much to China)

the US owes over 4 Trillion dollars, thats almost $40,000 per person, one of the highest debts in the industrialized world

The US is one of the only countries in the world running a multi billion dollar deficit every year- that means they are going deeper in debt

now onto what happens when the country cant pay its debt

1) the currency is devalued so it might take $130 to buy  a loaf of bread

2) the economy stagnates,manufacturing jobs go elsewhere

3) just look at south african countries where they are working for the equivelant of $2.00 per day and the country is billions in debt

with the amount The US is in debt I wouldnt be surprised if Kuwait or Qatar or china came knocking asking for the money owed to them and the Us having to say...sell Alaska to settle their debt

Answer 4

Well, believe it or not, just about every country on the planet is in debt. It has been my opinion, that we just wipe out the slate, and start over. The Chinese and Russians owe us so much, that if we were able to collect, we could pay off the Arabs and the South Americans. It is a mess, Little One. Peace!

Answer 5

It doesn't go to some kind of collections. It just makes it more difficult for them to borrow from other countries in the fututre. And richer countries will some times offer to wipe out the debt if they agree to some action or inaction.

Answer 6

lol no they don't do that XD.  That was a silly and funny joke there n_n;. hehe anyway I'm an anime fan too. And I like your display picture- its kawaii. ^__^ :)

Onto your question..well the US has a lot of debt right now.  So do other countries.  There's a lot of it.  But there are international and domestic effects for a country not paying its debt.  They won't get punished.  However, things might not be so good. Economically things would be harder for the country.  They can't get as many loans in the future- because they haven't been able to pay back other ones.  Due to the fact that they have not paid back money they need to for other countries and have bad 'credit' history (well its not like an individual's credit but each country does have record/etc on how they've repaid or not repaid things they owe).  On a domestic front its a pain.  The people in a country will have to pay more- through paying the government- in order to help pay a debt- Currently the national debt is so high that it will take higher taxes to pay it down (for America).  But sometimes debt is forgiven- it just depends on how things are, etc. :)

Answer 7

We get punished because we always end up having to pay out of out taxes the governments debt, salaries, you name  it -it's why there is no middle class anymore, there's poor who pay all the taxes and can't but gas, food and the rich who get the tax breaks (and are very educated in how to do so, along with other financial information) in order to stay rich.  The poor have access to  less; poorer education, poorer quality of food (and diabetes, obesity, high blood pressure run rampant - go fugure and they want us to eat healthy but those who have to go to food banks get sucky food) doctors, etc, so we keep getting sicker, and we poorer therefore are not privy to the information through education that will provide ones in need the know how to get out and from under the oppression.  It is all so very sad.  I can only hope that Obama can bring some stability, hope and real work needed to bring this country of ours around or at least get it back to a place where we know how to help ourselves.  However, if we want change, then we have to be willing to get that change, I mean extra change in our pockets.  And, it will only get worse for the next generation.  

Back to your question I only partially answered, it's simple we don't pay, so what?  We just get deeper into debt and thereby it's part of why we are where we are!  Recession.  Can't take care of our own, so how can we pay back?  We can't declare bankruptcy ha! It will take education of this beautiful country and the people in it, all people, to even out the plating field, in order for us to save ourselves.  Once this is done, then we will be enable d to get ourselves out of debt, then the government needs to work with us by lowering taxes, providing education for the basics like finances, keeping our country safe, our children safe, getting us stronger in order for us to take care of us!  Shall I go on?  Rome wasn't built in a day so how can we expect to be?

Answer 8

Well you can be guaranteed that whoever that country is indebted to will expect a LOT of favouritism and certainly recompensation of sorts but as you can see it's not even so cut and dry.

It's funny Canada's national debt is somewhere in the neighbourhood of 700 billion....compare that to the USA who owes over 8 TRILLION.  

I have no idea who else owes whom and how much, but you can see why some expect a little (okay a LOT) of recompensation.  How that pans out, depends on government and those who run it.

Interestingly I found this information on a site--Your top 10 if you will - interesting wouldn't you say? :

1   Brazil $232,004,000,000

2   Russia $183,601,000,000

3   Mexico $159,959,000,000

4   China $154,599,000,000

5   Indonesia $150,875,000,000

6   Argentina $144,050,000,000

7   South Korea $139,097,000,000

8   Turkey $102,074,000,000

9   India $98,232,000,000

10 Thailand $86,172,000,000

Here is some info on who holds the US debt:

So just who are these lenders? As of last June (the latest complete breakdown available), the biggest holder of Treasury debt was the U.S. government itself, with about 52 percent of the total $8.5 trillion in paper that's out there. Most of the government’s holdings are massive savings accounts for programs like Social Security and Medicare. Just as you may prefer to keep your Individual Retirement Account in the safe Treasury bonds, the folks who manage the Social Security Trust Fund are looking for a secure investment, too.

That’s leaves a little over $4 trillion in public hands. The biggest chunk (about 25 percent of the $8.5 trillion total) is held by foreign governments. Japan tops the list (with $644 billion), followed by China ($350 billion), United Kingdom ($239 billion) and oil exporting countries ($100 billion).

Other big holders of Treasury debt include state and local governments ($467 billion); individual investors, including brokers ($423 billion); public and private pension funds (319 billion); mutual funds ($243 billion); holders of US savings bonds ($206 billion); insurance companies ($166 billion) and banks and credit unions ($117 billion.)

Answer 9

Some of the answers are not so good- the question asks what happens if a country can't pay its debt...

I suggest you type 'HIPC' into Google and have a good read. It stands for Highly Indebted Poor Countries and was coined by the IMF. Different countries have different relief packages and so if you want to go into detail you should read yourself.

There is a good IMF paper by Boote and Thugge on this topic, I think it was written in 1993.

Answer 10

Ha ha ha. Well no.

Usually whenever a country is provided loan money, the loan is productive so if everything goes as planned, the country can repay through the income of that particular venture. It is extremely rare to see countries that cannot repay the amount.

Also, when the countries borrow amounts from other countries, they can repay it in terms of products. On the other hand, usually money is borrowed from the International Monetary Fund or the IMF. When this fund was started, many countries paid gold, etc, to get the fund going. So even if the country does not pay back, that affects its own credit and its own fund in the IMF. This actually happened once when a country could not repay the borrowed amount to the IMF, the amount was completely written off beause the country was a top contributor.