When a country cannot afford to pay its debts, it faces a huge disaster. Not only will unemployment increase, but its people will flock to the banks to withdraw their deposits.
Since 2021, the debt of governments has increased by $10 trillion. Total global debt will exceed $92 trillion by the end of 2021, and many countries will run fiscal deficits. So what happens when these countries are unable to pay their debts?
First, if a country fails to repay its debts, the living standards of its citizens will be severely reduced, and it will also affect the global economy. To cope with the deficit, the state would borrow money by issuing sovereign bonds.
The main causes of a country's bankruptcy are poor monetary policy, experiences of delinquency, political conflicts and problems in key economic sectors.
In the past, if a country failed to pay its debts, its assets were sometimes forcibly recovered. Today, a country's assets can no longer be forcibly taken away unless it has assets outside its borders. While recourse to the Tribunal has become a common problem-solving method, when a State owes money and does not pay it back, no international tribunal can justify it.
In 2008, Iceland's major banks collapsed and the government refused to repay $85 billion in huge debts, causing the currency to plummet, unemployment to soar, and the stock market to nearly collapse.
At present, the total debt of all countries, companies and individuals in the world has reached 281 trillion US dollars, and this figure will soar again in 2021, and the debt problem is getting worse!
What happens if a country declares bankruptcy? 2 minutes to take you to understand. Click on the video to see for yourself!
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