Can a Country become bankrupt?.
On paper the answer is yes, although throughout history, most countries function even after their debts are so high they cannot repay their creditors.
In 2010, many countries on paper are bankrupt, but they keep running, and even give the impression they are economically stable.
How does a government run one of these countries? Individually, if you spend more than you earn, you simply end up on the road to bankruptcy.
Countries work on different rules, they borrow, or extend their credit, because they are to big to fail.
How to Run a Bankrupt Country? 1.
Raise Taxes Any debtor knows as long as you can cover interest payments, the debt continues.
Governments simply raise indirect or direct taxes.
Working on the principle, paying interest keeps everyone happy.
Many countries use their new tax income to pay off this interest.
2.
Raising Retirement Ages Raising the retirement age saves governments money.
In Europe for example, several debt ridden countries have raised the retirement age, including debt ridden Britain.
State Pension funds then can be released to cover debts.
3.
Sell off National Assets Privatization raises cash for debt- ridden governments.
Selling off national assets or even resources helps reduce debt.
4.
Encourage Immigration In countries that cannot provide enough work for their citizens, Governments encourage their citizens to migrate or immigrate.
This may not be so obvious, sometimes it is in the guise of International job fairs, other times the local media advertise this option through television programs.
5.
"Nothing is Wrong" Governments often do not want to give the impression they are loaded with debt, so they tend to continue the impression all is well.
This could be done by ordering new cars for government use, to building new offices.
Instead of cutting back, bankrupt Governments often spend.
If people see "nothing is wrong," governments can continue the impression that the country is doing well.
6.
Debt for Trade Debtors eager to trade with these countries, often trade off debt repayments in turn for allowing their creditors to trade with them.
This allows cash-rich creditor countries to enter their markets.
7.
Print Money Since late 2008, the national printing presses of many countries have been extra busy, not only printing money but Government bonds.
Government Bonds are in fact money, backed by a government that pays a fixed annual interest on each bond.
The USA alone has issued billions of dollars of fixed interest bonds, since 2008, but so has debt ridden Japan, Greece, Italy, Spain and the UK.
8.
Award Bonuses Bankers collect bonuses, so do politicians.
This is often in the guise of a guaranteed pension after being voted out of office, to hefty expense accounts.
Even if there is high unemployment and debt in many developed countries- politicians often leave office much wealthier than they entered.
No country in this world is really bankrupt; in fact debts are often re-structured or given in exchange for trade.
But the inherent weakness of a debt-ridden country is that it obviously has been badly managed, and those who are responsible often are the ones that benefit from keeping the country in debt.