Bankrupt?

[Quest4Less]

For any economists out there - what happens if a country goes bankrupt? What does it mean exactly?

If we were to use the USA as an example - what if they just said they are now debt free and were not going to pay any other countries what they owed? What would happen?

 

[MarkJfr]

It means that a country cannot pay its creditors and as such cannot function because the net income is significantly less than the spending and hence they are bankrupt.

 

[Paladin]

In 2001 Argentina declared itself to be insolvent and incapable of servicing its foreign debt. The goverment limited all bank withdrawals to $250 per week. Note that most people are paid by direct depsoit to their bank accounts. Credit card interest rates are 30%. Public service salaries were first cut by 35% and then by another 13% in the 2002 budget. Forty pecent of public service employees were fired. Ninety percent of Argentina's banks were sold to international companies. International loans were withheld, and 51% of the budget went to service the foreign loans. Health care ad social programs were left with 5% of the government budget. Unemployment rose to more than 20%. Interest rates rose to stem the outflow of capital from the country. The number of people living in poverty rose from 1M to 14M. The Argentinean peso devalued in international currency markets and foreign capital was withheld.