Asked in
Economics

What happens if a country goes bankrupt?

Answer

User Avatar
Wiki User
September 13, 2011 11:57AM

Are you referring to America? Well, infact, a number of things could happen.

First of all, bankrupcy is highly unlikely. Especially in todays world. Usually when a country finds themselves heading in a direction where the government can no longer support a failing economy the first thing they will do is meet with other nations to form trade agreements to increase trade. For example, Country A, might meet with Country B and ask Country B to lift customs fees/tariffs to increase imports of Country A's goods.

If this fails, they will then seek loans from other countries. Usually this will be their allies since in peace agreements they usually, not only include military peace but also include economic peace which means the other country will bail them out.

If that fails then they will seek assistance from other countries and for something that their country has to offer in return. For example, Country B agress to assist Country A with financial assistance if Country A allows Country B to use a military base(s) in Country A's jurisdiction. It also means that Country B would have a HUGE influence over Country A's political position and 'world view.'

IF THAT FAILS...

1) The stock market will crash and credit will seize

2) All financial institutions will fail

3) All government funded programs will end (such as medicaid, defense, police, education, infrastruture support like roads, utilities etc)

4) Business will close and jobs will be lost

5) There will be mass rioting (and no police to stop the rioters or fire fighters to fight the fire)

6) Everyone will start killing each other for food

7) The rich will buy the country and turn a democracy into a dictatorship

As of March 1 the American government will be bankrupt

Before #1-7 can happen, the US will simply default on its debt. For an example of what happens then, see Argentina.