politics

What Happens when Nations Default?

Advice from Hitchhikers Guide to the Galaxy

Advice from Hitchhikers Guide to the Galaxy

What Happens when Nations Default? Life goes on.

According to bankers, defaulting on national debt ushers in Armageddon, the end of the world, nothing left but ashes under the feet of the cockroaches, the only creatures that could survive such a catastrophe.

Words such as “crisis” “emergency” and “cliff” are daily used in news stories relating to sovereign debt situations around the world. Sovereign default, we are warned, is like a deadly virus, “a contagion” that will spread worldwide in a “domino effect” (where have we heard that before?)

Fear + Jargon=Compliance

Are you scared yet? When laymen then try to figure out what can be done to prevent the end of the world as we know it, financial experts pour out reams of jargon and numbers, which serve two purposes: 1) It confirms their status as experts and 2) Renders the situation completely unintelligible to laymen.

What is Default?

When nations default, they simply give up trying to repay loans they have taken out. This is similar to bankruptcy, which is painful but not fatal. If one nation defaults, will the world end? No, but the banks who hold the loans will lose money, just as creditors lose money when someone declares bankruptcy. Banks and creditors do not like losing money; indeed, it is their job to make all the money they can. Yet bankruptcies happen, adjustments are made and life goes on. Every nation is different and complex financial policies can have variable results, but so far, none has resulted in the world ending.

Examples: Argentina Default and Recovery

Argentina defaulted in 2001, refusing to follow the Washington Consensus after it made matters worse. Coupled with debts inherited from previous dictatorships and corruption in high places, Argentina’s debts were untenable. Hard times and adjustments followed the default, but Argentina recovered more quickly than most after the crash of 2008 and then experienced significant reductions in poverty levels.

Default followed by economic success is a highly dangerous message according to world financiers, who want their pound of flesh, and want all sixteen ounces. Argentina is currently under economic attack by global economic elites, but vows to fight back.

Iceland’s Recovery

Iceland, a relatively prosperous nation of 320,000 and according to the UN Human Development Index the 17th most developed nation in the world, was hard hit by the crash of 2008. The nation’s entire banking system failed and Iceland said the banks were too big to bail out. Subsequent political unrest resulted in protests by one percent of its population- (a similar protest in the U.S. would consist of three million citizens.)

According to Bloomberg, “While the Euro grapples with record joblessness, led by more than 25% in Greece and Spain, only 4% of Iceland’s labor force is out of work.” They are trying to get that down to 2%.

Past Defaults

So while defaults are not pleasant, neither are they deadly diseased dominoes. Below is a list of countries that have defaulted. Please note: they are still alive and the earth is still spinning.

Africa

  • Algeria (1991)
  • Angola (1976,1985, 1992-2002)
  • Cameroon (2004)
  • Central African Republic (1981, 1983)
  • Congo (Kinshasa) (1979)
  • Côte d’Ivoire (1983, 2000, 2011)
  • Gabon (1999–2005)
  • Ghana (1979, 1982)
  • Liberia (1989–2006)
  • Madagascar (2002)
  • Mozambique (1980)
  • Rwanda (1995)
  • Sierra Leone (1997–1998)
  • Sudan (1991)
  • Tunisia (1867)
  • Egypt (1876, 1984)
  • Kenya (1994, 2000)
  • Morocco (1983, 1994, 2000)
  • Nigeria (1982, 1986, 1992, 2001, 2004)
  • South Africa (1985, 1989, 1993)
  • Zambia (1983)
  • Zimbabwe (1965, 2000, 2006 (see Hyperinflation in Zimbabwe)

Americas

  • Antigua and Barbuda (1998–2005)
  • Argentina (1827, 1890, 1951, 1956, 1982, 1989, 2002-2005(see Argentine debt restructuring))
  • Bolivia (1875, 1927,1931, 1980, 1986, 1989)
  • Brazil (1898, 1902, 1914, 1931, 1937, 1961, 1964, 1983, 1986–1987, 1990)
  • Canada (Alberta) (1935)
  • Chile (1826, 1880, 1931, 1961, 1963, 1966, 1972, 1974, 1983)
  • Colombia (1826, 1850, 1873, 1880, 1900, 1932, 1935)
  • Costa Rica (1828, 1874, 1895, 1901, 1932, 1962, 1981, 1983, 1984)
  • Dominica (2003–2005)
  • Dominican Republic (1872, 1892, 1897, 1899, 1931, 1975-2001[18] (see Latin American debt crisis), 2005)
  • Ecuador (1826, 1868, 1894, 1906, 1909, 1914, 1929, 1982, 1984, 2000, 2008)
  • El Salvador (1828, 1876, 1894, 1899, 1921, 1932, 1938, 1981-1996[18])
  • Grenada (2004–2005)
  • Guatemala (1933, 1986, 1989)
  • Guyana (1982)
  • Honduras (1828, 1873, 1981)
  • Jamaica (1978)
  • Mexico (1827, 1833, 1844, 1850, 1866, 1898, 1914, 1928-1930s, 1982)
  • Nicaragua (1828, 1894, 1911, 1915, 1932, 1979)
  • Panama (1932, 1983, 1983, 1987, 1988-1989)
  • Paraguay (1874, 1892, 1920, 1932, 1986, 2003)
  • Peru (1826, 1850, 1876, 1931, 1969, 1976, 1978, 1980, 1984)
  • Surinam (2001–2002)
  • Trinidad and Tobago (1989)
  • United States (1779 (devaluation of Continental Dollar), 1790, 1798 (see The Quasi-war), 1862,1933 (see Executive Order 6102), 1971 (Nixon Shock)
  • 9 states (1841–1842)
  • 10 states and many local governments (1873-83 or 1884)
  • Orange County, California (1994) [
  • Detroit, Michigan (2013)
  • Uruguay (1876, 1891, 1915, 1933, 1937, 1983, 1987, 1990)
  • Venezuela (1826, 1848, 1860, 1865, 1892, 1898, 1982, 1990, 1995–1997,[1998,[2004)

Asia

  • China (1921, 1932,1939)
  • Japan (1942, 1946-1952])
  • India (1958, 1969,1972)
  • Indonesia (1966)
  • Iran (1992)
  • Iraq (1990)
  • Jordan (1989)
  • Kuwait (1990–1991)
  • Myanmar (1984,1987, 2002)
  • Mongolia (1997–2000)
  • The Philippines (1983)
  • Solomon Islands (1995–2004)
  • Sri Lanka (1980, 1982, 1996)
  • Vietnam (1985)

Europe

  • Albania (1990)
  • Austria-Hungary (1796, 1802, 1805, 1811, 1816, 1868)
  • Austria (1938, 1940, 1945)
  • Bulgaria (1932, 1990)
  • Croatia (1993–1996)
  • Denmark (1813)(see Danish state bankruptcy of 1813)
  • France (1812)
  • Germany (1932, 1939, 1948)
  • Hesse (1814)
  • Prussia (1807, 1813)
  • Schleswig-Holstein (1850)
  • Westphalia (1812)
  • Greece (external debt: 1826-1842, 1843-1859, 1860-1878, 1894-1897, 1932-1964, 2010-present;domestic debt: 1932-1951)
  • Hungary (1932, 1941)
  • The Netherlands (1814)
  • Poland (1936, 1940, 1981)
  • Portugal (1828, 1837, 1841, 1845, 1852, 1890)
  • Romania (1933)
  • Russia (1839, 1885, 1918, 1947,1957, 1991, 1998)
  • Spain (1809, 1820, 1831, 1834, 1851, 1867, 1872, 1882, 1936-1939)
  • Sweden (1812)
  • Turkey (1876, 1915, 1931, 1940, 1978, 1982)
  • Ukraine (1998–2000)
  • United Kingdom (1822, 1834, 1888–89, 1932)
  • Yugoslavia (1983)
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About Je' Czaja

Je' is a writer, artist, and stand up philosopher. She founded and directed two non-profit organizations for disadvantaged children and their families, served as a missionary for three years and is the author of several books. https://www.smashwords.com/interview/jeczaja Amazon Author page: http://www.amazon.com/-/e/B00IU4RWKE

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