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What happens when a country can’t pay back its debts? A country going bankrupt is more technically known as a country defaulting on its debt. When a country defaults, it can’t pay back the money loaned to it by foreign investors and other countries. When its debt to GDP ratio is high, creditors won’t trust the country as much, and it’ll have a lower credit rating. It can be a major uphill battle that raises the unemployment rate, causes stock markets to crash, and severely lowers peoples’ standard of living.
Countries like Argentina, Greece, Jamaica and Iceland have defaulted on their debt due to major financial crises. But some of these countries have recovered much better than the others. Multi-billion-dollar debt means a country can be stuck paying back huge amounts of money. Without a booming economy and recovery plan, they could be caught in a vicious cycle. Iceland’s 2008 financial crisis was massive– how do you think they recovered?
Agencies like the International Monetary Fund are good resources for bankrupt countries to get bailouts. But a bailout can come with conditions like a country having to crack down on tax evasion or make their countries more open to international business. How do you think bankruptcy would affect the population of the US? Things like crime and unemployment would rise, as well as many other consequences. From why countries go bankrupt to how they can bounce back, here’s everything you need to know about how a country can become broke.
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Written by: Courtney Hayes
Narrated by: Adam Newmark
Edited by: Vitalii V.
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00:46 Why do countries go bankrupt?
03:14 What happens after bankruptcy?
05:52 What happens to the population?
06:47 What about the global economy?
07:31 Why defaulting is good for some countries”