How can a country go bankrupt ?

[luckybastard]

From: http://en.wikipedia.org/wiki/United_States_public_debt

By definition, international trade is the exchange of goods and services across national borders. Historically the currencies of nations involved were backed by precious metals (typically using some form of Gold Standard), which would cause a nation operating under a trade imbalance to send precious metals (economic goods in and of themselves) to correct any trade imbalances. In the current scheme of fiat money, the U.S. government is free to print all the money it wants. Consequentially, the government cannot technically go bankrupt as any debtor nation can just issue more money through a practice known as seigniorage.

So how come, for example, Argentina went bankrupt in 2002 ? Or Iceland just did ? Like stated in the above, technically, since money isn't coupled to metals like gold anymore, a country can just print money in their currency and pay off the external debt and 'circumvent' a bankruptcy that way !?!?

 

[luckybastard]

After some googling, I found these 2 interesting links:

http://www.washingtontimes.com/news/2006/jul/26/20060726-103040-2634r/

http://www.cato.org/pub_display.php?pub_id=3623

 

[codedeep007]

I think people believe Obama has a solution that's why he will get elected.

I came to conclusion this weekend that Food(Energy) Stamps would be the only solution to many people around world not just for America.

And these stamps would not count as new debit - When world leaders meet next month, they will discuss this as top agenda.

Issuing food stamps would inflate commodity price which will eventually lead the whole world out of depression in five years.

 

[jficquette]

Quote from luckybastard:

From: http://en.wikipedia.org/wiki/United_States_public_debt


So how come, for example, Argentina went bankrupt in 2002 ? Or Iceland just did ? Like stated in the above, technically, since money isn't coupled to metals like gold anymore, a country can just print money in their currency and pay off the external debt and 'circumvent' a bankruptcy that way !?!?

Because their debt was in dollars and couldn't get them.

 

[Covertibility]

The Federal Government's Financial Health

 

[jeb9999]

Quote from luckybastard:

From: http://en.wikipedia.org/wiki/United_States_public_debt


So how come, for example, Argentina went bankrupt in 2002 ? Or Iceland just did ? Like stated in the above, technically, since money isn't coupled to metals like gold anymore, a country can just print money in their currency and pay off the external debt and 'circumvent' a bankruptcy that way !?!?

For the vast majority of countries their currency is worthless outside their borders. If no one wants to exchange your multicolored funny money for real money your country is bankrupt.

 

[luckybastard]

Quote from jeb9999:

For the vast majority of countries their currency is worthless outside their borders. If no one wants to exchange your multicolored funny money for real money your country is bankrupt.

Well, I thought about this, but I figured, there would ALWAYS be an exchange rate for ANY currrency, simply because that currency can still buy you stuff in that country (and a country has ALWAYS stuff to sell, houses, land, whatever). But I guess under real hyperinflation, a currency devaluates so rapid that nobody wants to have it anymore and that would then indeed equal a bankruptcy.

 

[mahram]

who wants the american doller,its about one war one terriost attack away , from being a worthless pieace of paper. come on

QUOTE]Quote from luckybastard:

Well, I thought about this, but I figured, there would ALWAYS be an exchange rate for ANY currrency, simply because that currency can still buy you stuff in that country (and a country has ALWAYS stuff to sell, houses, land, whatever). But I guess under real hyperinflation, a currency devaluates so rapid that nobody wants to have it anymore and that would then indeed equal a bankruptcy. [/QUOTE]