National bankruptcy in the restaurant language a situation is called, in which a state cannot serve no more its national debt and/or not carry the interest payments out any longer (or wants). With the fact it is sufficient that the state concerned does not serve only one part of the debts any longer.

With the explanation of the national bankruptcy or already before it, with the danger of such, a substantial degradation of the is connected, which become measured by different Rating agencies "„"“. This shows up then in the so-called land risk, which is expressed in points of basis (100 points of basis = 1 per cent point). So for example Argentina had occasionally a land risk far beyond the 4000 points of basis. This means that Argentina (land risk of 4000) had to pay an impact at a value of 40 per cent for again taken up credits at the interest usual for industrial nations.

The Federal Republic of Germany as well as the individual German Lands of the Federal Republic get regularly from the international Rating agencies with AAA the highest possible credit-worthiness awarded. This permits it to the German state to take up credits on the capital markets to favorable low interest. This Rating could also worsen however with rising debt conditions. Japan Rating was lowered for example 2002 to AA and corresponds now about Slovenia, although the Japanese national economy is the second largest of the world (the Japanese portion of the national debt of the gross domestic product corresponds approx. 160%).

Possibility of the national bankruptcy

In contrast to private business a state has a set of possibilities, a national bankruptcy of the form after, less contents after of preventing. Thus the money, which the state needs for paying back debts, is printed by the central bank of the state. If the state pays its debts with printed money back, this can lead to inflation.

In addition the state has the possibility of raising taxes. If the central bank of the state is independent of the government of the state and if the central bank of the government the necessary money refuses, the government can raise taxes. It could about suddenly tax "“interest income"”. The government must pay then further interest to its creditors, but those must pay then on their interest income directly again taxes to the state government. So theoretically the government can decrease their interest payment obligations at will.

The government can tax also financial resources. Since the demands of the creditors on the state belong to the financial resources, the creditors would have to suddenly pay to the State of taxes in this case. So the obligation of the state knows to be paid back theoretically likewise decreased its debts.

A further possibility (part) a national bankruptcy to mask was, the devaluation of the own currency opposite the "“hard currency countries"”. Usually then with a "“improvement of the exportableness"” of the domestic industry in relation to the foreign country one justified. However this effect is only briefly effective, since over the usually necessary raw material imported goods inflation was again reimportiert immediately, which pierced finally on the Binnenpreisniveau. With the devaluation of the own the state debt decreases - in addition, the material financial resources of the citizens by the devaluation percentage accordingly. The citizens, who had become more intelligent by such experience then, saved then naturally in the future less, so that the future indebtedness framework of the state was again limited. A good example was Italy.

Such measures, like devaluation, decrease naturally the credit-worthiness of the state, at the worst can the state each credit-worthiness lose. The state can get rid of thus theoretically of its debts, which it made in the past. He can however its future credit-worthiness nearly never at the same time receive, but must then for the future without credits do. By therefore it borders are set to the national indebtedness of the state, which can be very flexible however.

For these reasons is formal state bank 9 gang rarely, more frequently is the loss of the credit-worthiness of the state. For lower state levels, approximately on the Federal State or district level in the USA, the national bankruptcy is rather possible, if the Federal Government refuses or it is legally forbidden it to be responsible for the national indebtedness of these lower levels. Thus the city New York already experienced 1975 inability to pay.

After national bankruptcy so-called currency reforms in currency history, which were locked with the introduction of new money characters and/or "“way capers"” by "“zeros"” (e.g. 1 trillion paper Mark = 1 pension Mark in November 1923 usually, followed) as well as the usually different around and/or devaluation by cash, business and private money accounts.

With such actions the private financial resources (money and insurance accounts, like e.g. life insurances) were according to experience concerned strongly and the business financial resources (trading accounts) nearly not negatively.

Examples of national bankruptcy

This situation gave it in Germany in 20. Century twice: 1923 as follow-up first and 1948 as consequence of the Second World War. In the year 1813 the State of Denmark was insolvent, in the year 1876 the Osmani realm. 1975 were the city New York bankruptcy.

See also: Bankruptcy

Articles in category "National bankruptcy"

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Related Websites

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• National Bankruptcy Conference
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• National Bankruptcy Conference: Mission
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• National Bankruptcy Review Commission
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• National Bankruptcy Sites
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