What happens when a country goes bankrupt?
Iceland sent shock waves throughout the world in 2008 when it declared bankruptcy amidst the 2007-2008 recession. When a country goes bankrupt, there are fewer rules to return to solvency as there are when a citizen or corporation goes bankrupt.BackgoundTechnically, countries cannot go bankrupt like a person or company because no international bankruptcy court exists. Instead, it becomes nearly impossible for the insolvent country to get loans from foreign nations.EffectsWhen a nation goes “bankrupt” it often experiences a devaluation of its currency and a lower standard of living. Argentina’s 2001 bankruptcy, for example, saw its economy decline 13 percent in one year.ConsiderationsWhen a country goes bankrupt, it effects more than just public services and government functions. Companies from bankrupt nations are often also looked upon as not creditworthy.Fun FactEconomists consider the United States as bankruptcy-proof because the world uses the dollar as a reserve currency. As a res
