What Happens When a Country Defaults on Its Debt?

Country defaults have been in the news lately, but what actually happens when a government can no longer pay off their debts? We dive into this strange topic in today's video.

DISCLAIMER:
This channel is for education purposes only and does not constitute financial advice - Richard is not responsible for investment actions taken by viewers. Please seek out a registered advisor if you require assistance (while Richard is a registered portfolio manager at WDS Investment Management, he does not provide advice through The Plain Bagel, which is not affiliated with his employer).

[SauceChef]

How to colonise a country in the modern world:
1. Lend money to a failing country
2. (Optional: if it doesn’t fail) silently trigger their economic collapse
3. Become the big brother and say “it’s ok, you don’t have to pay me back, but this time lemme do the work”
4. Bring in your state-owned corporations to fill in their industry
5. Increase in economic productivity
6. Citizens gain your trust
7. Overthrow government

[novamaster]

Obviously the country should just get a second job, deliver pizzas on the weekend, needs to have a garage sale, and just use the debt snowball method to pay off their debts and build the psychology of being fiscally responsible </sarcasm>

[idontliketoinvest]

Not sure the Russian default would be a perfect example, as it was mainly due to sanctions by the western world more like a forced default. Whereas Sri Lankan default is more like a true default as it was a direct cause of the country's poor economic performance and management.

[SamuelBSR]

0:26 You actually can. Russia did not default on its debt, it was not allowed to pay instead. Russia pushed a money transaction and it had enough money but the transaction was declined by the Western banking system. In order to pay back, Russia suggested that the borrowers get paid in Rubbles directly bypassing any artificial restriction. So, everybody who wanted their money back probably got them directly from Russia.

[idraote]

IMF are financial sharks. The miracle is that countries are actually able to recover after getting IMF """help""".

[adrianliew]

Hey Richard, just want to say thanks for all the genuine videos you have been sharing for the past! Appreciate the way you present the topics with your professionalism, not overcomplicated layman term, and with a sprinkle of bagel humor. Keep up the great work!

[Max-vetu]

The story about unregistered swimming pools in Greece goes to illustrate how selfish the Greek population was and how incompetent the government was at collecting those taxes.

[Kenxclout]

I have the best debts in the world!




Every single one of them is Outstanding!

[Fenix-fgcs]

Thanks a lot! I would love a more in-depth video about this topic, like a history of government defaulting, why it happened, etc

[hendrikheim]

Russia one was a bit silly of an example, as their debt is in a limbo, they could pay it but the recipent doesn't want it.

[qwertyuiop-cuve]

Pretty much comes down to it that the most you can do is to not lend anymore to that party ever again. You still lost your money and they can live happily ever after if they can manage without your cooperation.

[agustincarrasco]

The World Bank and the IMF both started from the Bretton Woods conference in the 40’s, which came about because the U.S dollar, as a result of war-fleeing European gold, had so many gold reserves backing it. Inevitably, however, inflationary Keynsian policies—which the Bretton Woods Agreement was founded on—plagued the U.S dollar and, much like Britain during WW1, the U.S defaulted on its gold IOUs and Nixon went off the gold standard in the 70’s.

The IMF and the World Bank are essentially American and fully backed by dollars. So, when you control the global reserve currency—and with it, all these international funds/banks (e.g., IMF and the World Bank)—it begs the question: what happens when the biggest debtor of all defaults?

[ryanendoh]

Can you do a follow up video on the implications to stocks and bonds held by investors (in both debtor and creditor nations) when a country defaults?

Thumbs up if you'd like this too.

[TheMrFishnDucks]

Great video. Very informative. Keep up the good work.

[CaedenV]

The new delivery is, as always fresh and warm! Exactly the way I love my plain bangles!

[JuanManuel-nmch]

Me, an Argentinian guy watching this: rookies

[nirmaljayasuriya]

From Srilanka, thank you for covering this,

[saynotopw]

Sri Lanka politicians are living cushy in America while the nation is in turmoil.

[bestgirlie]

What's needed? Liquid cash. Everyone only has credit. If you have stacks of cash, you can capitalize on everyone's credit. A recession as bad it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying.

[johnnewsom]

Russia was forced into default, Sri Lanka might be able to settle/restructure the debt with Japan.