eli5 Why it’s bad for country to default on it’s debt?
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Countries often need to borrow money — to pay for stimulus in times of recession, in times of unexpected disasters (COVID, earthquake), or in times of war. Selling bonds is also a tool to reign in inflation. So if a country defaults and investors refuse to lend in the future, that severely hamstrings a government’s ability to control the economy and pay for urgent expenditures.
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