Can they just ignore the debt like it never existed? Are there real reprucussions for the government or impacts to the econony?
In: 467
Governments sell Bonds to banks, other countries, I vestments funds etc. Bonds are basically loans, and the givt pays them back at a certain interval and rate. If a govt, company or whatever defaults on there Bonds, these buyers lose trust that they will ever get their money back, and new investors will also not trust them. The value of the bonds will plummet, and the ability for the Gov’t to raise new funds will get drastically harder.
For a Gov’t that runs deficits, that means the govt will risk going bankrupt, or have to massively reduce its spending. Since govt spending is on things for the people, that means the people get screwed, and you get civil unrest or revolution. The military budget would get slashed, putting the country at risk to its enemies.
Overall a sovereign debt default causes massive problems.
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