Sovereign debt default history? (2024)

Sovereign debt default history?

The overall record, from the first recorded sovereign default in 1294 up until the global financial crisis of 2008, reveals that serial default is far rarer than the much-ballyhooed 1980s events suggest. The only mass default in Europe's long record, dating back to 1294, occurs during the Napoleonic Wars (1800-1815).

The prospect of sovereign default is scary for investors, but many countries have never defaulted on their debts. Ecuador has defaulted 10 times in modern history, and Venezuela has defaulted 11 times.

The biggest private default in history is Lehman Brothers, with over $600 billion when it filed for bankruptcy in 2008 (equivalent to over $800 billion in 2022). The biggest sovereign default is Greece, with $138 billion in March 2012 (equivalent to $185 billion in 2022).

Argentina has defaulted on its international sovereign debt nine times, including three times during the past two decades. In 2001, the government defaulted on more than US$132 billion of federal sovereign debt.

The founding of the Bank of England put an end to defaults such as the Great Stop of the Exchequer of 1672, when Charles II had suspended payments on his bills. From then on, the British government would never fail to repay its creditors.

By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off. Congress distributed the surplus to the states (many of which were heavily in debt). The Jackson administration ended with the country almost completely out of debt!

1) Switzerland. It is no surprise to see Switzerland on this list. Switzerland is a country that, in practically all economic and social metrics, is an example to follow. With a population of almost 9 million people, Switzerland has no natural resources of its own, no access to the sea, and virtually no public debt.

It has serious economic consequences for the nation, making it expensive or impossible for it to borrow money in the future. It also causes domestic turmoil. Many banks, pension funds, and individual investors keep some of their assets in sovereign bonds. The nation's financial failure ripples through its economy.

There's a roughly one-in-four chance that the US will hit the so-called X-date — at which the government runs out of cash — without a deal to raise the debt limit, and the odds are getting worse, according to JPMorgan Chase & Co.

So if the U.S. cannot pay its creditors, interest rates on U.S. debt would go up, creating a cascade of higher interest rates. So mortgage rates, credit card rates, car loan rates. All would become more expensive. Finally, there is a real concern about the economy — that a default could spark a recession.

Who bailed out Argentina?

Argentina became the IMF's top debtor in 2018 after receiving a $57 billion bailout to help then-President Mauricio Macri's government steer out of an economic crisis.

A series of deposit runs began to have a severe impact on the health of the banking system. In December 2001, the Argentine authorities imposed a partial deposit freeze. With Argentina no longer in compliance with the conditions of the expanded IMF-supported program, the IMF decided to suspend disbursem*nts.

Between 1860 and 1930, exploitation of the rich land of the pampas strongly pushed economic growth. During the first three decades of the 20th century, Argentina outgrew Canada and Australia in population, total income, and per capita income. By 1913, Argentina was among the world's ten wealthiest states per capita.

As previously stated the UK's war debt to the US was finally paid off in 2006, every last dollar.

Eliminating the U.S. government's debt is a Herculean task that could take decades. In addition to obvious steps, such as hiking taxes and slashing spending, the government could take a number of other approaches, some of them unorthodox and even controversial.

Key Takeaways

Tax hikes alone are rarely enough to stimulate the economy and pay down debt. Governments often issue debt in the form of bonds to raise money. Spending cuts and tax hikes combined have helped lower the deficit. Bailouts and debt defaults have disadvantages but can help a government solve a debt problem.

The largest holder of U.S. debt is the U.S government. Which agencies own the most Treasury notes, bills, and bonds? Social Security, by a long shot. The U.S. Treasury publishes this information in its monthly Treasury statement.

The public owes 74 percent of the current federal debt. Intragovernmental debt accounts for 26 percent or $5.9 trillion. The public includes foreign investors and foreign governments. These two groups account for 30 percent of the debt.

At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.

Does China owe US money?

No. Actually the total amount of US sovereign debt owned by China (less than $1 Trillion) is actually less then the debt owed by China to various US owners of Chinese debt. The difference is that the US sovereign debt is all being paid principal/interest as per the terms, and China has defaulted on its debt.

Depending upon the type and scale of war your currency (in the bank) may lose it's value and in the worst case may reduce to a worthless piece of paper. Paying for war is the main problem for states.

A country cannot simply declare bankruptcy as a private business might do. Instead, the government needs to start a restructuring process, meaning renegotiating the contract terms of its debt with all its creditors, sometimes individual, sometimes with groups.