is it possible to be a global grant bovey?

ninky_2

never one for avoiding asking a stupid question in the hope it might actually prove not entirely stupid after all so here goes....

much comparison is made between national debts and private debts so i wanted to take the analogy further.

no one is denying that unplanned bankruptcy can cause heartache and devastation. the same cannot be said for carefully managed bankruptcy. not knowing quite how the global bailiffs operate i'm wondering if it is possible for a state to become bankrupt in the same fortuitous way as an individual. for example, grant bovey.

is it possible for a state to function economically by transferring assets in a way that global debt callers can't touch? just as an individual can have assets held by a spouse can a state have assets held and run by say the private sector (i note a fire sale of state held property being mentioned on another thread).

similarly, just as a private bankrupt is allowed things that are seen necessary for them to function (car for work) are there state held things the global debt callers can't touch (education, hospitals etc)?

for someone who like me who prefers to choose their partner on personality (state controlled economics) the only disadvantage i can see is that you'd have to be married to anthea turner (private sector) and put up with all her annoying ways (free market capitalism) for fear of divorce.

Generali

ninky wrote: »

never one for avoiding asking a stupid question in the hope it might actually prove not entirely stupid after all so here goes....

much comparison is made between national debts and private debts so i wanted to take the analogy further.

no one is denying that unplanned bankruptcy can cause heartache and devastation. the same cannot be said for carefully managed bankruptcy. not knowing quite how the global bailiffs operate i'm wondering if it is possible for a state to become bankrupt in the same fortuitous way as an individual. for example, grant bovey.

is it possible for a state to function economically by transferring assets in a way that global debt callers can't touch? just as an individual can have assets held by a spouse can a state have assets held and run by say the private sector (i note a fire sale of state held property being mentioned on another thread).

similarly, just as a private bankrupt is allowed things that are seen necessary for them to function (car for work) are there state held things the global debt callers can't touch (education, hospitals etc)?

The difference between personal and sovereign debt is that if the latter defaults there's nothing that the creditors can do beyond not lending more money in future. They have no claim over the assets of the Government or of any of the citizens of that country.

ninky_2

Generali wrote: »

The difference between personal and sovereign debt is that if the latter defaults there's nothing that the creditors can do beyond not lending more money in future. They have no claim over the assets of the Government or of any of the citizens of that country.

i'm assuming this is considered a big problem? who are 'the creditors' in reality? could an alternative source of credit be found / created?

can the creditors not set guidelines to a country such as reining in public sector pay etc? or does that happen before they stop lending?

Generali

ninky wrote: »

i'm assuming this is considered a big problem? who are 'the creditors' in reality? could an alternative source of credit be found / created?

can the creditors not set guidelines to a country such as reining in public sector pay etc? or does that happen before they stop lending?

It depends on what you mean really.

Some countries in the past have simply repudiated their debt, for example Russia 1998. They refused to make any more coupon (interest) payments on what they owed or repay the capital to either domestic or international creditors.

They found it tough to borrow at any price for a while but these days they can borrow again from the markets. At present it costs them 4.80%pa to borrow long-term compared to about 3.40% for the US.

More usually, countries go through a managed default assisted by the IMF and sometimes other groups like The Paris Club. The way it generally works is that the IMF will lend the country some money at low interest rates to keep repaying their debts to creditors. In return the defaulting country will negotiate 'haircut' with bond-holders (that is how much money the bond holders are going to lose), perhaps with the help of The Paris Club.

In addition, the defaulting country will agree some sort of staged austerity program with the IMF whereby the IMF will keep providing cheap loans in return for the Government bringing spending under control.

ninky_2

so why are we more worried about the state of our credit national credit rating than the state of our public services / economic situation of the general population?

it sounds like state bankruptcy is preferable to a generation of economic hardship.

ILW

I believe when Argentina defaulted they went through a few years when virtually all public services just stopped as they could not either earn or borrow the money to pay for them.

Thrugelmir

ninky wrote: »

so why are we more worried about the state of our credit national credit rating than the state of our public services / economic situation of the general population?

The UK no longer has the benefit of the British Empire to generate wealth.

ILW

ninky wrote: »

so why are we more worried about the state of our credit national credit rating than the state of our public services / economic situation of the general population?

it sounds like state bankruptcy is preferable to a generation of economic hardship.

We need to borrow money to pay for public services, we would have massive cuts if the ability to borrow was taken away.

In the case of the UK the debt is not the problem, the deficit is though.

ninky_2

ILW wrote: »

I believe when Argentina defaulted they went through a few years when virtually all public services just stopped as they could not either earn or borrow the money to pay for them.

true. my point was if those services were less reliant on state finance they would be less vulnerable to national debt / default. it's counter intuitive to a state interventionist like me but i'm just mulling stuff over.

for example if taxes were somehow paid directly to the services rather than via the state (not sure how that would be different to just paying for them, it would have to be to protect the less wealthy, but i'll think of something) would that remove vulnerability to state bankruptcy......:undecided

ninky_2

ILW wrote: »

We need to borrow money to pay for public services, we would have massive cuts if the ability to borrow was taken away.

In the case of the UK the debt is not the problem, the deficit is though.

surely that's not the real reason the government borrows money? i was assuming it was to grow the economy. there's not point in just borrowing money to pay for stuff you can't afford anyway. no logic in that whatsoever.

ILW

ninky wrote: »

true. my point was if those services were less reliant on state finance they would be less vulnerable to national debt / default. it's counter intuitive to a state interventionist like me but i'm just mulling stuff over.

for example if taxes were somehow paid directly to the services rather than via the state (not sure how that would be different to just paying for them, it would have to be to protect the less wealthy, but i'll think of something) would that remove vulnerability to state bankruptcy......:undecided

Sounds like you are advocating the end of all public spending and a "look after yourself" state. Surpised to hear that from you.