December 29 2009|07.33 AM UTC

Stan Reybern

10 Governments That Went Bankrupt

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National bankruptcy is a popular discussion topic of late. In light of the global financial meltdown and the runaway deficit spending of the United States in particular, observers are predicting that national bankruptcy is entirely possible. Harvard MBA John T. Reed, for instance, opines that our children and grandchildren will likely “live in a world where America’s credit cards have been cut up because our huge debt was renounced.” Those who insist this could not happen would do well to look at history, and all of the national governments that have gone bankrupt over the years. Today we’ll take a look back at 10 of the best-known examples.


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National bankruptcy skeptics like to claim that while countries went bankrupt hundreds of years ago, such catastrophe is out of the question in our modern, inter-dependent world. However, as Spiegel Online insists, national bankruptcy is not “just some theoretical construct.” In their article “The Ghost of Argentina, Spiegel tells the story of Argentina’s bankruptcy in 2001. There was a run on banks following a collapse of the country’s national currency. So desperate and panicked were Argentina’s citizens that “many spent nights sleeping in front of the automated teller machines.” Eventually, the situation became so chaotic that President Fernando de la Rúa fled an enraged mob by helicopter. Despite all the protests and bank runs, the nation simply could not repay its $145 billion in foreign debts.


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An even more recent national bankruptcy than Argentina’s 2001 fall from grace was Iceland, which became a casualty of the global financial crisis in 2008. According to BusinessWeek, the cause was a rapidly devalued currency: “the country cannot pay back its external debts, and the Icelandic currency, the krona, has become essentially valueless in the rest of the world.” The upshot of a worthless krona was that Iceland could no longer pay for imports, on which the country is heavily dependent. Worst of all, BusinessWeek notes, is that “with Iceland sitting outside the major currency trading blocs, there may be no one with the incentive or ability to save it.” Despite going hat in hand to the International Monetary Fund and Russia, the UK reportedly threatened to sue Iceland over unreturned money.


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Germany has the dubious distinction of having gone bankrupt not once, but twice in recent memory. The first bankruptcy came in the 1920s as a result of losing World War I. The “crushing reparations payments” (reportedly three times the value of all the property in the country) imposed by the Treaty of Versailles reduced Germany to a state of being “completely, hopelessly broke”, according to Unfortunately, this led to severe hyperinflation of German currency, which eventually got so out of control that “a wheelbarrow full of 100 billion-mark banknotes could not buy a loaf of bread.” The end of World War II produced another bankruptcy in 1945, as most of Germany’s industrial capacity and factories were destroyed by the allies.

Great Britain

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Germany was not the only country to go bankrupt after World War II. Following suit, Great Britain demonstrated that even winning a war is accompanied by significant losses. Indeed, a New York Times article reported in 2006 that the UK was only then making its final payment on $4.34 billion in loans extended by the U.S. all the way back in 1945. To put that sum in perspective, $4.34 billion in 1945 is roughly equivalent to $140 billion today, a sum that was “double the size of the British economy at the time.” So ravaged was the British economy following the war that almost all national resources were dedicated to paying war debts for five full years after its completion.


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Few developed nations have had economic histories as complicated and challenging as Russia’s. Never was this more apparent than in 1998, when the former communist country suffered a financial crisis unlike any it had experienced prior. This time period was also known as the “ruble crisis” because of the ruble’s central role to Russia’s struggles. Following months of downward pressure on the ruble by currency speculators, Wikipedia states that “Russian stock, bond, and currency markets collapsed as a result of investor fears that the government would devalue the ruble, default on domestic debt, or both” in August 1998. Inflation soared past 80% before the year was out, with many banks closing down and the ruble losing over two thirds of its value from August to September alone. Nor has the crisis been forgotten, with the UK’s Telegraph wondering in November 2008 “will Russia go bankrupt again?”


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Russia isn’t the only country that has been dragged into default by a decline in the value of rupees. In 2008, BusinessWeek reported that Pakistan “faced default on its huge foreign debt” amidst the beginnings of the financial crisis late that year. Remarking on the effects of looming default on the country at large, BusinessWeek states that “electricity goes out for as much as 12 hours a day, the gasoline lines get longer, and depositors rush to banks to pull out their meager savings.” Much of this trouble owes to Pakistan’s foreign exchange reserves dropping to $4.3 billion (a 75% free fall over the year prior) primarily because of soaring oil prices, which comprise roughly a third of Pakistani imports. Topping things off, the rupee lost about 25% of its value in 2008 alone.


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Zimbabwe offers perhaps the most tragic story of national bankruptcy. In 2008, CNN reported that the embattled African country was “in the midst of an outbreak of cholera, food shortages, hyper inflation, and renewed calls for President Robert Mgabe to step down.” Unable to repay its $4.5 billion debt and struggling with an astounding 80% unemployment, Zimbabwe’s plight eventually worsened to such an appalling degree that one informant told CNN “most areas hadn’t had water for at least a year.” Yale University’s Center For The Study of Globalization reached similar conclusions back in 2005, dubbing Zimbabwe “the world’s fastest shrinking economy.”


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Ecuador is another nation unfortunate enough to have gone bankrupt twice in its history. In fact, according to Bloomberg, Ecuador’s announcement that it would default on $30 billion in interest payments was the second such announcement in this decade alone. Addressing the world with defiance and self-righteousness, Ecuadorean President Rafael Correa flatly stated “I have given the order that interest payments not be made. The country is in default.” Arturo Porzecanski, an international finance professor at American University in Washington, spoke for much of the international community (and certainly Ecuador’s creditors) by calling the country a “serial defaulter.” “A lot of other countries have had one or two defaults”, Porzecanski explains, “but Ecuador tops them all.” All told, the South American country has gone bankrupt six times since its 1830 separation from Gran Colombia.


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In an article entitled Can European Countries Really Go Bankrupt?, the San Francisco Sentinel uses pre-twentieth century France as an object lesson. As the Sentinel reminds us, “France became insolvent eight times” between 1500 and 1800. While it is tempting to dismiss such long-ago events as irrelevant to modern considerations, we should remember France’s place in the world during those times. Because the United States either did not exist or was still forming from 1500-1800, France (along with England) was one of the world’s foremost superpowers. Indeed, it was largely France’s exorbitant financial support for the American War of Independence that made the country “so deeply in debt as to be effectively bankrupt” in the late 1700′s, according toWikipedia.


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The same San Francisco Sentinel piece names Spain as another national familiar with bankruptcy, having defaulted on its financial obligations seven times during the 19th century alone. In fact, Wikipedia reports that Spain was actually the first sovereign nation in history to declare bankruptcy, doing so as far back as 1557. It should be noted that Spanish King Phillip II “had to declare four state bankruptcies” during his time on the throne: 1557, 1560, 1575 and 1596. Such stories are sobering reminders that national bankruptcy is very much real, and has happened repeatedly throughout history to nations that fail to take proper precautions.

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{ 26 comments… read them below or add one }

David December 29, 2009 at 2:21 pm

You forgot New Zealand, with Muldoon.


David December 29, 2009 at 2:33 pm

What about New Zealand in the Fifties!!! Sold off most OF OUR STATE OWNED ASSETS, ELECTRICITY and COMMUNICATIONS.


jeff December 29, 2009 at 2:49 pm

New Zealand in the 80′s I believe.


Nectarin December 29, 2009 at 2:56 pm

I thought that Japan would be on this list after WW2


Dunner December 29, 2009 at 3:37 pm

Was it not he consequences of the great depression that backrupted Germany in the 1930s? The reparations merely being a major factor that tipped them over the edge during the depression – i.e. America demanding the repayment of loans that Germany was using to subsidise the reparation payments.

I may be wrong but I think Germany had a plan for the payback of the reparations using profits from the state rail system. It would have taken into the 80s but had it not been for the depression it might have worked – though it was pretty fragile.


Hhdez December 29, 2009 at 4:00 pm

I know this article only mentions actual nations, but considering California has the seventh largest economy in the World!! we should mention that we are bankrupt too.
Thanks Arnold…stick to making bad movies not bad politics.


john December 29, 2009 at 4:22 pm

Why no mention of the genocide of hundreds of thousands white farmers, along with their wives, children, and babies in Zimbabwe? That’s the reason for their food shortages.


Pat December 29, 2009 at 8:04 pm

What about New Zealand now????


Keigo December 30, 2009 at 1:43 am

Britain was in a lot of debt, but it didn’t default on it’s loans. How is debt = bankruptcy?


ANUJ AHUJA December 30, 2009 at 5:44 am

Good to read that India ain’t on that list.


Kiwi hedgehog December 30, 2009 at 5:47 am

FFS, please just spend two seconds thinking / googling before posting. New Zealand was the third richest country in the world in the 50s:

In the 80s the NZ economy was widely compared to a Polish shipyard, and reforms were painful, but it wasn’t bankrupt.


BS December 30, 2009 at 11:42 am

Iceland did not go bankrupt.


Anonymous November 13, 2010 at 11:55 am

the US is next
notice how all these involve numbers in the billions. the American national debt is something around 13 trillion. we are scewed for bankrupcy and we know it. maybe not during our lifetimes but its gonna happen. cuz seriously, there isn’t even 13 trillion dollars in all of america combined


Penny November 17, 2010 at 9:57 pm

the u.s will go bankrupt soon, time to start investing in silver


margaret December 7, 2010 at 3:39 pm

@David, how do you think it affected NZ selling off state assets, what position is country in now please?


austeeno June 12, 2011 at 4:26 am

what about italy???


Politic Dog August 7, 2011 at 1:22 am

America’s credit rating went from AAA to AA+ today. What’s next. We are in 14 trillion dollars worth of debt. I knew it was coming, but now the question is when will this situation leave. I researched countries going bankrupt, but America is a SUPER POWER country and owes trillions in debt not billions like those countries that went bankrupt before. This is scary because this situation is going to have international shock waves. I pray we come up out of this soon because those other countries bankruptcies were only trimmers. America going bankrupt is like experiencing a full blown volcanoe. This is like Fred Sanford of Sanford and Son actually having a real heart attack. I just know that the world is truely going to come to an end if we don’t stop being so consumptuous. I tell you, I always looked at the human race as a microscopic disease eating away at earth,s resources. Just think about it, we have never seen the end of space because the human race is simply a microscopic germinal entity that can only spread so far and then we die. Bankruptcy on a national scale is a remedy to our continuous consumption of earthly resources and one day the disease (of consumption) is going to spread so wide that there is not going to be a cure for NO BODY and that is when we will actually see ARMAGEDDON LIVE AND IN LIVING COLOR. Do you know what happens to the drug pusher when he has consumed the supplier’s product? He gets thrown in the ocean with cement bricks on his feet and the supplier takes all of the drug pusher possessions. Yeah China, Japan, and all the rest of you international creditors come and take of your spoils, but just remember this is not Monopoly and the properties is not made of plastic and PARK PLACE IS NOT FOR SALE.


chris December 31, 2011 at 8:34 pm

were is the united states on the list there in debt 15 trillion dollars


James January 21, 2012 at 11:16 am

One of the many differences with the debt situation in the US is that while we do owe some, what seems like a large sum of money, to other nations like China, the majority of our debt is to ourselves… A little research into the topic from actual bankers and economists tells a different story than what the Henny Penny pundits say. The only way the US can default on its payments is to just stop paying on our debt, we functionally can not run out of money because we are the reserve currency for the world, which is an enviable position. There are of course problems with what is happening economically, but being broke, i.e. running out of money, is not one. .


jdj September 24, 2012 at 1:15 pm

U.S dollar will NOT always remain the world’s reserve currency just research British history. The pound was once the world’s reserve currency. The US can lose this position you can only print but so much money before it becomes devalued giving way to hyper-inflation. The level or borrowing for the US is unsustainable debt. The laws of economics will prevail.


Shoboski February 2, 2012 at 8:45 pm

There are two ways to overcome indebtedness. One, Stop all-unnecessary Spending. Two, Increase the Revenues (Income).

The Spending I will address a little later but first I want to talk about increasing our Income, or our Tax Revenues. We CAN NOT do it by taxing the people who create jobs. They will just go to some other Country. The way to increase our Tax Revenues is to “Grow the Economy.”
Our present Revenues are approximately $4.2 Trillion and our total Economy, the Gross National Product (GDP) from which we get the Tax Revenues is approximately $14.4 Trillion. That means we collect from ALL taxes about 28%. Our Budgeted spending is approximately $6.2 Trillion, which means in short, we are spending $2 Trillion more a year than we take in. That is, we have a Budget Deficit of about $2 Trillion.

Assuming we do not cut the spending any, but there are a ton of places to cut spending. If we raise our GDP, then we will increase our Tax Revenues. The First expenditure I want to talk about is our purchase of Foreign Oil. (Yeah, I know the Oil Companies pay for that.) However, for every dollar that leaves our Economy or Our GDP, that is money that does not circulate in our economy. But if it remained here for the purchase of our own Oil Reserves (or Energy of what ever type) that money would circulate 4 times in the economy. So instead of sending a dollar out of the Country we would keep it and it would be spent 4 times in our Economy WHICH WOULD ADD $5.00 to or GDP.

We spend $500 Billion a year on Foreign Oil. If that stayed here it would amount to 5 Times that much in our GDP. That means our GDP would grow by $2.5 Trillion and it would get taxed at the normal tax rates so that one item would produce an additional $700 Billion in our Coffers. That would increase our revenues from $4.2 Trillion to $4.9Trillion. That means if we did not cut any spending we would only have to borrow $1.3 Trillion instead of $2 Trillion next year.

That is not the only place where we are sending our money out of the county to deplete our cash reserves. We have a trade deficit with China of approximately $300 Billion. That is $300 Billion more that goes out than comes in. If we Balance our Trade Deficits we would accomplish the same as not buying the Foreign Oil. That is money we would spend here at home to circulate in our GDP instead of theirs. We also have a Trade Deficit with N. Korea, India and Japan of another $200 Billion or more. We also send to Foreign Countries that don’t like us another $200 Billion in Foreign Aid. We have another $65 Billion that is sent to Mexico every year from Illegal Aliens who work here and send their money back home. If we corrected just those deficits we would retain in our GDP another $800 Billion, plus the $500 Billion from Oil. That is a Total of $1.3 Trillion that we could keep here to circulate in our GDP.

That would mean our GDP would grow by and additional $6.5 Trillion. Our GDP would then be approximately $21 Trillion instead of the present $14.5 Trillion. The tax collected on that if it remained the same would then be $5.88 Trillion. Then we would only have a Budget Deficit of $12 Billion. We can certainly cut that and much, much more. BUT THE MAIN POINT is Keep our money here and stop giving it away. That is the same thing Donald Trump has been saying.
One other thing; that additional $6.5 Trillion in the Economy would CREATE approximately 20 MILLION NEW JOBS. The Unemployment problem is solved also.

Now, to cutting the Spending: There is something magical about a human who is working. He creates and he thinks. If he knows he must find a job, he will find one. Let’s cut the Unemployment Payments to 4 months. (And I will tell you that is twice as long as it really takes.)

Next, in 9 months let’s stop all welfare except to the physically and/or mentally handicapped. That would mean that we would have 5 million people on the work rolls in 9 months plus the 12.5 million that are now on unemployment benefits. With our workforce increased by approximately 17 million people, we would not need the Illegal Aliens who are here taking the jobs. That means we could enforce our laws that are already on the books and the Illegal Aliens would deport themselves in a couple of years. That will save us the cost of deporting them.

With all our people working and our money staying at home, and us developing and producing our own resources our economy could be back on an even keel we can cut other items like Corporate Welfare and we will have a balanced Budget. IF WE DO THAT – WE WILL NOT GO BANKRUPT and our economy will again be the strongest in the wold.



Adam June 11, 2012 at 6:02 am

How about corporation profit?? If follow your way,corporation profit will be shrink and and the gdp will not grow.this will lead to deflation like what happen in japan in 90s till today.debt is bad for majority,but american needs debt, more explotation of earth resources to sustain the living lifestyle..This is realty!! .Bankrupt is a certain! War could be a solution to this!!!


Anonymous September 24, 2012 at 1:27 pm

Why stop at the physically disabled or mentally handicapped? Many of them can work too. How can people find work when those who get unemployment are displaced workers? See you have to have had a job & worked there for a couple of years before you can get benefits. People are unemployed due to cut-backs in business activity. You know firms going out of business through bankruptcy, financial crimes like madoff etc., out sourcing of services or technology displacing people or hiring of foreign labor. You’re out of your mind if you think people are going to lay down & die in the streets from starvation & exposure. Who promoted policies like NAFTA/GATT? There was a time in America when homelessness didn’t exist. Are there really enough jobs to support all those who are out of work? You are too stupid if you don’t understand that unemployment benefits are temporary and the ex-employee could land on the street worse case scenario or end up bankrupt drawing down all personal resources if employment is not found. Unemployed people having to drain pensions, 401(k) stock/bond funds, selling off properties and such is a tragedy and no doubt this too has an adverse affect on the overall economy.


Tim Gabz June 15, 2012 at 8:56 am

California is bankrupt due to generations of welfare spending, something Arnie inherited and was blocked repeatedly.

I am from Zimbabwe and I was burnt badly. Socialistic largess and waste precipitated the crisis that was only accelerated, not caused by the land invasions. The land was confiscated to buy votes and support from people that counted. With the national economic structural adjustment program, ’92-’93 they allocated currency to friends who imported what took their fancy and killed off a substantial part of the local manufacturing industry who were only later allocated currency to buy replacement equipment.

Greece is like Zimbabwe in 2000, it’s gonna fold, America is in a very dicey situation standing only because if the $ falls we are all in the dwang. However trade is weening itself off the U$D and precipitating things further. The change is coming, it is how it is mitigated.

Internationally, particularly in the West debt > GDP and there has to be an adjustment so pensions and savings etc are over valued on paper because our governments have spent it and the banks will have to compromise, with our money.


VonVanVonder August 1, 2012 at 8:24 pm

America is bankrupt and has been since 1933.
The United States went “Bankrupt” in 1933 and was declared so by President Roosevelt by Executive Orders 6073, 6102, 6111 and Executive Order 6260, [See: Senate Report 93-549, pgs. 187 & 594 under the "Trading With The Enemy Act" [Sixty-Fifth Congress, Sess. I, Chs. 105, 106, October 6, 1917], and as codified at 12 U .S.C.A. 95a. The several States of the Union then pledged the faith and credit thereof to the aid of the National Government, and formed numerous socialist committees, such as the “Council Of State Governments,” “Social Security Administration” etc., to purportedly deal with the economic “Emergency.” These Organizations operated under the “Declaration Of INTERdependence” of January 22, 193, and published some of their activities in “The Book Of The States.” The 1937 Edition of The Book Of The States openly declared that the people engaged in such activities as the Farming/Husbandry Industry had been reduced to mere feudal “Tenants” on their Land. [Book Of The States, 1937, pg. 155] This of course was compounded by such activities as price fixing wheat and grains [7 U.S.C.A. 1903], quota regulation I7 U.S.C.A. 1371], and livestock products [7 U.S.C.A. 1903], which have been held consistently below the costs of production; interest on loans and inflation of the paper “Bills of Credit”; leaving the food producers and others in a state of peonage and involuntary servitude, constituting the taking of private property, for the benefit and use of others, without just compensation.


hale September 22, 2012 at 8:23 am

i think pakistan is the most bankrupt country and its situation is becoming worst its political leadership and terrorists along with some army generals are responsible for this alarming situation i want someone to discuss it


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