Russia will go bankrupt? That’s what happens when countries go bankrupt

The first thing that hits the creditors – these are mostly banks and pension funds. The country is therefore no longer getting any new loans and is stuck with new bonds. Citizens, of course, panic and try to clear their accounts. This intensifies the pressure on the banks and leads to bank failures.

However, companies no longer receive new loans and cannot invest. The result is a wave of bankruptcies and mass unemployment. Further consequence: the tax revenues break away.

The way out

And how do states get out of it?

Brutal but true: by bleeding creditors and taxpayers. Most of the time your money is gone. Therefore, the creditors often have to be rescued first. In the Greek crisis, it was German and French banks that had lent the country money.

And the states themselves must commit themselves to a strict austerity course. For the beaten citizens that is the next hammer. But this is the only way states have a chance to get money again. Then the International Monetary Fund (IMF) comes along and sets the rules. And last but not least, states often have to sell large parts of state property.

And Russia?

If Russia crashes now, international creditors would pay for it too. Domestically, Putin would probably have to go the way of Lenin. 100 years ago, Russia was bankrupt as a result of the 1917 communist coup and civil war. Cut off from the world, Moscow had only one way: wartime communism. So: total nationalization, martial law, dispossession of citizens and violence.

By Editor

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