A country going bankrupt

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halfnote19_IHB

halfnote19_IHB

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Who knew this could happen?

<a href="http://www.businessweek.com/globalbiz/content/oct2008/gb2008108_036648.htm?campaign_id=rss_daily">Iceland on the Brink of Bankruptcy</a>
 
Only 320,000 people and too much foreign debt.

You can only export so much fish and attract so many tourists.

These people will get crushed with Hyper Inflation very quickly.
 
I used to hold high-yield Icelandic krona CDs. They were doing pretty well for a while, then things started going south in a hurry, so I got out. Not the overall return I was hoping for in the end, but not bad either.

How does a country go bankrupt? Do they just tell all their creditors "Sorry, can't make the payments anymore," and go back to farming?
 
[quote author="Daedalus" date=1223532596]I used to hold high-yield Icelandic krona CDs. They were doing pretty well for a while, then things started going south in a hurry, so I got out. Not the overall return I was hoping for in the end, but not bad either.

How does a country go bankrupt? Do they just tell all their creditors "Sorry, can't make the payments anymore," and go back to farming?</blockquote>


Will their FICO score goes down the tube and they can't buy anything for 7 years?
 
[quote author="halfnote19" date=1223532894][quote author="Daedalus" date=1223532596]I used to hold high-yield Icelandic krona CDs. They were doing pretty well for a while, then things started going south in a hurry, so I got out. Not the overall return I was hoping for in the end, but not bad either.

How does a country go bankrupt? Do they just tell all their creditors "Sorry, can't make the payments anymore," and go back to farming?</blockquote>


Will their FICO score goes down the tube and they can't buy anything for 7 years?</blockquote>


Naw, I'm sure someone in Congress will sponsor the Icelandic Financial Rescue Bill quite soon and the American taxpayer will save them too...
 
<a href="http://www.portfolio.com/news-markets/international-news/portfolio/2008/06/16/Vulture-Funds-Sue-Over-Bad-Debt">Portfolio magazine has a great article on debt vultures suing countries to pay up</a>.



<em><strong>Some low-profile investors are making ungodly amounts of money buying third-world debt on the cheap, then suing for the balance. Can they be stopped? More important, should they be?</strong>



Despite what some think, Paul Singer is not the devil, and the only horns he has are for navigating midtown traffic. An aggressively low-profile 63-year-old billionaire and supporter of conservative causes, Singer is a bespectacled, gray-bearded man who shies away from being photographed but has rarely ducked controversy.



Singer?s main claim to notoriety is Elliott Associates, a $10 billion New York-based hedge fund he founded in 1977. It is Elliott?s affiliation with Kensington International, a so-called vulture fund (which represents about 1 percent of the hedge fund?s total business), that has led many to claim that Singer has bright red skin, a very long tongue, and a forked tail. He?s part of a new generation of investors?the vultures?who buy up the defaulted debt of developing countries on the cheap, then sue to recover 10 or 15 times what they paid for the notes. It?s a very good business, if you don?t mind being attacked by Congress, mauled in the press, and treated as a pariah by the do-gooders leading the global anti?poverty movement.</em>



I *heart* chartpr0n.



http://www.portfolio.com/images/sit...06/vultures-playground/vulturesplayground.jpg
 
[quote author="graphrix" date=1223540292]He?s part of a new generation of investors?the vultures?who buy up the defaulted debt of developing countries on the cheap, then sue to recover 10 or 15 times what they paid for the notes.</blockquote>


What if the country decides not to pay them back? What kind of consequences are there?
 
[quote author="zovall" date=1223546753]



What if the country decides not to pay them back? What kind of consequences are there?</blockquote>




See: South America



(iirc, argentina and maybe a few others did this in the 80s, consequences: no access to foreign credit markets for a few years)
 
Looks like Pakistan is going to join Iceland

<a href="http://www.businessweek.com/globalbiz/content/oct2008/gb20081020_947596.htm?chan=top+news_top+news+index+-+temp_global+business">BW</a>
 
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