Guest Post: What Happens When A Nation Goes Bankrupt

Tyler Durden's picture

Submitted by Simon Black of Sovereign Man

What Happens When A Nation Goes Bankrupt

Three years ago today, my best friend called me and told me to turn on my television. I remember the way he described it– “Lehman is finished.”  The TV showed guys packing up their desks on Sunday afternoon, moving out of their offices forever.

That was the precipice from which financial markets plunged the following day, taking the global economy along for the next three years.

We appear to be at that moment once more.

Greece is out of cash. Again. The Greek Deputy Finance Minister said on Monday that his country only has enough cash to operate for a few more weeks.

As I write this note, French, German, and Greek politicians are all on a conference call, feverishly trying to figure out a way to avoid default.  Everyone seems to understand the consequences at stake… given the chain of derivatives out there, a Greek default will completely dwarf the Lehman collapse.

Unfortunately for the bureaucrats, dissent against the Greek bailout plan is spreading across Europe… and leaders can no longer ignore the growing wave of opposition in Finland, the Netherlands, Austria, and Germany.

It’s no wonder, when you think about it.  Why should a German hairdresser who retires at age 65 stick his neck out so that a Greek hairdresser can retire at age 50? This, from a continent that was perpetually at war with itself for over a thousand years.

Europe’s great benefactor over the last several months has been China, whose treasury has been buying up worthless European sovereign debt to ensure that Greece doesn’t default.

It’s a testament to the absurdity of our failed financial system when the highly indebted rich countries of the world have to go to China, a nation of peasants, for a bailout.

Speaking at the World Economic Forum this morning, Chinese premier Wen Jiabao delivered a stern message: there is a limit to Chinese generosity, and it will come at a price.

The Chinese will undoubtedly use any further investment in European bonds as leverage to influence western politicians. They already bought Tim Geithner. The US government refuses to label China a ‘currency manipulator’. Similarly, European politicians will now be forced to acknowledge China as a ‘market economy’.

Ultimately, this charade will fail. It’s a simple matter of arithmetic. China could buy every single penny of Greek debt and it still wouldn’t solve the underlying problem: Greece would still be in debt! And more, still hemorrhaging billions of euros each month. Throwing more money at the problem only makes it worse.

Then there are those Greek assets for sale… like state-owned Hellenic Railways Group. It lost a cool billion euros last year. Or the notoriously inefficient, highly unionized, traditionally lossmaking Greek postal service, Hellenic Post. Any takers?

These are not exactly high quality assets… nor can Greece expect to get top dollar in what’s clearly a distress sale.

Over 200 years ago, Napoleon was forced to sell France’s claim to 828,000 square miles of land in the New World in order to cover his war expenses. US President Thomas Jefferson happily obliged, paying the modern equivalent of around $315 million (based on the gold price), roughly 59 cents per acre in today’s money.

According to US census records, there were around 90,000 people living within the territory during that time who literally woke up the next day to a different world.  This is the sort of thing that happens when governments go bankrupt.

With the Lehman collapse, a lot of people got hurt… but it was mostly a financial and economic issue. When an entire nation goes bust, the pain is felt much deeper: the most basic systems and institutions that people have come to depend on simply disappear.

Argentina’s millennial debt crisis is a great example of this… suddenly the power failed, the police stopped working, the gas stations closed, the grocery stores ran out of food, the retirement checks stopped coming, and the banks went under (taking people’s life savings with them).

European leaders (with Chinese help) can postpone the endgame for a short time, but they’re really just taking an umbrella into a hurricane. It would be foolish to not expect a Greek default, and it would be even more foolish to not expect significant consequences. The only question is– how are you prepared to deal with what happens?

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madgstrader's picture
The US WILL Default

Phoenix Capital  If you believe that our leaders have even the slightest clue of how to solve the economy’s problems, Obama’s jobs proposal should rid you of your delusion......

X.inf.capt's picture

oh, they gotta clue, trader

it just doent fit in with their 'vision' of a 'future america'.

nope-1004's picture

It’s a testament to the absurdity of our failed financial system when the highly indebted rich countries of the world have to go to China, a nation of peasants, for a bailout.

LOL.  Spot on Simon.  Soon coming to Merika.


reader2010's picture

You got it dead wrong, dude. We are a nation of peasants while China is a nation of slaves.

eureka's picture

What's the difference between US consumer and credit and bailout slaves, a.k.a. peasants - and Chinese hard working and saving 50% of their income survivor "slaves"?

I'l tell you: the former are sliding slowly into material and spiritual hell - the latter rising to the top of it.

CrankItTo11's picture

Time for a New World Order... One World, Under Antichrist, with Slavery and Murder for all!

Popo's picture

oh god, no more Graham Summers please. That lightweight jackass has been spamming Zerohedge with his newsletter ads daily. Not to mention his newsletter is entirely cribbed from other posters.

SheepDog-One's picture

No ones forcing you to read anything there Popo.

Dr. Richard Head's picture

If the US government can force democracy at the end of a gun, I am willing to bet reading would be applicable as well.

Here is my current list of provisions that I cycle through on an inventory program regularly -

- 20 MRE kits

- 10 gallons of water

- 2 month food supply

- 20 gallons of gas

- $1,000 in accorted denominated US currency

- cold weather gear

- batteries

- .38 handgun with 1,000 rounds

- Assault rifle - 500 rounds

- silver/gold

- assorted seeds for different "barterable goods"

- still need to add to my cigarette and booze stock, but it has been last on the list.

Any other basic tenets you would suggest?

reader2010's picture

and online access for reading ZH.

TJ00's picture

The fiction "This is John Connor. If you are listening to this,you are the resistance."

has become fact "This is Zerohedge. If you are reading this,you are the resistance. "

Incubus's picture

I like the machines. They don't judge me like asshole faggot people do.

durablefaith's picture

.22 LR for barter

Knives of good quality steel

Long wearing footware (military boots)

Canvas, thread, parachord

glokk26L's picture

22 not a good idea for barter.....don't trade what could get aimed back at you.

22 lr should be to keep for yourself.  Remember, 22 lr cannot be reloaded economically, so at its current price, figure at least 4 bricks per item you have that uses it.


X.inf.capt's picture








(a smithing skill, butcher, baker or candle stick maker( be worth more alive than dead)

HellFish's picture

You need more AR ammo.

You need 12 gauge with 1000 rounds.

Get bigger handgun.

Dr. Richard Head's picture

Thank you all.  I used to think I was crazy, and was told I was crazy, for trying to warn others.  I have reserved myself to the idea that we aren't going to get out of this the easy way, so the hard way a cometh.  Hope I am wrong, but the calm before the storm seems to have ended and the clouds are rising over the horizon in Europe. 

This is going to be one hell of a ride.

X.inf.capt's picture

it wont be easy doc, but maybe we'll make it through this with our assholes intact...


MrBinkeyWhat's picture

You are not crazy at all. You are one of the "sane" ones. If you are not checking yet, you should start.

takinthehighway's picture

Wouldn't hurt to pick up "Patriots" and "How To Survive The End Of The World As We Know It", both by James Wesley, Rawles, the administrator of that site.

trav7777's picture

you ARE crazy...all of you madmaxers stockpiling fucking MREs that will constipate you to death along with more ammo than you could possibly carry are fools.  I will cackle when we burn your house down and all that stupid shit goes up in smoke or when you are forced to abandon it due to pollution of some kind

Chump's picture

Not one of your more intelligent comments.  Here's hoping you forgot a sarc tag in there somewhere.

floydian slip's picture

dont forget your rape whistle trav

it helps drown out the screaming


Incubus's picture

I guess they believe in the grasshopper and the ant: except there's won't be a few grasshoppers.  There'll be swarms of locusts and the locusts are going to take their cake and eat that shit and then eat them and their kids.

X.inf.capt's picture







Prometheus418's picture

Well, shit, let's not even make any kind of effort then.

Thanks for the advice.

SheepDog-One's picture

Yea Trav, really moronic. Maybe an attempt at humor, but comes across as nervous titters from someone walking thru a graveyard at midnite.

Money Squid's picture

Note to self - kill trav7777 first, then enjoy survival meals and rest easy in hammock. :)

I Got Worms's picture

I keep telling myself that I am either right, or batshit crazy for thinking these thoughts about what is heading our way. The way I see it, if I'm crazy, nothing can be done about that - but if I am right, lot's of work to do to get ready.

Melin's picture

Preppers are currently ridiculed for taking precautions, will soon be attacked for being "lucky" when everyone else is out of supplies and will be the future's heroes when we're done writing the history books.

Rodent Freikorps's picture

Historically, they will be demonized as hoarders.

That is why you don't talk about Survival Club.

sullymandias's picture

All that survival stuff you gotta get, this one is way more important: make friends with your neighbors

krispkritter's picture

A 12ga 'slug gun' is a good one to have. Rifled barrel, 3-5 round clip, and around $2-300.  Keep in mind if you intend to HUNT, that an AR or almost any semi-auto over 5 rounds will be illegal to use. If you get caught, it's problems with the authorties, a fine, and loss of the gun, probably for good.  Saboted slugs or some new slug designs will make the gun effective out to 150-200yds. Plus it will shoot all the standard stuff you would use in a 12ga. but requires more cleaning. A .22 rifle is also a must have for hunting. Sub-sonic ammo makes it about as quiet as a pellet gun. If you need small game or just to eliminate pesty varmints, it is cheap to use and doesn't raise a ruckus like the .38 or AR. 

Shameful's picture

Just some suggestions

More water, 10 gallons can go faster than you think and it's easy and cheap to save and store water.

Up size that pistol.  I would suggest a good .45 auto (partial to the Springfield XDM and it's price, or old school 1911) or at least 9mm auto.

Riffle, more ammo and more magazines.  At least 1k rounds and 10 magazines, even if you want to move on can always ditch it.  Better to have it and not need it and as a recreational shooter 1k rounds goes fast.

If you are planning on staying in one location reloading supplies make shooting cheaper, and kind of fun to have your own loads.  But if sticking around I would also deepen the food supply.  You mention batteries, so assuming you have flashlights, and a good headlamp is fun to., keeps hands free if need to work in the dark, also matches/lighters.  Toilet paper, but then can just buy the big boxes at a big box store, as well as other hygiene and cleaning products.

Dr. Richard Head's picture

Sounds good.  Looks like my next bonus money is going to be used up pretty quick here. 

Founders Keeper's picture

Hi Dr. Richard Head.

Regarding your bonus money.  I'm getting rid of my FRNs as fast as we can tolerate.  Laying up hard "assets."

Here's a cheap non-directed light source.  Vegatable oil lamp.  Get 2-cup clear Pyrex measuring cup with handle.  Buy 100% cotton mop head, cut away a 12" strand for a wick.  Wrap medium gauge (24 ga.) wire spiraling around the length of the wick.  Bend a loop-like base in the wick, set the arrangement at the bottom of the Pyrex cup, then extend the 2 ends of the wick up straight approx 2 inches high from the bottom of the Pyrex cup.  These ends will serve at 2 wicks.  Pour vegetable oil into the cup, leaving half inch of wick above oil level.   Light your wicks.  Enjoy light.  Oil lamps have been around for thousands of years. 

Pluses:  Can use all sorts of vege cooking oil including canola, corn, peanut, olive etc.  Can use new fresh vege oil, expired rancid vege oil, and used vege oil.  Nice handle on Pyrex cup for carrying.  Clear Pyrex gives max light.  AND, fire hazard is extremely low; if the kids knock over the cup the flames will extinguish in the vege oil.

Far far cheaper than candles.  And a mop head full of potential wicks will last nearly a life time.

Good suggestions all from Posters this evening.

Best wishes.  Hope for the best, and prepare for the worst.


Melin's picture

Thanks FK.  That's one of the most useful, easy to remember tips I've learned yet.  Another one regarding water capture is to dig a hole, place a collection bowl in the bottom, drape and secure plastic sheeting into the hole weighted with a rock so that the plastic pulls down into a central cone above the bowl and voila, overnight condensation drips into the bowl from the underside of the plastic.    

Chump's picture

I second the XDM .45.  What a weapon!

LFMayor's picture

Medical kit.  Some "tea" type candles or long burning votives.   Liquid dish soap for you, hotel bars for barter.  Salt, multivitamins.   hospital or vet type face masks.   A second set of good boots, extra undwear, extra socks.  5 gallon buckets for toliet and laundry duties.

You've got a good start, better than most.  Buy more AR ammo and +1 to the scattergun suggestion above.

I'll trade you some of my home made Section8 jerky for extra ammo maybe, after the rukus dies down a bit.  It will be made with real sea salt, to promote mental vigor! 

trav7777's picture

who the fuck do you idiots envision needing to shoot? 

espirit's picture

Prolly the next door neighbor who knows they have all this shit.

Melin's picture

Cacklers who burn our houses down.

floydian slip's picture

correction:  Cacklers who try to burn our house down. 


Dr. Richard Head's picture

I would imagine people like you who need something to eat. /sarc

Listen, I have no idea how things are goingto turn out at this point.  The supplies I am gathering I use regularly anyway (aside from ammo other than target fun and the MRE's - they were a gag gift someone gave to me).  I just happen to be buying a bit more.

If nothing happens I just happen to beat inflation of food that I eat anyway.  If currency collapse happens, then I bought myself some time to figure out what's next. 

It's better to do what I am doing rather than being reliant on the government for unemployment check or food stamps - I tell you what.

I am just fortunate enough (or planned well enough) to have greater income than expenses.  I could put that money in the bank and lose it to inflation while being paid out a paltry interest rate.  I could throw into a 401 (k) or stocks and just hand it to Wall Street. I could pay off more of my underwater mortgage and just lose the extra capital to the loss of value of the home.  Or I could blow it on coke and hookers, but my wife wouldn't like that.

I am not sure what to do with extra capital anyway, so at least I am prepared for a snow storm or something if an Argentina style collapse never comes.