In the 15th century moneylender’s had their benches broken when they run out of their hard-earned cash on other people’s backs and hence the origin of ‘bankruptcy’. The broken benches, smashed stopped them starting up business again. Back then insolvency was public and it was irrevocable. Although, like everything where there’s a will, there’s a way and the broken benchers probably still got back into their moneylending line of business to fleece a few more before they went down the tubes again. That was the beginning of when banks started to become too big to fail.
Just recently France got another telling off from Moody’s and ended up beng downgraded. While the rest of Europe has managed to drag (almost) itself out of recession and see some sort of growth, France is still in the doldrums and suffering for its lack of initiative and lack of stimulus. It was downgraded from Aa2 to Aa1, despite the outlook being stable. The report from Moody’s stated that the problems will continue since France is not addressing the problems at the root of the matter, resulting in structural unemployment as well as weak profits for companies and losses in global markets. The report stated: “The current economic recovery in France has already proven to be significantly slower — and Moody’s believes that it will remain so — compared with the recoveries observed over the past few decades. In part, this is due to the erosion of competitiveness and loss of growth potential following the global financial crisis. It is becoming increasingly clear, in the rating agency’s view, that these problems will continue to constrain growth long after the cyclical recovery from the crisis is completed. In Moody’s opinion, France’s potential annual growth rate is at most 1.5% over the medium term. France faces material economic challenges, such as a high rate of structural unemployment, relatively weak corporate profit margins, and a loss of global export market share that have their roots in long-standing rigidities in its labour and product markets.”
The rating attributed to France is expected to remain as is for the next 12 to 18 months, which means that there will be no improvement in the French economy for another 2 years probably.
But, France is nowhere near as bad as some countries. There are some that are almost on the verge of implosion and they have soaring debts. What will happen to them and who are they?
Most In-Debt Countries in the world on the edge of Insolvency
The outlook for this country is negative according to Moody’s and government debt for 2015 stands at 39.6% of GDP. The credit rating for Belarus is Caa1. The last-dictator of Europe, President Alexander Lukashenko, who has been in power for over 20 years, now refuses to privatize national industries still in good-old Communist style. It has suffered greatly due to the sanctions imposed upon Russia as its economy is closely linked to the Russian Federation’s. Its currency has also suffered and is now linked and indexed to the Russian ruble (40%), the US dollar (30% and the euro (30%).
Argentina’s outlook is also negative and the credit rating currently stands at Caa1, with government debt at 49.5% of GDP for 2015. The inflation rate in the late 1980s stood at 12,000% and they are still suffering the consequences of the terrible years that set them back then. In 2001, the government defaulted on $100 billion in debt when it was unable to see its exports rise because it had pegged its currency to the US dollar. The country defaulted again in 2014 and in the up-coming elections all candidates are looking to see a rise in foreign investment to get themselves out of trouble.
This country has a credit rating that stands at Caa2 and 132.8% of government debt as a percentage of GDP (2015). GDP per capita currently stands at $8,784 also. The country has a positive outlook since its credit rating recently went from Caa3 to Caa2. There is greater confidence in the economy due to the simplification of tax returns and the implementation of a new minimum business tax.
This country has an outlook that is stable and a rating of Caa2. Government debt this year stands at 75.7% of GDP and GDP per capita is $8,321. Its GDP is currently at $1.8 billion. In 2012, the country defaulted on the repayment of $23 million, after having run up debts to the tune of $540 million.
This country has a credit rating of Caa3 and its outlook is stable today with government debt at 39.6% of GDP. Per capita GDP stands at $16,346. Fuel prices have had an adverse effect on this country’s economy and caused increases in debt, since nearly 94% of earnings are from oil today for this country.
Government debt here stands at 172.7% of GDP (2015) and per capita GDP is $26,773. The rating is currently under review for Moody’s and the present credit rating stands at Caa3. Greece defaulted on the repayment of $138 billion of its bailouts of 240 billion euros in 2012. The country has one of the highest unemployment rates in the history of the world sometimes hitting 25% (and even 60% for youth employment). What changes will take place with the election of the left-wing party Syriza and Prime Minister Tsipras, then his resignation and now his stunning victory and regaining of power in a second election within eight months?
Ukraine has a credit rating of Ca and a negative outlook. Its government debt stands at 94.1% of GDP ad its per capita GDP amounts to $8,278 today. This country has the worst credit rating of all country in the world and it is the second lowest credit rating possible. The likelihood of default stands at 100% according to Moody’s.
There are only seven countries in the world with a credit rating that is worse than C in the world today. These are the seven countries that will go bankrupt if they don’t find a solution to their problems.
The Ancient Greeks had it off to a tee. Bankruptcy didn’t even exist as a term and when a man ended up falling into debt then it was his wife, children and servants that ended up in debt slavery. They would have to work and were forced into physical labor in order for his debt to be paid back. It was only in Athens that the families of debtors were saved by the Laws of Solon, forbidding an Athenian from being enslaved. But, it was ok to enslave foreigners or people who were not from Athens. Sometimes that slavery would last for the lifetime of the wife and children, given to the creditor since the debtor had made a mistake. What’s changed these days when someone goes bankrupt? It’s just someone else that ends up paying for it all rather than the person or the institution that did the dirty deeds in the first place. When the banks go bankrupt, we don’t break their benches any more. We just tell them not to worry and that they will get a good old-fashioned bailing out from the Federal Reserve. When the banks lend too much because they want to make a killing, we let them do it again because they were visibly having so much fun doing so.
Even before capital markets took off internationally, countries were going bankrupt and Spain, France, Portugal and Prussia regularly went bankrupt because their eyes were bigger than their bellies with regard to world expansion. They never had the money, but they just ran into debt and went bankrupt. Back then, they never concealed it. Today, things are different. Bankruptcy fraud is the order of the day with asset concealment or destruction of documents, conflict of interest ad redistribution arrangements as well as falsification.
Once upon a time in the not-too-distant past people ended up going to a debtors’ prison for falling into debt. Back in the 19th century it was a common way to deal with those that owed too much money to others; forced into labor to pay off what they owed to their creditors. Of course, at the same time, the wife and children fell into poverty because there was no safety net to fall back on. When released from prison, they were forced in debt bondage and became indenture servants or serfs.
How many of the bankers should end up as debt-bondaged serfs? What should happen to the countries that just willingly allow themselves to fall into debt?