They don't go bankrupt in the conventional sense.
When they go bankrupt economists like to use the term "Hyper Inflation".
This means that the currency they produce becomes worthless.
When they go bankrupt economists like to use the term "Hyper Inflation".
This means that the currency they produce becomes worthless.
- Hyperinflation
- Great reset
Likely effects may include
- Revolution
- War
- Famine
Here is a nice BBC article how hyperinflation has been solved in the past
https://www.bbc.com/news/business-45523636
Usually there is a period, or permanent, “dollarisation” of the economy https://en.wikipedia.org/wiki/Hyperinflation#Aftermath but not sure if this is an option for the something of the scale of the UK or the EU.
If the GBP hyperinflates, you won't need to dollarise something of the scale of today's UK. Their economy will be worth a lot less. If it lasts for long enough, Scotland, Northern Ireland and perhaps even Wales will organise different problems for themselves. There would also be a humanitarian crisis and a migration/refugee crisis to help reduce the scale. On the other hand, the dominance of English, traditional respect for UK education, and the capacity of services to be delivered remotely would encourage an early dollarisation: all sorts of law firms and programmers will be asking for salaries in the currency of the source country. So I suspect the UK would dollarise more quickly and more successfully that other similar disasters.
The eurozone is somewhat uniquely placed in the context of a hyperinflation, because there are many separate countries who would, in that context, be enthusiastic to reintroduce national currencies. Whether that staves off the problems in the whole zone or what happens I don't know, but it might break it down into bite-sized chunks.
I struggle to understand what they might have meant by it in that kind of generic use.
(In addition to treasuries, the money is spent subsidizing home loan interest rates below market).
Plus, in general hyper inflation means people in debt get relief, its the lenders who lose the purchasing power of the money they lent.
There are at least two, the legal definition of “under administration under bankruptcy laws“, and the less formal but still common “insolvent”.
With a representational commodity currency (e.g., silver certificates) rather than fiat currency, insolvency (the inability of the issuer to redeem outstanding currency at face value) is at least reasonably connected to the risk of hyperinflation.
OTOH, neither definition even applies to fiat currency issuers, who literally cannot be insolvent in their own currency, and usually aren’t subject to bankruptcy law.
They can find that they are unable to use their own currency to do anything. This is practically equivalent to being insolvent, even if you give it a different name.
That's not what hyperinflation means.
Hyperinflation is not the same thing as inflation, it's not just a monetary phenomenon. It happens when a population rejects a currency. It has historically always involved at least one of: losing a war, regime change or foreign-denominated debt - some kind of exogenous event. [1]
Hyperinflation is the collapse of an economic system in which one of the symptoms is dramatic decrease in purchasing power.
[1] https://www.pragcap.com/hyperinflation-its-more-than-just-a-...
My understanding is small community banks sold by the FDIC to larger banks or their depositors paid out directly. [0] Larger banks - WaMu for instance - were put under the purview of the Office of Thrift Supervision (OTS) and their customers assets and certain liabilities sold. In WaMu's case it was to JPMorgan. [1]
[0] https://www.fdic.gov/consumers/banking/facts/payment.html
[1] https://en.wikipedia.org/wiki/Office_of_Thrift_Supervision
I've been occasionally watching the Turkish Lira this past year. The rates against the USD are still sinking. Against the EUR it's pretty stable. Yet allegedly they have something like 80-150% inflation in Turkey, while the EUR-zone has 10%. How does this work, why isn't the Lira becoming "worthless" with that amount of inflation?
If TRY against EUR will stay stable until January 2023, I expect that we will talk about TRY having roughly the same inflation as EUR.
so i also wonder what they're doing to curb the spiral
https://www.bbc.com/news/business-45523636
The problem is that Erdogan is not doing any of this. His controversial politics are taking Turkey further down in the pit. Because Turkey’s political system is somehow broken, it is not clear if any election can replace Erdogan.
When governments produce a lot of money, their dollar becomes substantially less. This causes them to need to produce even more money (because money which used to be enough is no longer), creating a cycle and a desperate attempt to produce something out of nothing, where eventually what used to cost one dollar literally costs trillions of dollars - hyperinflation.
Banks manage a lot of money, so if they go bankrupt the government needs to bail them out by printing a lot of money, causing massive inflation. And if the government needs to pay off foreign creditors (they do), and tries to address the resulting poverty caused by the inflation, it leads to printing more money and hyperinflation.
EDIT: Relating to the Turkish Lira and why that isn’t hyperinflating: I don’t know where exactly the line is where “high inflation” triggers the cycle and becomes hyperinflation. I suppose they still have resources, so their currency still has some worth. Just, either they don’t have as many resources as before, or the government is printing money which it spends on itself in order to drain money from the average person without explicit taxation.