Cancelling Foreign Debt

[The Idler]

What happens when a government unilaterally decides to cancel all its foreign debt? And what happens after that government is replaced (democratically or otherwise)? Does the debt return?

[Raúl Duke]

What happens when a government unilaterally decides to cancel all its foreign debt? And what happens after that government is replaced (democratically or otherwise)? Does the debt return? I'm no expert but...

Usually, when a government cancels debts or show problems on repaying debts their bonds get "lowered" in status; which makes it harder to get more credit (I'm guessing).

Some cases, it could lead to aggression/war against that nation (the one who cancels the debt).

When a government is replaced, the debt stays, especially if the creditor says it so, in place unless one party or both parties repudiate/forgive/end the debt sometimes after.

My question is, what happens after an anarchist, et.al. revolution? Should we re-pay the debts of the overthrown bourgeois state? Personally, I say we should repudiate the debt, although perhaps this may be "ultra-leftist" for some. (I once suggested that in case of revolution in the U.S., we should repudiate the trillion-dollar debts and not pay anyone, particularly China yet someone said that we should repay China. China is not 3rd world and they're not leftist so we should treat them the same as every other bourgeois nation)

[mikelepore]

I say cancel the debt. After the revolution, it's not the same borrower anymore. The land should be described as "the location where the USA used to be."

[Catillina]

Hmm, I think yfter the October Revolution, Lenin cancelled the russian debt to other countries( not 100% sure about that through)

[Uppercut]

Hmm, I think yfter the October Revolution, Lenin cancelled the russian debt to other countries( not 100% sure about that through)

He did.

"Tsarist Russia had the largest foreign debt of any nation in the world in 1917, when about half of Russian industry and bankers were foreign owned. After the Bolshevik Revolution, the Soviet government refused to settle Tsarist foreign debts, and nationalized foreign-owned banks, factories, and mines compensation. American and West European banks were left holding huge stacks of worthless Tsarist bonds. Western governments could not even collect interest on old loans to the Tsarist and Provisional governments of Russia."- The Soviet State, pg. 346

[danyboy27]

What happens when a government unilaterally decides to cancel all its foreign debt? And what happens after that government is replaced (democratically or otherwise)? Does the debt return?
the lender will probably try to sue the country in question, and it will have a big impact on the cqapability of the country to borrow money.


Now, for a person, not being able to borrow money is a mundaine problem, but for a country, it will have catastrophic impact, beccause most of the country have to borrow money , hell even the us actually live on borrowed money.

Unless this country can be 100% self sufficent he will greatly suffer, and will have big problem to trade with the outside world.

so much for free market and freedom.

[Raúl Duke]

We can always trade with marginalized countries, like Cuba and such.

Just give them manufactured goods and other resources they don't have in their island in exchange for whatever or Cuban/etc credit towards other foreign goods.

Just be creative, we can find a way around the lost of credit from creditor/prior-debt holding nations.

[Boboulas]

Just be creative, we can find a way around the lost of credit from creditor/prior-debt holding nations.

I like it, thinking outside the box is exactly what is needed in any revoultionary situation.

I would imagine that the the revoultionaries would just refuse to pay. I sure as hell wouldnt expect to pay for the previous governments problems, which is what i am doing now in the UK!!!

[Red Saxon]

Mexico tried that, defeated France, and then had a party about it.

[redSHARP]

investors bail out and the national money inflates. state bonds are reduced in value, and foreign countries probably would withhold aid or monetary benefits. bad case- your home countries businesses around the world would be taken over as collateral.

i am not sure, but i think a new government is still responsibly for past debt, however a few quick negotiations could clear that debt in theory.