Russia likely to default on its debt

[marke]

Russia is near bankruptcy. How does that happen and what are the consequences for a nation when it goes bankrupt?

MSN

Russia may have defaulted on foreign bonds for the first time since the years following the 1917 Bolshevik revolution.
That's the word from credit agency Moody's after Moscow tried to service its debt in rubles.
Russia is required to service its debt in U.S. dollars, according to Reuters.
Moscow made payments on April 4 on two sovereign bonds maturing in 2022 and 2042.
Russia "therefore may be considered a default under Moody's definition if not cured by 4 May, which is the end of the grace period," Moody's said in a statement on Thursday.

 

[marke]

What do we know about national defaults on a debt? We know S&P lowered its evaluation of US credit under Obama for the first time in US history. Why, and what difference does that make? Is there a danger the US could default on its own debt in the future? Here is an article on debt defaults:

Why do countries default on their debts?

If Russia defaults on its debt payments, it won’t be the first government to do so. A default can mean creditors lose money and raising debt gets harder.

www.weforum.org

What does it mean to default and how does it happen?​

The International Monetary Fund describes default in simple terms as a broken promise or breach of contract. When a government borrows money from foreign and domestic creditors, it is contractually obliged to pay the interest on those loans. If a payment is missed, this is described as a default.
Defaults happen when governments are not able to – or don’t want to – meet some or all of their debt payments to creditors.
Weakening economies and “reckless spending” are among the factors that can lead to defaults, according to Investopedia, the financial content website. Countries can also face problems if they borrow in a currency other than their own. This means that, if their budget falls short, their central bank can’t print more money to fill the gap.

Reckless spending leads to bankruptcy, something that politicians rarely admit, sadly.

The US debt is currently more than $30 trillion. https://usdebtclock.org/

 

[marke]

Does the national debt issue affect you or me? Should we be concerned? Should we advocate for corrections in our taxing and spending policies? Does any of this really matter? Yes, it matters.

Interest on the National Debt and How It Affects You

The interest on the national debt is how much the federal government pays on the outstanding public debt. Learn how it's calculated and what it means for you.

www.thebalance.com

Interest on the National Debt and How It Affects You​

The interest on the national debt is how much the federal government must pay on outstanding public debt each year. The national debt includes debt owed to individuals, to businesses, and to foreign central banks, as well as intragovernmental holdings.
Intergovernmental vs. Public Debt
The intragovernmental debt is what the government owes the Social Security Trust Fund and other federal agencies. It's not part of the public debt and it doesn't impact the interest on that debt. It's money the government owes itself.

The debt held by the public—$22.3 trillion as of January 2022—is held in the form of Treasury bills, notes, and bonds, as well as Treasury Inflation-Protected Securities (TIPS), savings bonds, and other securities. The majority of the public debt is owned by the American people, either through individual investors, the Federal Reserve, or state and local governments.1

I've heard people say the US does not have to pay its debt because it only owes itself the money. That is a kindergarten-stupid erroneous assumption. The US does owe Americans money and why would anyone say it does not matter whether those Americans get paid or not? Do they think it would not matter if they got paid money owed to them as well?

A large part of the US debt is money owed to Social Security. Does it matter that if the US defaults on its debt social security payments to seniors will be halted?

 

[marke]

What is the real threat Americans face with rising debt?

Interest on the National Debt and How It Affects You

The interest on the national debt is how much the federal government pays on the outstanding public debt. Learn how it's calculated and what it means for you.

www.thebalance.com

How the Interest on the Debt Affects You​

The interest on the national debt immediately reduces the money available for other spending programs. Advocates of certain benefits will call for a reduction in spending in other areas as it increases.

A growing debt burden becomes a big problem for everyone in the long term. The World Bank says a country reaches a tipping point when the debt-to-GDP ratio approaches or exceeds 77%.13 The U.S. debt-to-GDP ratio was around 125% through most of 2021.

Gross domestic product measures a country's entire economic output. Lenders worry whether the country will repay them when a country's debt is close to or greater than the entire country's production.

Russia may default on its debt this year. The US may also soon default on its debt due to the fact that the U.S. debt-to-GDP ratio is already at a dangerous 125%. Those are facts that should become a part of mainstream discussions, not brushed aside while kicking the stupid free-spending careless can down the road to disaster.