In modern history, many countries have used borrowings to finance their growth and development. However, these borrowings can become untenable and not supported by internal economic growth.
These countries can enter a period of economic weakness that is exacerbated by ever increasing debt, eventually ending up in national bankruptcy.
We are seeing this scenario today with the fall of the Greek government. Other notable failures include:
- The stunning collapse of the Soviet empire in 1989.
- Argentina’s bankruptcy in 2001
- Germany has gone bankrupt twice. First, after they emptied their coffers to fight World War I. The end of World War II produced another bankruptcy in 1945.
- Great Britain also went bankrupt after World War II.
- France went bankrupt eight times between 1500 and 1800, including the French Revolution of 1774.
- Spain defaulted seven times on its obligations during the 19th century.
Such stories are sobering reminders that national bankruptcy is very much real, and has happened repeatedly throughout history to nations that fail to take proper precautions.
The United States is not taking ‘proper precautions’.