Default is a negative phenomenon for the economy

Probably, a large number of people remember, and some even shudder to think of the consequences and the power of the phenomenon, which is described by a short word “default”. It is not just incomprehensible to most, the term – “monster” that “ate” years created economic system. Is “thanks” to the default of 1998, Russians and Ukrainians are fully aware of the degree of influence of global economy on the home refrigerator. This phenomenon is identified with the empty store shelves, long queues and hopelessness of the empty promises of the government about the imminent change in the situation.

If we consider this concept as an economic term, the default – it is a process of violation by the borrower of its payment obligations to the creditor. In addition, this word is identified with the inability to make payments on its debt obligations in time and also to fulfill other terms of the loan agreement.

If we consider this term more deeply, the default – any refusal of payment on loans. It's safe to say that this concept is synonymous with the word "bankruptcy». The directly application of the term “default” implies a narrow focus-this refers to the government's failure to pay their debts.

The Origins of the concepts covered in a patina of historical antiquity. Medieval European landowners refused to pay their debts, thereby causing a default. This is true for other parts of the world. For example, economic processes that took place after the First world war. A country like the United Kingdom, followed by France, together with Italy, refused to pay their debts to America, spisovskiy to default. The United States is still committed to the required amount with Germany, which that must be paid in accordance with the Treaty of Versailles.

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The End of the 20th century was marked by the debt default in developing countries-Sri Lanka, Venezuela, Angola, Brazil and others. The most painful for the population was a process that occurred in Argentina. It was then, in 2001, together with the default country was subjected to the successive governments. The population was frightened by the riots and looting. As already noted, Russia and Ukraine have also felt the power of this phenomenon.

It is Customary to distinguish several types of default:

1. on Bank debt;

2. of credit obligations, valued in national currency;

3. on loans, the cost of which is calculated in a foreign currency.

It is Worth noting that, like any other economic phenomenon, a default carries with it both negative and positive effects. So, the negative results of this process are the reduction in the financial rating, the lack of financial insurance, minimum internal cash reserves, the depreciation of the national currency, declining real incomes, the cessation or severe reduction of the production rate, the sharp contraction of the banking sector and the lack of lending opportunities for private companies, the enormous number of political issues, etc.

The positive aspects include the reduction of the cost of manufactured goods, output to a safe level of work of all spheres of government. In terms of default is essential to the functioning of the so-called false economic schemes. In addition, the government has a real opportunity to reduce the amount of debt sitting at the negotiating table with the lender.

The Default of Greece or Cyprus, America or Mexico never happens unnoticed. Due to the presence of export-import relations of all market participants, or otherwise associated with the debtor, you feel the effects of this phenomenon.