Default is a negative phenomenon of the economy

Probably a lot of people remember, and some even with a shudder recall the consequences and strength of the phenomenon, which is described by the short word "default". This is not just a term incomprehensible to many - it is a "monster" that has "eaten" the established economic system for years. It was thanks to the 1998 default that Russians and Ukrainians fully realized the impact of the global economy on the home refrigerator. This phenomenon is identified with empty store shelves, long lines and the hopelessness of the government's empty promises of an imminent change in the situation.

If we consider this concept as an economic term, the default is the process of violation by the borrower of payment obligations to the creditor. In addition, this word is identified with the inability to make payments on its debt obligations on time, as well as fulfill other loan conditions stipulated in the contract.

If you consider the term deeper, then default is any kind of refusal to pay for loans. It can be confidently asserted that this concept is synonymous with the word "bankruptcy". At the same time, the use of the term "default" itself implies a narrow focus - it means the government's refusal to pay its debts.

The origins of this concept are covered with a touch of historical antiquity. Even the medieval European landowners and landlords refused to pay their debts, thereby causing default. This is also true for other parts of the world. For example, the economic processes that took place after the First World War. A country like the United Kingdom, followed by France and Italy, refused to pay their debts to America, having subscribed to a default. The United States is still trying to get the required amount from Germany, which it had to pay in accordance with the Treaty of Versailles.

The end of the 20th century was marked by a default in developing countries - in Sri Lanka, in Venezuela, Angola, Brazil and others. The most painful for the population was the process that occurred in Argentina. It was then, in 2001, along with the default, the country underwent a change of several governments. The population was frightened by pogroms and looting. As already noted, Russia and Ukraine also felt the power of this phenomenon.

It is customary to single out several types of defaults:

1. for bank debts;

2. for credit obligations valued in national currency;

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

It is worth noting that, like any other economic phenomenon, the default carries both negative and positive consequences. Thus, the negative results of this process are a decrease in the financial rating, lack of financial insurance, minimal domestic cash reserves, a fall in the national currency, a decline in real incomes of citizens, an end to or a drastic decline in production, a sharp contraction in the banking sector and a lack of credit for private companies, A huge number of political issues, etc.

To the positive moments, one can attribute the decrease in the cost of the goods produced, the access to a safe level of work in all spheres of the state. In the conditions of default it is impossible to operate the so-called false economic schemes. In addition, the government has a real opportunity to reduce the amount of debt by 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, all market participants, in one way or another connected with the debtor, feel the consequences of this phenomenon.