In the conditions of an unfavorable economic and financial situation all over the world, the balance of payments is disrupted not only at the international level, but also within the state. Today, almost everyone has a debt, albeit a small one, from an ordinary person to large sovereign states. First of all, these are payments on loans and borrowings, which must be regularly repaid along with interest.
The concept of "default"
Any situation in which an individual, company, organization or state cannot pay off its debts with creditors is called a default. At the state level, this is an economic collapse, expressed in the insolvency of the state as a result of a sharp decline in the value of the national currency. Unable to pay off domestic and foreign loans, the country's leadership is forced to officially declare the termination of payments for a long-term indefinite period, thereby declaring a default. This type of default is also called sovereign.
The most striking example is the default in Russia, which occurred in 1998 on August 17. During this period, the state stopped payments on bonds not only of the state short-term model, but also of the federal loan, as a result of which foreign investors and international financial companies suffered.
But not only the state can be a debtor. This role can also be played by any enterprise, company, corporation that, due to their activities for various reasons, cannot or do not want to pay off their debts.
Default types
The most relevant types of default today are ordinary and technical.
A common default is the bankruptcy of the debtor. In other words, he simply does not have the money to pay his debts. If we are talking about a private person and non-repayment of a loan, then financial institutions may try to withdraw housing and other property, which are collateral, on account of the debt. In the event that a company or an enterprise has declared itself bankrupt (that is, declared a default), a manager is appointed in court, who must decide either to reorganize and change the direction of the company, or to fully or partially sell the enterprise along with the property. The proceeds will be settled with the debtors.
Declaring the state bankrupt is a complicated procedure. Accordingly, the consequences of this are more serious, therefore, the case of the country that announced the default is considered by international courts.
A technical default is a situation in which the borrower has the ability to pay off the debt, but deliberately goes to the violation. This may mean that he refuses to accept any terms of the contract (interest or the amount of debt). In this case, there is a possibility that the parties will resolve the situation through negotiations and the obligations will be fulfilled. Otherwise, the case may go to the court, and the creditor has the right to declare the debtor bankrupt.
Consequences of default
For the average person, the consequences of bankruptcy, be it a state or a company, are not very pleasant. If the organization refuses to fulfill its obligations, then for its employees this threatens with non-payment of wages, freezing payments for a long time (and maybe forever), subsequent reduction, dismissal and closure of the enterprise.
The prerequisites for the default in Russia in 2014 are no less grave. In the course of its existence, in order to ensure the normal functioning of the national economy, the state borrows funds not only from national companies, banking structures or its citizens, but also from other countries. And if a country declares a default, then this can only mean one thing - the economy is declining, there is an outflow of investor funds, inflation is growing at a galloping pace, the currency is depreciating, just like the shares of state-owned companies. As a result of all these negative consequences, the state is unable to settle accounts with its debtors. The average person who has savings deposits, deposits or government bonds suffers. Also, foreign countries, which previously allocated loans and borrowings, are at risk of non-repayment of funds.
It is difficult to say whether there will be a default in Russia in 2015, but certain prerequisites still exist. This is the fall in world oil prices and the international economic crisis, which directly affects the value of the ruble. If, nevertheless, this happens, then the fall in the value of the Russian ruble will completely depreciate it, and savings and deposits in the national currency will be lost.
