Defalt - what is such simple words, the default situation of 1998 and her lessons

January 23, 2021.

What is default in simple language

January 23, 2021.

Hello, dear blog readers Twenty years ago, events occurred in our country, which in the modern history were called the Black August 1998.

Defalt in Russia has become an economic shock for most Russians.


Citizens who survived the hardest financial crisis, still remember this period with horror. The possibility of a new default is still scared of Russians. After all, what happened once may repeat. But is it?

Defalt 1998.

August 14, 1998 on the question of the possibility of devaluation of the ruble President Boris Yeltsin said: "Will not. Not. Firmly and clear. " The dollar rate at that time was 6 rubles. 27 cop To this mark, the American currency has never returned anymore.

About the freezing of payments on GKO (State short-term bonds) Prime Minister Sergei Kiriyenko announced three days after the speech of Yeltsin. The Central Bank has ceased to support the ruble. Starting with a slight decline, the Russian ruble literally collapsed in the last days of August and the first week of September. At his peak (09.09.98), the dollar was worth almost 21 rubles.

Depreciation of the national currency led to a repeated increase in prices, salaries, pensions, social benefits. The inner gross product has decreased. The collection of taxes decreased, production fell. Some large banks went bankrupt, citizens lost their savings.

You can learn about the reasons and consequences of the crisis in detail from our video.

According to estimates of the Moscow Banking Union, the economic losses of the Russian Federation in 1998 amounted to about 96 billion dollars. Of these, 33 billion lost corporations, 45 billion banks, 19 billion - the population.

What is default simple words

Polls conducted in 1999 showed that two thirds of the inhabitants of our country cannot explain the term "default", and tell that it is such simple words. We will try to eliminate this gap.

The word is borrowed from the English language - Default. It denotes failure to fulfill obligations Termination of payments , not pay.

To allow default can Even ordinary person . To do this, it is enough to overdue the loan payment or not to make a monthly bank card payment.

Initially, the term was only applied to loan debt, but with the development of financial instruments the word has gained more importance. For example, the most common way to attract funds by the governments of countries are securities - bank bills, bonds, bonds. Termination of interest payments or principal debt on securities is considered a default.

In addition to financial obligations, the term denotes non-fulfillment of any conditions provided for by the loan agreement or the conditions for the issue of securities. So, the obligatory requirement when issuing a loan business is to pass reports to the bank. Failure to submit a balance sheet for a prescribed period is considered as default.

Summing up, you can give a term several definitions. Defalt is :

  1. Non-fulfillment of debt obligations within the prescribed period.
  2. Insolvency of any subject. As the latter, the company or state can speak.
  3. Violation of the conditions for obtaining a loan (loan), the issue of securities and other agreements to attract funds.

In the broadest sense, default understand Violation of any obligations - non-fulfillment of trade agreements, retreat from political, diplomatic agreements. But usually there is a classic interpretation of the term.

Types of default situations

Economists distinguish two types of default - normal and technical.

  1. Technical default Arises due to temporary difficulties. The borrower is ready to fulfill its obligations, but currently has some problems.

    In the case of individuals, this situation often occurs when salaries delay. By entering into a loan agreement, employees often tie a monthly payment date for the day of earnings. Incompretable money transfer leads to a violation of the loan conditions. However, the receipt of funds through a small segment of time (what is it?) Corrects the position.

    The reasons for the technical default may be the oversight of employees, a payment system failure, unforeseen circumstances. Usually the situation is rapidly leveled and has no consequences.

  2. To ordinary default Provides the inability of the debtor to fulfill its obligations. There is no money for payment of debt, and not expected. Similar words, the usual default is a situation that is close to bankruptcy, that is, the recognition of the debtor insolvent in court. Only competent and decisive actions of crisis managers can correct the situation.

In the borrower category Defalt can be:

  1. sovereign (state);
  2. corporate;
  3. banking, etc.

The sovereign default is also called the first-level default. It affects all citizens of the country and is negative effects on a global scale.

Causes of insolvency

The main reason for the default is the imbalance of the debtor's income and expenses. Budget deficit covered by loans and loans. Debt service leads to an even greater cost increase.

To cover the costs, the debtor attracts new funds, the cost of borrowed money increases. As a result, the debt obligations of the subject grow as a soap bubble, which sooner or later burst.

Budget deficit cause :

  1. irresponsible behavior of the borrower;
  2. income fall;
  3. force majeure;
  4. economic crisis;
  5. Change of political regime, etc.

Getting a loan or credit, the debtor is not able to foresee what awaits him in the future:

  1. An ordinary person can lead to a financial loss of work loss, transfer to a low-paid position, illness.
  2. In the company, the profit decreases due to the reduction of demand, loss of the part of the market, the technological lag from competitors.
  3. At the state level, the fall in revenues is expressed in low tax rates due to a decline in the production or taxpayer's maintenance in the shadow economy. Sometimes when changing the political course, the government may refuse payments for old debts.

Consequences of default

Borrower who made default Loses confidence lenders. Refusing to pay for debts once, it is very difficult to find a new loan. Investment risks are growing, it is possible to get money only under high interest, which further aggravates the financial position of the debtor.

At the same time, there are positive moments when declaring default. Stop payments on external debt gives a borrower with the opportunity to send funds to its financial recovery and Get out of crisis . Therefore, at the corporate level, before declaring the debtor bankrupt, crisis managers are sent to the company or organization. The purpose of their work is to restore the solvency of the borrower.

What is the sovereign default

On the World Arena, the obligation to fulfill the signed international treaties has been introduced by the Westphalian world of 1648. The insolvency of the country leads to especially serious consequences :

  1. The authority of the state and national business is undermined. For government and corporations, cheap loans become inaccessible.
  2. The devaluation of the national currency is occurring, imported goods are expensive.
  3. If the economy (what is it?) He strongly depends on foreign shipments, the purchasing power of money is reduced. The population is poor and cannot buy goods in the same quantity.
  4. Reducing demand negatively affects industrial production. The sales market is reduced, the costs are growing. The crisis especially hurts on companies operating on imported raw materials. Many corporations are ruined.
  5. To reduce the expenses of the enterprise reduce the staff and reduce wages, which leads to even greater impoverishment of ordinary citizens and the growth of different types of unemployment.
  6. The banking sector suffers. Investment outflow, the impossibility of obtaining international assistance and depreciation of reserves collapses the financial system.

With a sovereign default, not only the bankrupt state suffers, but also the creditors' countries. The consequence can be the collapse of financial markets and the international economic crisis. As a result, not only the population of the state refused to pay for debts, but also citizens of other territories.

At the same time, default mobilizes state reserves. Budget funds are more efficient. Lenders are afraid to lose everything and go to the restructuring of debts (what is it?), Agreeing on longer payments or refusing percentage.

Weak companies disappear, survive the strongest (natural review). The fall of the national currency rate contributes to increasing the competitiveness of internal manufacturers. In essence, it is though painful but necessary For recovery economy tool.

Crisis lessons in 1998

The consequences of the default in Russia in 1998 are still reflected in the economy. Some of them are gradually smoothed, others will still affect life in our country for a long time.

Which lessons Citizens and government from the financial crisis were removed:

  1. The events of those years have long undermined the confidence of the people to power. It is no secret that, if any risk, citizens change the national currency on dollars or euros and take bank deposits (what is it?). Do not cause confidence in the country government bonds. Citizens prefer to invest money in the business or banking sector than to give them to the government.
  2. Russians more responsibly began to trust money banks. High interest rates are not the main motive for choosing a contribution, but rather cause alertness. The created deposit insurance system has changed the behavior of depositors and raised the stability of the banking system.
  3. After the financial collapse, the state avoidsing money abroad. In Russia, now one of the lowest levels of the public debt (about 13% of GDP). At the same time, reserves are growing, which allows the economy to feel steadily under the influence of external sanctions. There are periodically conversations about the need to invest in industry and agriculture, but so far the position of the authorities is unchanged. Low government and reserve growth remain the priorities of economic policy.
  4. Refusing external sources, the government prefers to look for funds for investing (what is it?) And social needs within the country, often neglecting the well-being of their citizens.
  5. The state intervention has increased in the country's economy. The government learned that it is much easier to manage state-owned enterprises than private business. According to the latest research, the share of the public sector in the market is about 70%.

In general, the budget policy of the Government of the Russian Federation after the 1998 default is aimed at improving the economic stability of the country.

Good luck to you! Seeing fast meetings on the pages of

Defalt: What is it and why it happens, for what features to determine the approach and how to protect

In Russia, when they talk about default, they immediately remember 1998. The government was then refused to repay short-term government bonds, which led to an increase in the dollar course, a sharp price increase and the depreciation of the savings of ordinary citizens. There was a default, the consequences of which were very negative for the population. However, the concept of "default" is much greater. It can relate not only to a separate state, but also to companies. What is default? Is it possible to determine whenever a simple person when it starts?

About default with simple words

The term "default" is denoted by the refusal to pay debts on major debt, interest and other obligations under the loan agreement. Defalt in the company - the refusal to pay it to creditors. The result becomes bankruptcy.

Defalt in the country - the refusal to pay state debts. Moreover, it can be both domestic obligations (in front of the population) and external (in front of other countries).

In Russia, with default collided in 1998. The budget deficit at that time was covered by the release of state short-term bonds. This financial instrument has begun to use since 1997. At first, the bets were slightly higher than zero, and the state has fulfilled its obligations without any problems. In the new year, the stock market fell, which led to an increase in BT rates at first to 19%, and then up to 49.2%.

For the payment of debts, the state had to produce more and more new bonds. There was a Pyramid of GKO. The moment came when it became impossible to comply with credit obligations. Technical default announced on August 17.

In other countries, defaults occurred and occur. From 1946 to 2006, for example, more than 169 government defaults occurred. Most often, they accounted for countries like Spain and Greece.

Causes of defaults

Defalts in the country and individual companies can occur for various reasons.

Defalt companies

The main causes of the default commercial organization are:

1. Active growth of competition. 2. Negative changes in the market. 3. The growth of hopeless, as well as overdue receivables. 4. Failures in the supply of raw materials. 5. Error management policy. 6. Exactability of exchange rates. 7. Growing the cost of equipment.

As for the default state, it can occur for the following reasons:

1. Economic crisis as a result of a negative foreign policy situation. 2. Building the volume of external and internal debt. 3. Change of internal political course and intentional refusal to comply with debt obligations. 4. Reducing the income base. 5. A sharp increase in spending.

Types of default

Defalt is simple or technical. Each view has its own characteristics and distinctive features.

Simple default is associated with the fully inability of the country or the company to pay debts. Technical - inability to fulfill obligations due to temporary difficulties. If in the near future it will not be possible to repay the debt, the technical default turns into a simple.

For example, in 1998 there was a technical default. Then the state did not abandon completely from the repayment of debts on GKO, but used installments of payments and reducing volumes. Consequences of default

For the company, default has negative consequences. Banks cease to issue loans, counterparties refuse to enter into long-term contracts, the profit falls. If a simple default occurs, the next step will be bankruptcy. The company suspends the activity or completely stops work.

The effects of default for the state can be both negative and positive. Among negative: devaluation, drop in the standard of living, reducing income of the population, closure of enterprises, withdrawal of foreign capital. Economic and political processes are broken and destroyed. Unlike the company, the state continues to exist, but a lot of time will be required to come from the crisis.

There are also positive consequences. For example, one-day company leave the market. The means that are released as a result of the refusal to pay debts can be sent to the development of production and industry. Foreign companies leave the market, which makes it possible to develop domestic business.

How to understand that default is approaching?

The main precursor of default is the situation when difficulties with debt payments arise. Companies decreases, problems with customers appear, increasing receivables. The state has difficulties with the fulfillment of public debt securities obligations. If large companies with states are ceased to pay international debts, it will lead to a default and crisis of the entire financial system.

Another feature of the approaching default is to change foreign exchange rates. When the Central Bank cannot affect the cost of the currency, the situation is exacerbated.

How to protect against the default to a conventional citizen?

The main goal of ordinary people on the eve of the default is to preserve their income. It is important not to lose what you have accumulated. You can protect yourself in several ways.

Buying a property

When signs of default appear, you can also purchase real estate at a normal price. So you invest in a promising asset. Soon the price will raise sharply, and after the default happens, they will fall, because There will be no demand. Gradually, the market will come to normal, but it will go for years. Buying real estate should if you want to save funds for a long time.

Buying currency

Not having knowledge in the financial sphere, it is difficult to guess when the Natsawa will begin to be cheaper. It is necessary to engage in analytics and forecasts, or use insider information. At the beginning of the crisis, the banks sharply overstate the course of the currency and restrain the sale of the dollar. You can use yourself by separating savings into several parts: dollars, rubles, euros.

Purchase of precious metals

Experienced investors are always investing in gold. Simple citizens can buy ingots, coins or invest in impersonal metal. The investment in precious metals will allow you to save your capital. Such an investment is best done for the long term.

Buying securities

The most prominent, but requiring certain knowledge of the investment. You can buy stock packages that will increase in price after default. There is a risk that many companies will close as a result of a default. We must carefully choose securities to minimize losses.

Defalt - Test for all

Failure to pay debts entails great consequences for a separate company and the state. The organization may terminate its activities. If the default occurs in the country, then millions of citizens may lose savings, thousands of companies will close, the economy will fall into decline.

In order to protect against default, it is necessary to follow the situation in the financial sector and make the right investment. Only so you can avoid the most negative consequences and resist in difficult times.

What is "default" with simple words

Surely the reader faced the situation when to understand what he means one or another economic term has to shut up a mass of literature. At the same time, every edition is given different explanations written by a darker, to understand who is difficult to understand the usual person.

One example of such terms is "default". If the senior generation of our country is not acquainted with the older generation, then young people mostly draw information from the Internet, and with difficulty can distinguish various economic phenomena.

So, this article will discuss what "default" is a simple language, what kind of types and consequences does it have? And what needs to be done to avoid it?

What is "default"

With default, our country collided back in 1998. Events occurred in the summer, and how the story will show, "Black August" will long remain an alarming memories in the memory of many citizens of Russia.

In this terrible period, all savings were simply depreciated. People began to panic, because everything that was accumulated over long, turned into paper. Citizens began to buy absolutely everything in stores. The inflation rate has grown sharply. As for banking institutions, they simply ruined. One of the brightest spots of that time was the ruin of Inkombank, which was part of the five large financial institutions of the country. The entire lending system has ceased to function. The unstable economy led to the standard of living of the population sharply fell.

It is difficult to say for what reasons such events occurred, especially since today the experts did not come to a general opinion. It was clear that the government was not coped with the tasks assigned to the offensive of the default.

Foto: Ron Leishman

Simple words, we can say that default This is a refusal to pay debts. Including a violation of credit commitments assumed in the form of an inability to make a fee to pay off interest or the principal debt to the creditor. This phenomenon is subject not only to states, but also individual enterprises, and even individuals.

If, for example, an organization cannot pay salary to employees, then such a situation can be solved by increasing turnover, or by attracting third-party capital. Comprehensible questions are solved across the country. The default state will inevitably entail tremendous damage for the entire people. However, in more detail about the consequences of default, it will be a little later.

Species and causes of default

Depending on the circumstances, experts identify the following types of default:

These types can be viewed in the table:

View Simple default Technical default
Definition It is also referred to as bankruptcy, i.e. The debtor officially recognized the fact of non-fulfillment of debt obligations due to the lack of money. In a different way, it is called temporary. This kind of default may occur whenever the debtor does not fulfill the terms of the contract. Moreover, the reason for the delay of payments is any technical reasons, such as wage delay, software failure, etc.
Ways out of the situation Individuals Apply for help to lawyers who confirm the fact of bankruptcy in court. Next, the debt is covered in accordance with the legislation;

For companies A group of persons who solve issues selling property and assets are appointed. According to the results of the work done, the priority of debt repayment is established;

In the scale of state Tasks are solved at the global level. Participation can take both other countries and international campaigns, including the global foreign exchange fund.

The consequences of such a default can be called the smallest. Usually they are simply and easily solved together with the elimination of the cause that caused his appearance. In cases where a long time has been observed a technical default, the lender has the right to apply to legislation and require the fulfillment of obligations in court.
Note There are also sovereign and cross-default. In the case of a sovereign default, the country cannot fulfill its obligations, both external and internal debt. The meaning of the cross-default is that it is not possible to pay for debt on one operation entails non-compliance with other obligations. If temporary financial inconsistency arises several times, for example, two - three times in six months, then this circumstance is negatively affecting the credit history of the borrower.

Naturally, in default, no matter how he was, there is nothing good. He will definitely be negatively affecting not only further partnerships, but also on the fate of every citizen.

The reasons for the occurrence of default can be a lot. However, among them distinguish the main situations of the emergence of failure to fulfill obligations. To which include:

Cause of default Description
The company or state led the wrong economic policy, which caused the imbalance of the budget; The imbalance of the budget may occur, for example, if large incomes were expected, or expenses increased dramatically. As a result, it was spent more than it was received, and as a result of money on debt repayment may not be.
There is a decrease in income; If we consider in the scale of the whole state, the decline in revenues can occur due to the fact that the budget does not receive cash in the form of, for example, taxes from legal entities and individuals, or prices for exported goods have fallen. Companies may not be profitable, due to increasing competition, or reduce demand for goods and services they produce.
In the country or in the world an economic crisis occurred; The economic crisis leads to the fact that the decline in production is observed, real incomes of the population are beginning to fall. In the country, the outflow of capital may begin, which will only aggravate the situation, both individual organizations and the whole country.
Change of political regime. As a result of such a situation, new policies come to power, which may refuse the obligations of the previous manual. As a result, many economically communications can be violated, which will lead to default, both on the external and internal level.

As can be seen from the reasons presented, there may be many reasons for the occurrence of default. But no matter how these situations were, each of them has its own consequences. And which we consider below.

Consequences of default

As previously noted, the offensive of the default negatively affects the fate of every citizen, enterprises or the state.

For individual individuals or companies, there is a decrease in the level of confidence from partners, a partially or completely collapses reputation. If still with such persons there are ever contract, then, undoubtedly, there will be more stringent conditions. However, this is characteristic only for technical default.

If there is a simple default, he will entail the complete disappearance of a legal entity, or its strong reorganization. After such circumstances, again return and earn the trust of partners is unlikely to succeed. Nevertheless, the recognition of bankruptcy is in some cases the only legitimate way to exit the current critical situation.

Undoubtedly, the crisis of a separate physical or legal entity does not affect the economic situation in the country. While the default of a whole state has more significant consequences.

The national economy default leads to the external debt of the country. As for internal debt, he will also inevitably grow up. Will be observed, for example, wage delays, it will especially affect those professions that are funded from the budget. These are doctors, teachers, etc. An increase in food prices, and the lack of money will entail social tensions. People can arrange strikes, rallies and meetings.

Inevitably, the collapse of the national currency called devaluation will begin to occur. This circumstance will entail an appropriate situation in foreign currency funds and markets. And the cost of shares of some large companies can fall sharply, which will lead to their ruin.

Unfortunately, such situations are not a myth. The story knows many cases that occurred not only in Russia, but also abroad. Involuntarily suggests a question What measures should a person take, an organization or a government in order to prevent the onset of such terrible events?

What needs to be taken to avoid default

It is clear that such a phenomenon as a default does not occur suddenly. He is preceded by many causes and circumstances.

In order for an ordinary citizen to avoid situations under which he will not be able to answer for its obligations, it is necessary to make much seriously approach to the issue of lending. After all, in the case of the declaration of default, it is possible not only to become bankrupt, but also lose all the property.

First you need to resolve the question of the need to take money in general. It is likely that it is possible, for example, to postpone with the purchase, cut the right amount and buy the desired thing.

However, unforeseen circumstances happen. For example, they did not give a salary or dismissal or abbreviation. Many people in this case run for help in microcredit organizations. Such companies promise to take money in debt only one passport.

Immediately it should be noted that the way out of the situation, when a person overlaps a loan loan, will not lead to anything good. Solving the problem of today, the client only aggravates its position in the future. After all, instead of one unpaid amount, two will appear at the end of the month. In addition, in the absence of payment, he will have to pay an impressive amount of the penalty.

It is important to remember that before taking part in any transaction with any financial institution, it will be advisable to weigh your financial opportunities.

Much more difficult things with enterprises and organizations. After all, leadership decides not only current issues on the activities of their company, but also does not disregard the payment of wages to employees, the receipt of payments to creditors and suppliers. To implement successful activities, all these factors are important equally.

Legal entities will appropriate will not save on the Accounting Department. After all, an experienced economist will be able to balance the budget and reduce the debit with a loan. And constant control over income and expenses will help to avoid risks and unnecessary spending.

Unfortunately, default on the scale of the state can be compared unless with the end of the world. No one knows what is happening, and the most important thing nobody understands how to be. In this situation, competent steps of the country's leadership will come to the revenue. The experience of the past showed that one of the reasons for the 1998 default was the wrong economic policy held by the leadership. Russia lived mainly due to what exported to neighboring states. And the moment when world oil prices fell, became fatal for our country.

Currently, the leadership is carried out policies aimed at developing many industries within the state. So, the economy will not depend only on exports, such as gas and oil, and will become more stable. In addition, one should not forget that an additional reserve has been created by the government, which is intended to be a "airbag" in case of complex financial situations.

All these circumstances give reason to believe that the country's population is still not threatened. And the time is every citizen to think about how to become a conscientious payer.

In the Russian Federation, the concept of "default" is associated with the events of 1998, when a sharp jump of the dollar rate occurred, which led to the fall of the Russian ruble. Savings of citizens, including those in savings deposits in banks, depreciated, introducing the main part of the country's population in the conditions of a deep financial crisis. Because of the jump in the American currency, prices have increased the prices of most of the consumer goods, as well as on the main services that people are accustomed to enjoy every day.

But the term default has a wider sense that is connected not only with the state in terms of the crisis. This is a complex economic term that has several interpretations at once. What default is what kind of types and signs will tell Brobank.

What is default (simple words)

The term default (from English. Default) means the refusal or physical impossibility of executing financial obligations to the lender. It spreads on how to pay for the principal debt (loan body) and interest, penalties, penalties specified in the loan agreement. In most cases, the term is understood as the lack of opportunity to repay financial obligations.

The term default means the refusal or the physical impossibility of executing financial obligations to the lender

Defalt can be declared legal entities and individuals, groups of companies, whole states (an example of the Russian default of 1998). It is a formal precursor bankruptcy borrower, since it is at this stage that the procedure of financial observation is appointed. But the default does not always involve the subsequent bankruptcy: it may have a temporary nature or depend on the circumstances that may fall out in the near future or to be resolved by itself. It is customary to distinguish between several basic types of default:

In turn, each of these species is divided into additional subspecies. These subspecies differ in many signs. Also, the difference lies in the subjects of default. Depending on the type, several solution options are envisaged. If there is no solution, either impossible by virtue of unreasonable circumstances, then the consequences of this in 99.9% of cases is the bankruptcy of the issuer (borrower).

What is "simple default"

A fairly common form of default. It has a standard explanation: a company or an individual on the verge of bankruptcy refuses or has no appropriate opportunity to fulfill its obligations to the lender.

In the economic sphere, these processes led to a change in the method of formation of relations between economic entities: connections were not built on the principles of personal dependence, but on the basis of the property dependence, when coercion and submission gave way to voluntary interaction, which is based on its own interests.

This happens when the maturity of debt repayment, dividend payments, coupon payments, payments on bonds, and other payments. In this case, the bankruptcy procedure is initiated by the borrower himself, or its still current lender.

With a simple state default, international financial institutions are connected to the process, which allocate funds for the repayment of the country or all obligations, in return, requiring any structural changes in the current economy. For example, such assistance is to receive in 1998 by the Russian Federation from the International Monetary Dotations Fund in 1998 Repayment of internal and external debt.

The process of functioning and development of the market economic system related to changes in the forms of private ownership, the evolution of economic entities - individuals and legal entities, in the role of which citizens and economic organizations are. A relatively new system had to be held with the market economic institutions and the actions of the Economic Center represented by the state, which create social conditions for their interaction.

Similar examples have recently become massive, since almost any modern state can be hit by default. Simple default is divided into two separate subspecies: sovereign and cross. The market economic system is often subjected to both forms that are adjacent.

Sovereign default

An example of a simple sovereign default was described above. The sovereign default is declared by states that are not able to repay internal and external obligations due to the oncoming economic crisis. This type of default is also declared when refusing to repay external or domestic obligations with a separate state.

Sovereign default is declared by states that are not able to repay internal and external debts due to the deep economic crisis

Under financial obligations at the same time fall:

  • Social and pension payments to citizens of the state.
  • Salary (including budget employees).
  • The external debts of the state in front of the participants of the world community, or before international financial organizations.
  • External credit obligations.
  • Obligations arising from international legal relations - Contribution, Reparations, and other international legal sanctions.

With regard to the states fell under the sovereign default, the UN resolution is directly prohibiting the rest of the world community to force the debtor's state to change the political or state system. Before the adoption of the resolution, such incidents had widespread, especially if the debtor was the country belonging to the so-called third world. Now this is impossible from the point of view of international agreements.

Cross default

Another subspecies of a simple default. To declare it can states, legal entities of any level, ordinary citizens. Under this term is understood to the automatic closure of all credit lines, if the borrower fails to repay the obligations at least one of them. For example, if the company does not have the opportunity to pay one obligations, this circumstance applies to all other obligations.

Under the cross default it is understood as the automatic closure of all credit lines, if the borrower fails to pay obligations at least one of them

In practice, there are cases where the company that regularly paid 2-3 credit lines has fallen under default due to the impossibility of repayment of obligations on the third credit line. In standard form, this form of default means its distribution to all obligations of the borrower, even if it continues to pay for some of them. Most often, this form is observed when funds are received from one source of financing. Cross default is still called cross-default.

Technical default

This form of default is also often found, which implies the temporary difficulties of the borrower / payer / issuer in terms of compliance with its financial obligations. With technical default, the company or an individual faces circumstances that prevent the obligation to fulfill in a timely manner. At the same time, these circumstances should not depend on the will of the payer.

The classic example of a technical default: the company must pay the 1st day with the bank on the loan, decorated some time ago. The payer's company is waiting for the receipt of funds from his counterparty, which, in turn, should translate funds before the deadline for a loan payment. If the counterparty is not paid in a timely manner under the contract, the Bank's client will not be able to make a loan payment. As a result, the client falls under the technical default, since his straight guilt in non-payment for a loan is not. Other signs of the technical form of default:

  • Availability of reserves for repayment of obligations.
  • Coordination with the creditor transfer of payment timing.
  • Subsidation under the penalties of the creditor.
  • Reducing the amount of debt - by agreement.
  • Possible transition from technical default in constant.

In the last 20-25 years, it is the technical default that is considered the most common form. The complexity here lies in the fact that this form can develop into a simple default, if the circumstances on which the client does not pay, not to be resolved in the near future. If the state falls under the technical default, then to some extent it helps him come out of a complex position.

Lenders agree to reduce the amount of debt, so the payer can keep its economy from full collapse, managing the released funds to its main industries. The penetration of the principles of equality and freedom in the economic sphere of society causes the emergence of a market economic system, which has become a new status of economic entities. This status was formed as a result of the approval of private ownership of resources, an equivalent exchange in the process of free competition, a constantly growing division of labor.

Consequences of default

The fact that such a default, citizens of Russia learned in 1998, when, due to the economic crisis, the Russian ruble fell in relation to the dollar almost four times. The most serious consequence of default is the devaluation that occurs during the sovereign form of default. The effect of these factors plays an important role in the further development of the market economic system, the emergence of new forms of economic activity of economic entities and forms of their interaction.

The default is understood as the depreciation of the national currency rate against foreign currency

Under this term means the depreciation of the course of the national currency against foreign currencies. At the same time, there is an increase in prices for consumer goods and services. It turns out that people simply lack money for the acquisition of elementary goods that they are accustomed to enjoy in everyday life. All this made it possible to formulate new goals and values ​​of society, which influenced all parties to life, including the economic activities of people.

As a result, the country falls into a deep economic crisis with empty counters in stores and state employees who have nothing to pay wages. Not to mention the pensioners who are forced to live without state support until the authorities come up with a decision to exit the country from the position of the default.

Therefore, the study of the market economic system provides for a comprehensive analysis of the forms of private property, economic entities and the institutional environment of their interaction. It is the private property that helps most countries get out of sovereign default and improve their economy.

about the author Darchiev Anatoly Ruslanovich

Anatoly Darchiev - Higher Economic Education in Finance and Credit and Higher Legal Education in the direction of "Criminal Law and Criminology" in the Russian State Social University (RGSU). More than 7 years worked in Sberbank of Russia and credit Europe Bank. He is a financial adviser to large financial and consulting organizations. He is engaged in an increase in the financial literacy of the visitors of the Bobank service. Analyst and expert on banking. [email protected]

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Hello, friends!

For modern youth, the word "default" is just another economic, often incomprehensible, term. For older people, this is August 1998. More than this word is not associated with anything.

What is default, everyone should know, because with enviable regularity, this phenomenon visits one, then another country. And even a prosperous Europe does not bypass. For example, Greece, Spain and a number of other countries.

To increase the overall level of financial literacy, the term is very necessary, because it affects the country's economy, and therefore on a particular person.

Concept and species

Defalt with simple words is the refusal to pay for its obligations.

Based on this definition, the term is suitable for a separate person, and to the enterprise, and to the state. The way it is.

Defalt can declare all of the above economic entities:

  • The person who has ceased for some reason to pay a loan and interest on it;
  • an enterprise, delaying payroll, pay taxes, payments on a bank loan or payment of materials to suppliers;
  • The state that announces the impossibility of repaying its internal or external debts.

Examples on all subjects can be found abuse, including by States. Defalt 1998 in Russia received the name "Black Monday". In August, the government officially announced that it would not be able to repay their short-term obligations under the existing conditions.

But this is not the first case in our history. In 1918, the Soviet government refused to return royal debts. We had to do this, descendants of those rulers, already at the end of the 20th century.

Throughout the last century and the beginning of the current country, Europe and America declared their impossibility to pay for debts. The last case is Greece in 2015.

A more scientific definition of default gives Wikipedia.

Economists distinguish 2 types of default:

  1. Simple when a country, an enterprise or a specific person declare its inability to pay off debts due to lack of money.
  2. Technical may arise due to temporary financial difficulties, technical errors in transferring money, etc. It is believed that in the near future the situation is normalized and the debtor will return to repayment. If this does not happen, it comes a simple default.

Do not confuse a bankruptcy of a citizen or enterprise. This is a legal procedure, which is described in detail in the relevant laws. And may occur after the declaration of default, and maybe not.

After reading, you will understand how to stop working for a penny on the unloved work and start living truly freely and with pleasure!

Signs of the onset of default

How to understand that default becomes not an illusion, but a reality. There are certain beacons that signal an unfavorable situation. When preparing the material for this article, I read many different opinions of analysts on this. Interviews were this year, and last year. Many predicted default in 2017 and 2018. Today it is clear that the forecasts were not justified.

I am to the fact that predictions do not always come true, even from eminent economists. But there are certain signs to which the state should pay attention to and to eliminate the impending danger in time:

  1. The situation in the foreign exchange market is accompanied by the rise and fall in the national currency, which is unable to take control.
  2. A sharp drop in prices for exported goods and services whose share is large in the budget. As a result, income is reduced. There is a danger of a lack of money to repay obligations.
  3. The increase in credit debts of large companies with state participation. The refusal of one or more of them to pay the debt can lead to a crisis in the national economy.
  4. Lack of economic growth, inflation growth and production drop due to internal or external factors.

Causes of default

Why is the default? Is it really not learned for so many years to prevent it? I think that the problem is that there are many reasons for its occurrence and they are different for each specific case. We highlight the main of them.

Causes of the default of a separate person:

  • loss of work or reduced wage level
  • thoughtless satisfaction of their needs at the expense of loans,
  • loans to pay off other loans
  • low financial literacy
  • Emergency (severe illness, natural disaster), etc.

For the enterprise:

  • Bad work with debtors, as a result - accumulated over a few years outstanding debt;
  • Bankruptcy and care from the main supplier market;
  • illiterate chief accountant;
  • increasing competition and loss of products market sales;
  • passion for loans with poor prediction of the market situation;
  • the devaluation of the ruble;
  • Economic sanctions, etc.

The devaluation of the ruble by an ordinary language means depreciation of it in relation to world currencies. For example, in 1998, the ruble depreciated 4 times, from 6 to 24 rubles for 1 dollar.

For the state, the reasons are global. For Russia, the risk of a default may be associated with such:

  • The dependence of the country's economy from imports

Due to sanctions, the fall of the ruble exchange rate, the cost of imported components for many enterprises becomes inexperienced. The spiral begins to spin. They raise prices, because the costs of raw materials and consumables have increased. Consumption falls. Production is reduced. Economic growth slows down. You can continue to infinity.

It was for combating such dependence several years ago that the import substitution program was launched.

  • Dependence of the economy from world energy prices

For all recent years, the Government is trying to reduce it through the development of other sectors of the economy. Judging by the reports, it began to get acquainted, but so far the addiction is still very high.

  • World economic crisis

Russia is a part of the global economy, and the difficulties of a global scale will definitely affect us. For a developing economy, this means that economic growth will slow down, the consumption of accumulated reserves will increase.

Which have already touched the leading sectors of the economy and enterprises that are significantly investing in the development of the country. Restrictions are entered not only for the real sector of the economy, but also for the banking sector, that pulls down already all.

  • Illiterate external and domestic policy

Many analysts associate the 1998 crisis with the financial pyramid constructed by the Russian government (state short-term liabilities) and the unrestrained work of the printed machine.

The uncontrolled emission of money, which is not provided with a product leads to acceleration of inflation, depreciation of the ruble and more negative consequences.

  • Unbalance of the budget

When expenses increase sharply with unchanged income. As a result, the deficit increases and money to repay obligations may not be enough.

Failure to pay debts

We looked at only a small list of causes of default. The consequences can also be very different: from sharply negative to positive.

For a citizen, this threatens bankruptcy and spoiled credit history. Nobody will write debts, they are restructured at best, that is, they will revise the terms of lending towards mitigation.

For an enterprise, this can end it with the departure from the market and the destroyed reputation. With a favorable scenario, there is a long establishment of relations with suppliers, creditors, their own employees.

The consequences of the state default are heavier and affect everyone without exception:

  1. On a global scale, the country loses a credit rating in the global community, which limits its access to loans.
  2. There is a massive outflow of capital, including foreign. Investors do not want to invest in the country's economy, the government of which does not pay the bills.
  3. The fall of the ruble and loss of confidence of citizens to national currency and the government as a whole.
  4. Reducing the standard of living of the population and the growth of social tensions. The likelihood of rallies, strikes and mass riots is great.
  5. Falling production and termination of economic growth.
  6. The budget crisis, when it is not possible to pay for government spending on maintenance, for example, hospitals, schools, kindergartens, etc.
  7. Inflation growth, which manifests itself in raising prices for goods and services. As a result, reducing the purchasing power of the population.
  8. The ruin of the banking sector and production enterprises.

None of the consequences exists alone. The one pulls the other. Sometimes it is very difficult to escape from a closed circle. Countries fulfill the recommendations of the IMF (International Monetary Fund), in the functions of which include assistance to states that have fallen into a difficult financial situation. But often this leads to the loss of independence, aggravate the situation, especially for the descendants who will take on loans.

The picture is not at all iris, but in such a situation you can find positive moments. Economists did it:

  1. Refusal of loan payments will allow these money to develop industries, which are undeservedly forgotten in the race for "light" credit money.
  2. Care from the import country will lead to the development of domestic production and a decrease in dependence on foreign goods.
  3. It will occur natural selection. Weak structures from the market.
  4. The depreciation of the national currency will benefit on enterprises that export products.

The main thing that will make any subject of the economy from the situation of the default is an experience. And wonderful if a citizen, an enterprise or the state lean it to apply to avoid repetition of negative events.


Studying such concepts as default, once again convinced how difficult it is to manage the car under the name "state". A couple of incorrect steps and millions of citizens were deprived of all their savings, loss of confidence in the banking system and the government. For many years, the population settled the fear of repetition of the events of the end of the twentieth century. All this leads to a panic because of any negative news world or national economy.

No one can say, it will repeat something like that or not. The experience of other countries shows that everything is possible and more than once. And someone became the victim of the 1998 crisis among our readers? How serious is the lesson turned out to be for you?

Russians became acquainted with the word "default" in August 1998, and acquaintance it was not pleasant. Yes, economists say that the default delivered the Russian economy from some vices and helped her go to growth. But ordinary people from this are not easier - the strongest devaluation of the ruble followed the default, and people then had a one more time. Therefore, a new default in Russia is afraid of not the first decade. Meanwhile, the term itself is not clear to everyone. Let's figure out what a default is to speak the most simple words for ordinary citizens without special economic education.


What is default in the economy the simplest words

In fact, there is nothing complicated in defining default. Often this term is perceived as a very wide concept associated with the economic crisis. In reality, the default can only be an impetus for the crisis, run it. And he himself means a very narrow concept.

Default in the economy, if we speak the most simple words, understandable to simple citizens - this The impossibility of returning debt . Only and everything.

In fact, many of us are confronted with a personal default. They took into debt from a familiar thousand rubles with the promise to return the fifth number after the salary. And the salary was detained to the eighth. If there are no other opportunities to return the debt (there is no amount pending on the black day, it is impossible to reboot from another friend or to quickly earn this thousand) - Please, the fifth number you find yourself in the situation of default.

Such a default when you can return the debt, but later promised, called Technical . If the situation is such that the debt is huge, it is impossible to pay it, and you are bankrupt - this plain Defalt.

It is clear that the simple default is much worse than technical. If you just delay pay, people usually understand you and enter the position. Of course, the next time they will be in debt with caution, but still give. But after a simple default, nobody wants to contact you. And if he wants, then on the bible conditions - for example, the debt will only be given in some MFIs under a huge percentage, since the risk of credit is very large.

Personal default is usually the problem of one person. No one from the surrounding, except family members and lenders, does not affect at all. But the default state is serious.

In 1998, a technical default happened in Russia - more or less tolerant species of this economic phenomenon. But even his consequences were very significant and resulted in a fully crisis of the country's economy.


Why do defaults arise in the economy

The default economic policy almost always leads to the default. The easiest way to default is an unbalanced budget, where expenses exceed income.

Again, it is easy to understand this on the example of a simple person, and then simply transfer this example to a whole state. Gets a conditional uncle Vanya 30 thousand rubles per month. And consumes 40 thousand rubles per month. Then the TV is needed, then the kitchen headset, then the car radio. Where to get extra 10 thousand? Right, borrow.

States can act in the same way - the budget is accepted deficient, incomes are less expenses. But pensions and salaries of state employees need to pay, roads will repair, and it is also desirable to develop a new rocket. The missing money is taken in debt or abroad, or in its own citizens and organizations.

Take a loan little, you need to pay it. What Uncle Wan is that the state at some point does not remain anything but to take new loans to repay the old ones. It is clear that if your own earnings are growing, it's the way to nowhere. Or rather - directly to the default, when paying for debts is no longer obtained.

Specifically in 1998 in Russia, all this looked like this - the state occupied money using short-term GKO bonds. At first, interest on bonds were moderate, and the state coped with their obligations. But a small percentage is a small interest in GKO. He had to raise him, and by August 1998, the state was ready to give insane 49.2% per annum on these bonds.

In fact, the GCO turned into a state pyramid by type mmm. To pay the debt to previous creditors, they took money from new, promising a huge percentage. The pyramid could not fail, which happened on August 17, 1998. This day it turned out that the budget does not have money to pay the HP holders.

Other causes of defaults from the state are:

  • Revenues are reduced under the same or higher expenditures - for example, the main exported product has fallen in price, less taxes are received in the treasury, etc.
  • The global international economic crisis, which hits the economy of a separate country.
  • Internal politicians change dramatically, and the government deliberately refuses to pay debts.

What lead defaults

Defalt in the economy of a whole state is a phenomenon, of course, very heavy. For a while, the state cannot fulfill its obligations, including social. Just because there is no money in the treasury, but no one will give in debt. As a result, they can delay salaries to state employees, paying pensions, etc.

The consequence of the default is often the devaluation of the currency - the ruble, for example, in 1998 fell to the dollar four.

See also: Devaluation of currency in the economy - that this is the most simple words

The devaluation of the currency is an automatic price increase for all import goods or those domestic goods, which use imported raw materials or equipment.

However, it is impossible not to say about the positive consequences of the default. And they are too.

The rise in price of imports pats its own manufacturers to the release of those products that it used to be easier to deliver from abroad. Import substitution begins, new productions are opened, jobs appear.

Defalt eliminates the economy from those defects that led to it. The state takes into account their mistakes and conducts economic policies otherwise. And lenders who want to get at least something are in position and are ready to install debt, a decrease in interest on bonds, etc.

In Russia, it happened. After the heavy default of 1998, the economy became healthier and quickly went to growth. Actually, the rise of the 2000s is largely due to the fact that at the end of the last century, the Russian economy pushed out from the bottom.

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