Probably a large number of people remember, and some even with a shudder recall the consequences and power of the phenomenon, which is described by the short word "default." This is not just an incomprehensible term for many - it is a "monster" that "ate" the economic system that has been created for years. It was “thanks to” the 1998 default that the Russians and Ukrainians fully realized the degree of influence of the world economy on a home refrigerator. This phenomenon is identified with empty store shelves, long lines, and the hopelessness of empty government promises about an imminent change in the situation.
If we consider this concept as an economic term, then default is a process of violation by a borrower of payment obligations to a creditor. In addition, this word is identified with the inability to make payments on its debt obligations on time, as well as to fulfill other conditions of the loan loan prescribed in the contract.
If we consider this term more deeply, then default is any kind of refusal to pay on loans granted. It is safe to say that this concept is synonymous with the word "bankruptcy". Moreover, the use of the term “default” directly implies a narrow focus - this refers to the government’s refusal to pay its debts.
The origins of this concept are covered with a touch of historical antiquity. Even medieval European landowners and landowners refused to pay their debts, thereby causing default. This is also true in other parts of the world. For example, the economic processes that took place after the First World War. Such a country as Great Britain, and followed by France, together with Italy, refused to pay their debts to America, writing off to default. The United States is still striving to receive 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 default in developing countries - in Sri Lanka, Venezuela, Angola, Brazil and others. The most painful for the population was the process that occurred in Argentina. Just 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 distinguish several types of default:
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, 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 monetary reserves, a drop in the national currency, a decrease in real incomes of citizens, a cessation or strong decline in production rates, a sharp contraction of the banking sector and the lack of credit facilities for private companies, the emergence a huge number of political issues, etc.
The positive aspects include the reduction in the cost of the manufactured goods, access to a safe level of work in all areas of the state. Under default conditions, the functioning of so-called fake economic schemes is impossible. 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, one way or another connected with the debtor, feel the consequences of this phenomenon.