Many nations have been devastated by unexpected debt crises. Roll your mouse over the countries and states below to learn more about their sudden economic catastrophies.
In 2008, the state of California needed to borrow or raise $40 billion. In a special election, voters rejected higher taxes. Because state law requires politicians to balance the budget, the state was forced to lay off thousands of employees, raise some taxes, and cut billions from popular programs. Californians will pay far more to borrow in the future, as the state’s credit rating dropped from “A-” to “BBB”. Despite the size of California’s crisis, that $40 billion shortfall is only 0.3% of the size of our national debt.
A stock market and real estate bubble in Japan led businesses and individuals to borrow far more than they could repay. When the bubble burst in 1990, the Japanese economy was crippled. As of 2008, the Japanese stock market was actually lower than it was in 1982.
From 1975 to 1991, Argentina’s government embarked on a strategy of printing money to pay its debts. The eventual inflation was so great that 100 billion Argentine pesos in 1975 were worth 1 peso in 1992. If the same thing happened in America, Bill Gates’ fortune of $60 billion would be worth 60 cents.
In the 1990s, the Thai government accumulated a huge amount of foreign debt. In 1997, the government was so overextended that it could not afford to protect the value of its own currency. In a few months, the Thai baht lost 40% of its value, 1.5 million people lost their jobs, and the Thai stock market lost about 75% of its value.
After Iceland’s biggest banks declared that they were unable to repay their loans, the government nationalized them to avoid disaster. The country had to borrow huge amounts of money to afford the takeovers, and now every Icelander owes the equivalent of $156,000.
This small African nation has experienced some of the worst inflation in history. For a decade, the government continually printed more money to pay its debts, so all the money in circulation was constantly devalued. The pace of inflation was so fast that prices were doubling every 1.3 days. At that rate, a bag of rice that cost $10 on Monday would be $80 by Friday. By one estimate, Zimbabwean currency was devalued by 89 sextillion percent. (One sextillion is a trillion trillion!) Read more about Zimbabwe’s debt crisis.