Defaulting on Debt

I've heard about some predictions about development of the next crisis.

New chapter of the financial crisis. Several countries can default on their governments' bonds.

This problem is likely to be about suffered debts, the bonds which government used to borrow money from investors. As a whole, country's budget deficits become bigger and bigger, so government increasingly needs to sell bonds to fill the funds.

One of the leading economists, Tom Smith, gives the one of the possible predictions about crisis. It is that some nations will be unable to repay investors' money, they will default on their bonds. If a person can buy a bond, he can lend money to government and have interest on this money during fixed period. Quite often government has to borrow more money to repay previous borrowing. Lenders start worrying whether government can repay money. Fact is that higher the level of government's debt the larger amount of money government needs to borrow each year. But there is a point when government can not go on and can not insure the fund.

The President of the Independent Strategy reported about possible consequences of increasing of that. First of all, new crisis, which is called the credit crisis, may be caused by that the large banks lend too much money and consumers borrow too much money. It lets government borrow themselves. So, the initial problem of crisis is too much credits. To reduce the real value of the debt the state has to increase the taxes or create inflation.

So, the consequences may be reflected in unexpected measures of economic policy, devaluation of currency and changes in other key economic indicators.