Question

what happens when government finances go horribly wrong. It discusses fault, repudiation, receivership, and bankruptcy. Please describe and discuss each of these situations.

Answer 1

The government faces many challenges to keep the finances as close to the actual figures, however, sometimes; the finances might go different than calculated.

When the finances go wrong, some faults are directed towards the economics. Economists try to explain their theories of economic meltdown and try to find a solution to it. This little messiness of the subject makes it vulnerable to most faults during the period of depression. There are always ways to correct the unbalanced growth, but this process might involve some time and effort.

The second cause of financial depression could be repudiation. Repudiation is a situation in which the bearer refuses to pay back the amount borrowed at an agreed upon rate. There is a provision of the same in the financial accounts as ‘bad debts’. This situation can demand many questions regarding the unexplained nature of economics.

Receivership refers to the transfer of authority or hold of company’s operations and business assets. The party which receives such authority is known as a ‘receiver’ and has to look after the business operations, receives any profits or loss made out of them and even takes care of the business’s bankruptcy. The goal is to bring back the company on healthy track and to save it from failing.

Bankruptcy is like a nightmare for an economy. This happens when a business or a person is further incapable to pay the debt because all its available wealth and valued assets have been already used up for payment towards the debt. Bankruptcy is a worst condition for any economy; however, the economy gets a chance to start afresh due to it as all its previous outstanding debts stand cleared due to its inability to pay. But it might affect the economy’s future dealings and credibility among investors.