How to Avoid Your Government’s Bankruptcy

How many governments have gone bankrupt in history?
How close is your government to bankruptcy?
Is your government already bankrupt?

These are interesting questions, but a more appropriate question is –

“How many governments have NOT gone bankrupt?”
As it turns out, almost every government in the world has failed to pay its debts, not just once, but multiple times!

A Brief History of Government Defaults on Debt

Spain is usually credited (no pun intended) as the first country to fail to pay its debts. In 1557, King Philip II announced that he was no longer able to pay his debts. Over the next hundred years, Spain defaulted on its debt nine more times. Historians believe this was one of the reasons for the decline of the Spanish empire.

The United States declared independence in 1776, and the new American government decided to experiment with paper money and issued the Continental Dollar. These dollars rapidly lost their value, until finally, the government tried to devalue them to 2.5% of their original value.

It’s not entirely fair to blame this on the US government— the British issued and circulated fake Continentals as a form of economic warfare. Benjamin Franklin (who ironically is now on the $100 bill) commented that the devaluation of the Continental Dollar acted as a kind of hidden tax to finance the revolutionary war.

The experience of the Continental Dollar was so bad that there was even a clause included in the constitution inspired by it. Article I, Section 10, Clause 1, of the US constitution reads:

“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”

Currency failure can be different in each case and can happen due to different reasons such as hyperinflation, political and economic instability, war or natural disaster, or external factors such as sanctions.

What Happens When Governments Go Bankrupt?

Governments going bankrupt is now much closer to reality than it was in the past. When economies still ran on gold and silver, a government running out of money just meant that the government was out of money. Now, with fiat currency, governments can devalue their currency by creating more until people lose confidence in its purchasing ability.

This makes it easier to take on enormous amounts of debt, but it also makes it easier for governments to drag their citizens into bankruptcy with them. Before paper money became internationally popular, governments used to debase coins by mixing metals like tin and iron with their silver coins. Still, citizens could protect themselves by keeping the older coins and spending the newer coins. With paper currency, this is no longer the case.

After these early crises, almost every country in the world defaulted on its debt multiple times. Sometimes government bankruptcies led to wars, but in most cases debt was “renegotiated” which meant creditors lost a lot of money. And all too often, the creditors were the country’s citizens.

Paper money first started out as deposit slips for gold. When you put an ounce of gold in the bank, the banknote meant that you loaned that bank an ounce of gold, and they owed you one ounce of gold. If the bank went bankrupt, the banknote holders lost their gold.

With Governments, banknotes represent a credit that you can use to pay taxes. If the government goes bankrupt, it means they have to find new currency to pay taxes, since the old currency is now worthless.

How to Protect Yourself From the Government’s Bankruptcy

If you look at history, sooner or later all governments go broke, but that doesn’t mean you have to. Owning gold and silver has been the way to protect wealth from the financial problems of governments for all of human history.

Even US, Federal Reserve Chairman Alan Greenspan understood the problems with fiat currency. He once said:

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”

Greenspan, like Benjamin Franklin before him, understood that inflation could be a hidden way of taking wealth.

Thankfully, things have changed since Greenspan. The US dollar’s monopoly is over, and SilverToken now offers the convenience of instant, borderless transactions with the stability of silver. And not a moment too soon.

Global debt levels are at an all-time high, with overall debt reaching an all-time high of $303 trillion in 2021. That’s over 350% of the world products – GDP. According to the World Bank study, a debt-to-GDP ratio of over 77% has a negative effect on any economy.

With inflation surging, central banks are raising interest rates. This will raise the cost of debt worldwide, making the debt burden larger. The worst part is that in order to keep making payments on the debt, governments keep creating even more debt!

All of these factors mean, it’s just a matter of time before fiat currencies lose all purchasing ability, causing governments to default on their debt.

The key to protecting yourself is to invest in assets that hold their value. We explored some investments that perform well in recessions in another post. Silver is one of the best options available, and with SilverToken it’s easier than ever before to own.

SilverToken makes it possible to purchase silver at any time 24/7, with no need to create an account or hand over personal information. SilverTokens are managed by the Ethereum blockchain network, the world’s most trusted and secure decentralized blockchain, and can be exchanged for physical silver at any time.

You can either pick up physical silver at one of our 12 global vault locations or order it by mail. You can also sell SilverTokens back to us at the spot price of silver at any time.

It’s time to break the cycle of debt and inflation and return to sensible money. Find out more about how to buy SilverToken today.

Many government-issued currencies have failed in the last 200 years. Some recent examples include:
The German Papiermark during the hyperinflation of the 1920s
The Chinese Yuan during the 1920s and 1930s
The Hungarian Pengo during the hyperinflation of the 1940s
The Argentine peso has multiple times, most recently in 2001
The Zimbabwean dollar in the late 2000s