How to Bankrupt a Nation

The Seychelles: Paradise Bankrupt. It turns out that this idyllic vacation spot off the coast of Africa owes more money than it takes in and the IMF has been called in to bail the place out. Officials in the Seychelles say that they borrowed too much money and then the economy went south. There just aren't as many fat cats booking $6,000 rooms this season. So one way for a nation to go bankrupt is to live on borrowed money. This is similar to the game musical chairs. Someone else took the chair ahead of you and behind you. Now you are standing and have no place to go. It is also rather like the scenario wherein everybody is in for a swim. But then the tide goes out and only then do you notice that you seem to have misplaced your bathing suit. When there was plenty of other people's money around, no one knew who was swimming naked.

Iceland has gone bankrupt as well. They have screwed up in an entirely different fashion. There is economic theory called the Bigger Fool Theory. In this theory you buy something worthless for an exorbitant price because you are convinced there is a bigger fool than you who will pay an even higher price. Someone forgot to tell the Icelanders how the game is played. They built their economy on the worthless crap they were supposed to sell to a bigger fool. They said to the rest of the world: One Stop Shopping! Get all your foolish needs met in one place. We are the center of Foolishness in the known Universe. And indeed, they were.
Both the Germany's Weimar Republic and today's nation of Zimbabwe generated hyper inflation. This made their money worthless and meant that you had to have wheel barrows full of cash to buy a loaf of bread.

Interestingly enough, the sovereign nation of the United States of America is going for a trifecta. As a nation, as businesses, and as individuals, we have borrowed too much. Our banks have agreed to be the next to the last fool in the bigger fool theory. Our government has agreed to be the Biggest Fool--toxic assets, yumm!!! And now at long last, the feds are reducing the value of our currency to toilet paper. They are doing this through a sleight of hand called "monetizing the debt." Basically we are printing money and then loaning it too ourselves. What could possibly go wrong?

Don't try this at home. Bankrupting a nation should be left in the hands of professionals. You might screw it up.