Value Quest Bourse - Glossary: Bankruptcy

Glossary

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BANKRUPTCY

An individual, business, or country that is unable to repay debts and thus declared as insolvent. All of the debtor's assets are used to repay a debt, and the leftovers are distributed among the shareholders. The bankruptcy process can be done in a form of liquidation, which brings to an end the affairs of a business that doesn’t make sense any more, or reorganisation when it is estimated that business can produce more value if it’s kept running. There are 'voluntary bankruptcy' called upon itself by a debtor, and 'involuntary bankruptcy' which is forced on court orders on behalf of creditors. The main goals of a bankruptcy are to enable fair settlement of the creditors’ legal claims and to give the debtor a chance for new start.

National bankruptcy is the formal declaration of a government not to repudiate its debts. It is usually followed by devaluation of the currency, default on domestic debt, and moratorium on payment to foreign creditors. The international negotiations, which take place on that occasion, often end in a partial debt cancellation or debt restructuring. The consequences for citizens are devaluation of their monetary wealth and high unemployment.

Recommended artwork
enlarge image 0 Euro issued by 0 Euro Bank, created by artist Michael Aschauer
(c) Michael Aschauer

To avoid dispute between EU member states, the original Euro-banknote series doesn’t feature real buildings or people, but fictitious buildings representing important styles of European history. The Zero Euro design leaves the front side empty and sets Turkey’s half moon into that void. Its back side depicts real bridge, modelled after the ’Bridge of Liberty’ in Novi Sad, Serbia as it looked like after being bombed by NATO in 1999.

0 Euro Bank http://www.0euro.biz

An examples in the HISTORY -> The sovereign debt crisis

England was the first European country which declared bankruptcy in 1340. The fiscal pressure was caused by The King Edward III, i.e., his war campaigns and high-priced alliances with the German princes. The king took a loan from Italian creditors in order to finance the invasion to France which led to Hundred Years' War. In 1341, the regency council, discontent with the mounting national debt, forced Edward to accept strict limitations on his finances in return for a grant of taxation.
Spain faced national bankruptcy thirteen times. During the regency of Philip II, Spain got bankrupt four times in 1557, 1560, 1575 and 1596. Inherited state debt, made by Charles I of Spain, was about 36 million ducats and an annual deficit of 1 million ducats. On the grounds of gold and silver from the New World, Charles I of Spain took enormous loan from the Fuggers banking family in order to run election for Holy Roman Emperor. The King Philip II further indebted Spain because of the wars and overseas expeditions which sometimes used up 90% of the state budget. Chronic bankruptcies of Spain brought chaos into the German banking and ended the domination of the Fuggers on European financial market.
Between 1500 and 1800, France was dragged into eight state bankruptcies. Frequent financial crisis caused immense cost to the French people. The outlays outpaced income and brought regressive tax system upon the lower classes. In 1805, France almost got bankrupt again due to the wild speculations with Spanish silver reserves in Mexico done by French trading consortium.
After losing the War of the Fifth Coalition against France in 1809, Austrian Empire had to pay war reparations equivalent to 85 million francs which caused state bankruptcy. Prior to the war, Austrian finance minister warned that the treasury would run out of money during 1809 if they continue to support large Austrian army that had been mobilised for the Third Coalition. Despite the warnings, the Imperial Government decided to wage war against France and lost. In 1812, Austrian Empire took new loan in order to fight Napoleon, and got bankrupt again.
Ottoman government declared bankruptcy in October 1875. Overall financial collapse was triggered by a long period of drought and famine in Anatolia which caused agricultural shortages and decline of wool and silk export. The Imperial Treasury was drained by gigantic and expensive Ottoman administration, wars in the Balkans, and widespread poverty of peasants who were not able to pay high taxes.
Greece got bankrupt at the end of XIX century due to the fluctuation in a prices of dried grapes, i.e., the main Greek export article at that time. The disease ruined French vineyards and the price of grapes went up. After the recovery of vineyards and introduction of special custom taxes in France, the price dropped down disastrously.
Mexico had declared bankruptcy eight times. Last time it happened in 1982 when repayment of $80 billion foreign debt became disputable. Mexico suffered effects of recession in US, who was the buyer of 65% of their exports. The financial collapse emerged due to the decline in prices of major Mexican exports which caused big budget deficit (34% of its revenues came from borrowing), high projected inflation rate of 60%, shortfalls in dollar reserves, and finally continued capital flight. The financial speculators looted the country by withdrawing $50 billion from the economy (the Mexican Gross national product in 1981 was $120 billion).
On 17 August 1998, Russia went through its fifth bankruptcy called "Ruble crisis." The chronic fiscal deficit was plugged by internal loans with very high interest rates. But the bonds issued for the amount of $13,5 billion couldn’t be redeemed. The crises was caused by declines in price of crude oil and nonferrous metals, an artificially high fixed exchange rate of the ruble, the economic cost of the war in Chechnya, declining productivity and high debts of Russian industry, and continued debts on wages. By 1 August 1998, $12.5 billion was owed to Russian workers. In mid-August, $4.8 billion lent to Russia by the IMF to support a number of major banks went missing. Russian oligarchs made a fortune during the "Ruble crisis."
The biggest state bankruptcy was declared by Argentina in 2002. The financial system collapsed due to the foreign debt of $100 billion dollars, caused by debt crisis and overrated value of peso in comparison to dollar. Between June 2001 and June 2002, Argentina’s gross domestic product (GDP) dropped by 13.5%, with a record decline of 16.3% till the end of the year. For the six months devalued peso lost 300% of its value against the dollar. As the result of Argentine economic crisis (1999–2002) the creditors had to agree to the renunciation of up to 75% of the outstanding debts.
In 2010-11, the sovereign debt crises of Greece, Portugal, Italy, Ireland and Spain, brought a fear that Eurozone will collapse. Rising government deficits and debt levels, due to the massive bank bailouts and public sector deficit, resulted in downgrading of countries’ credit ratings and caused crisis of confidence in financial markets. In 2010, Greek public debt (equalled to 115% of their GDP) reached 328.6 billion Euro. The debt rating was decreased to a 'junk' status by Standard & Poor's, who estimated that investors would recover only 30–50% of their money in a case of Greek default. Possible break up of Euro will cause the banking crisis that could not be controlled by the financial authorities. Members of the Eurozone established The European Financial Stability Facility in order to fight crisis and provide help to Eurozone states in financial difficulty. The subject of contentious debate is an introduction of Euro Bond that would allow the members of the Eurozone to refinance their debt on reasonable terms. In meanwhile, the speculators have waged bets against the European currency.

REF 1 -> “National bankruptcy”, Weekly magazine NIN, No 3163, Published: August 11, 2011;

REF 2 -> “You Need This Dirty Word, Euro Bonds”, SPIEGEL interview with George Soros, Published: August 15, 2011; https://www.spiegel.de

REF 3 -> “Cuts to Debt Rating Stir Anxiety in Europe” by Jack Ewing and Jack Healy, The New York Times, Published: April 27, 2010; https://www.nytimes.com

REF 4 -> “Argentina: life after bankruptcy” by Clara Auge, Le Monde diplomatique, Published: September, 2002; https://mondediplo.com

REF 5 -> “Corruption Watch: Tracking Down IMF Billions” by Roman Kupchinsky, Radio Free Europe, Published: June 27, 2002; https://www.rferl.org

REF 6 -> “Gold and Silver: Spain And The New World” by Richard Cowen, Geology 115 course at UC Davis, Published: April, 1999; https://mygeologypage.ucdavis.edu

ADAPTABILITY: Learn from experience and adjust to new circumstances or environment.
ART: A creative mental or physical activity done by artist in order to produce an artwork.
ART by UNESCO (1980): UNESCO Member States recognise that “art reflects, preserves and enriches the cultural identity and spiritual heritage of the various societies, constitutes a universal form of expression and communication and, as a common denominator in ethnic, cultural or religious differences, brings home to everyone the sense of belonging to the human community, should accordingly, and for these purposes, ensure that the population as a whole has access to art.”
ARTIST: A liable agent of the art who produces artworks as a profession or hobby.
ARTIST by UNESCO (1980): Implies “any person who creates or gives creative expression to, or re-creates works of art, who considers his artistic creation to be an essential part of his life, who contributes in this way to the development of art and culture and who is or asks to be recognised as an artist, whether or not he is bound by any relations of employment or association.”
ASSET: A resource with economic value owned by an individual, corporation, or country, that might provide benefit in the future. This includes cash, stocks, bonds, equipment, buildings, real estate, etc.
AUTONOMY: The condition of self-government. The autonomy of an individual or organisation depends on access to resources in the environment and competition for them.
ACTOR-ENVIRONMENT MODEL: Two dominant paradigms includes: natural selection model, focused on survival and environmental selection; and political economy model or resource dependence model, focused on strategic choice and adaptation to the environment.

BANKRUPTCY: Unable to repay debts and declared as insolvent. There are 'voluntary bankruptcy' called upon itself by a debtor or 'involuntary bankruptcy' which is forced on court orders on behalf of creditors.
BOND: A debt security that has a fixed maturity date issued for the purpose of raising financial resources. It confirms the existence of an obligation and it serves as a creditor’s proof that a debtor will repay borrowed money at a fixed rate of interest at a specified time.
BET: Risk something against (someone) on the outcome or happening of a future event.
BET OPTIONS: Represent three requisite elements for achieving a goal in games, economics or life: environment, resources and strategies.

CAPACITY: Or munificence, a feature of environment that indicates the supply of resources in the environment, the munificence enlarges safety.
CAPITAL: A money or machinery inserted within a specific set of social relations whose aim is expansion of value, i.e., the accumulation of capital.
CHANCE: An opportunity to succeed unexpectedly.
CHOICE: An opportunity to succeed unexpectedly.
COERCION: The use of force or threats to make someone do something unwillingly.
COMPETITIVENESS: An ability to strive better than others, requires rapid responses to changing environmental conditions.
CONCENTRATION: A feature of environment that denotes the degree to which necessary resources are controlled by a small number of players, high concentration raises dependance and risk.
CONTINGENCY: An event that cannot be predicted with certainty.
COORDINATION: A feature of environment that demonstrates the capacity of players to act together according to shared group ethics and common values or goals. The coordination strengthens safety.
CORRUPTION: Bribery or depraved conduct by those in power.
CRASH: A sudden and major decline in a stock market, usually when a 20% drop in an index's total value is evidenced.
CREDITOR: A party to whom money is owed.

DEPENDENCE: The state of relying on or being controlled, defined as the barging position of the focal organisation with respect to interacting organisation.
DEPTOR: A party who owes money.
DURABILITY: Continuing for a long time.

EFFICIENCY: The use of resources that maximises the production.
EFFECTIVENESS: Successful in producing a result. Yuchtman and Seashore defined organisational effectiveness as the ability to obtain scarce resources, hold barging position, and maintain one’s autonomy.
ENVIRONMENT: A surrounds of individual or organisation viewed as a pool of resources.
ENVIRONMENT’s DIMENSIONS: six abstract features relevant to information and resource view of the environment: capacity, concentration, hostility, mutability, stability, coordination.
EQUILIBRIUM: A state in which supply and demand are matched.
EXPANSION: The process of increasing.
EXPECTATION: A belief that something ought to happen.

FREEDOM: An absence of constraint, or liberation from social and cultural bondage that prevent full self-realisation of a person. The motto of Value Quest Bourse is the paraphrase of Marx and Engels statement: “No one is free, the winners must compete, the losers must be exploited.”
FUNDS & CAPITAL: A resource that implies operating funds and accumulations of capital that one has on its disposal.
FLUCTUATION: Irregular rise and fall in a quantity and quality over time.

GREED ECONOMY: The set of inter-related economic activities driven by greed that implies the production and consumption of goods and services whose ultimate goal is high Index of Fortune.
GOLD: A valuable soft yellow metal used in jewellery, decoration, and to guarantee the value of currencies.

HOSTILITY: Or threat, a feature of environment that shows the disposition of surrounding toward the player, the hostility increases risk.

IMPARTIALITY: Fair and just treatment of all rivals.
INFORMATION: A resource that entails a facts provided by the environment about something or someone.
INDUSTRIAL SECTOR: A branch of an economy.
INTEREST: A stake in an undertaking or the cost of renting money.
INTERVENTION: (Government) Influence in another’s affairs or marketplace.
ISSUER: Entity that issues securities.

LABOUR: A mental or physical activity done in order to achieve certain result, or a job that you do in order to earn income.
LAISSEZ FAIRE: The policy of letting things to develop without (government) control. The French phrase laissez-faire, means "leave to do" or "leave it alone", implies noninterventionism by state in the operation of market.
LEVERAGE: The amount of debt used to finance a firm's assets. The borrowed money or financial instruments are used to increase production volume, and thus sales and earnings. The financial leverage is calculated as the ratio of total debt to total assets, e.g., a firm that has more debt than equity is highly leveraged.
LIQUIDATION: Brings to an end the affairs of a business or firm that doesn’t make sense any more. The assets are sold to pay creditors, the leftovers are distributed among the shareholders.
see BANKRUPTCY

MATURITY: The period for which a bond, contract, guaranty, etc., is issued or is in force.
MISTAKE: Incorrect action or judgement.
MONEY: A current medium of exchange made in the form of coins and banknotes.
MORALS: A person's standards of behaviour or beliefs concerning what is goodness and rightness in character and behaviour.
MUTABILITY: A feature of environment that implies liability of surrounds to change. High level of overturns in the environment raise uncertainty and risk.

PERPETUAL BOND: Or Perp, a bond with no maturity date. It is not redeemable by the issuer but generates return forever similar to stock dividend payments.
PERSONNEL: A resource that refers to people employed or engaged in an organisation.
PLANNING: A set of actions for achieving goals in future.
PREDICTABILITY: Happening in the way you expected.
PRIVILEGE: A special advantage available only to some people.
PROBABILITY: The likelihood that something will happen.
PRODUCTS & SERVICES: A resource that encompass commercially manufactured articles and work done for a customer.
PROFIT: A financial gain that you obtain by the difference between the amount earned and the amount spent on costs.
PROSPECTS: Chances for success and wealth.

QUEST: A long and arduous search for something.

RANDOMNESS: Happening without method or conscious decision.
REDUCTION: The process of decreasing.
RESOURCE: A supply of funds and capital, information, personnel, products and services that a person or organisation seeks after in the environment in order to operate effectively.
RESPONSIBILITY: A moral obligation to deal with something.
RESTRICTION: The control and limitation of someone or something.
RISK: A possibility of an undesirable outcome, damage or loss.

SAFETY: The condition of being protected from risk.
SECURITY: A financial instrument representing financial value, such as: debt securities like bonds; equity securities like common stocks; and derivative contracts like swaps.
STABILITY: A feature of environment that identifies weather the surrounds is firmly established. Low level of fluctuations in the environment increase safety.
SPECULATION: Taking high risks in expectation of large gains.
SOLIDITY: The state of being substantial and firm.
SATISFACTION: Fulfilment of a need, demand or desire.
STRUGGLE: A long and hard fight.
SWAP: A derivative contract in which counterparties exchange one security for another to change the maturity (bonds), quality of issues (stocks or bonds), or due to the fact that investment goals have altered.
STRATEGY: A plan of action or policy designed to deal with uncertain future circumstances.
STRATEGIC CHOICE: Certain decisions, structures or behaviours which are positively or negatively selected, depending on their fit with environmental conditions.
STRATEGIC’ CONTINGENCIES THEORY: of Intraorganisational Power by D. J. Hickson states that power within the organisation comes from a subunit’s capability for coping with critical organisational uncertainties, as well as from the importance of the uncertainty and the extent to which other subunits can substitute.

THE INDICES OF FORTUNE: (pl.), an indicator of total value of a person's prospective assets: virtues, hopes, intellectual property, money, securities, land, or valuables such as artworks.
THOMAS THEOREM: A sociological theory which stated that the definition of a situation influences the present: “If men define situations as real, they are real in their consequences.” It was formulated in 1928 by William Isaac Thomas (1863–1947).
THE WHEEL OF FORTUNE: Refers to the uncertainty of Fate. A symbol of the goddess Fortuna.

UNCERTAINTY: Unmeasurable risk.
URTICA ANTIDOTUM: A salvage serum; an industrial sector Health and Social Work.
URTICA FABER: A forger of the future; an industrial sector Education.
URTICA LUCRUM: A exchanged value; an industrial sector Trade.
URTICA MANUS: A measure of value; an industrial sector Manufacturing and Services.
URTICA METAMORPHOSIS: That which changes; an industrial sector Arts, Recreation and Entertainment.
URTICA NUNTIUS: A messenger; an industrial sector Information and Communication.
URTICA NUTRIMENTUM: An inherent value; an industrial sector Agriculture.
URTICA SIDEREUS: An use value; an industrial sector Science and technology.
URTICA THESAURUS: A deposit of value, an industrial sector Finance and Insurance.
URTICA TRIDENS: An instrument of power; an industrial sector Public Administration and Defence.

VALUE: The regard that something is held useful, important and precious, or the worth of something measured by the price paid or asked for it.
VALUE AT RISK (VaR): A technique based on the statistical analysis that enables estimation of losses and measures possible risk while it happens.
VALUE QUEST BOURSE: An art-allegory of socio-economic cycle created as an amalgam of hazard game, enterprise strategies and stock market.
VARIABILITY: The range of possible outcomes.
VARIATION: short-run or long-run transformation that occurs at random or as planned response to environmental contingencies. The most suitable variations (structures or behaviours) are retained through the selection process.
VQ VALUE: A number within VQ Indices that represents the sum of won and lost points per industrial sector played at VQ roulette. It is calculated and displayed in real-time.
VQ VOLUME: A number within VQ Indices that represents the number of bets per industrial sector played at VQ roulette. It is calculated and displayed in real-time.
VQ INDICES: A portfolio of VQ industrial sectors representing a statistical measure of change in Volume, Value, and Winning strategy. It is calculated and displayed in real-time.
VQB (histogram): A diagram that displays the volume frequency of VQ Perpetual Bond, i.e., the survival rate of value inputs over a given period of time.
VQX 10: An index of Value Quest Bourse composed of values of 10 component sectors. VQX 10 histogram displays the fluctuation of VQX 10 over a given period of time. Calculated continuously.

WINNING STRATEGY: A strategy (inside bets) displayed within VQB Indices that has highest number of won points at VQ roulette per industrial sector.
WITHDRAWAL: The action of removing or stopping something.