Debt Bomb

DEFINITION of 'Debt Bomb'

This occurs when a major financial institution, such as a multinational bank, defaults on its obligations that causes disruption not only in the financial system of the institution's home country, but also in the global financial system as a whole.

BREAKING DOWN 'Debt Bomb'

A debt bomb can occur also if consumer spending is based heavily on debt. For example, if a nation incurred huge credit card debt, individual debt holders could default en masse and create trouble for creditors.

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