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.

RELATED TERMS
  1. Financial System

    A financial system can be defined at the global, regional or ...
  2. Default

    1. The failure to promptly pay interest or principal when due. ...
  3. Credit Default Contract

    Security with a risk level and pricing based on the risk of credit ...
  4. Institutional Investor Index

    A measure of sovereign debt risk that is published biannually ...
  5. Temporary Default

    A bond rating that suggests the issuer might not make all of ...
  6. Default Risk

    The event in which companies or individuals will be unable to ...
Related Articles
  1. Markets

    How Countries Deal With Debt

    For many emerging economies, issuing sovereign debt is the only way to raise funds, but things can go sour quickly.
  2. Investing

    Inside National Payment Systems

    Investopedia explains: The global interconnection of U.S. payment systems makes commerical and financial transfers possible.
  3. Personal Finance

    Understanding Default Risk

    Default risk is the chance that companies or individuals will be unable to pay their debts.
  4. Markets

    Inspecting A Country's Debt

    Tensions over just how to handle debt are pitting the rich world against the developing world like never before.
  5. Markets

    Does 2016 Spell the End of a Global Debt Cycle?

    Examine the growth of global debt from 2010 to 2015. Emerging market debt has grown significantly, while advanced economy debt has grown marginally.
  6. Markets

    How Debt Limits A Country's Options

    While debt is fundamentally necessary to the operation of a national government, it can also be limiting and dangerous.
  7. Retirement

    What The National Debt Means To You

    The U.S. deficit seems to grow every year. But how does it actually affect you?
  8. Personal Finance

    Digging Out Of Personal Debt

    Good intentions can put consumers in even more personal debt.
  9. Markets

    Emerging Market Defaults: Beware of Second Wave

    Emerging market corporate defaults have the potential to be the biggest risk to global markets.
  10. Personal Finance

    4 Debt-Busting AlternativesTo Balance Transfers

    Credit card balance transfers can help pay off debts – but they can cost you. Here are some other approaches worth checking out.
RELATED FAQS
  1. How many nations must a company trade in to be considered a multinational corporation?

    Learn about the conditions a company has to meet to be considered multinational, and find out when investing in multinational ... Read Answer >>
  2. What's the difference between debt consolidation and debt management or debt settlement?

    Learn about different ways of handling debt when you become overwhelmed, including debt consolidation, debt management and ... Read Answer >>
  3. Why would you look at a company's net debt rather than its gross debt?

    Learn the difference between net debt and gross debt, how to calculate debt using a company's financial statements and why ... Read Answer >>
  4. What are the typical day-to-day responsibilities of a Chief Operating Officer (COO)?

    Learn how a country's debt crisis affects the world, including how currency values, inflation and output are affected on ... Read Answer >>
  5. What's the difference between debt consolidation and debt settlement?

    Learn the differences between negotiating a debt settlement with your existing creditors and applying for a new consolidation ... Read Answer >>
  6. How long do typical debt management plans take to pay off debt?

    Find out more about how debt management plans are administered and what circumstances determine how long a management plan ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center