Nik1ta
I always enjoy MaisieD’s posts and I’m in awe of her knowledge of economics, but I’m confused as to why a country could become effectively bankrupt because global investors lose confidence in its government policy and it’s currency becomes so devalued as to be effectively worthless internationally. Iceland, Argentina, Greece, etc. Why do countries need loans from the IMF if they can simply just print their own money endlessly? I can see that a government can spend what it likes internally by effectively printing its own money, but if globally it’s economic policy is seen as unsound and its currency is worthless then it can’t pay for it’s imports .Obviously Iceland, Greece, Argentina, etc continue to exist and have recovered, but I can’t see how QE and excessive government spending work if other countries have no confidence in that country’s policies I am a bit economically illiterate but perhaps someone can explain this in simple terms.
Well, first of all, don't worry about the UK 'going bankrupt' because our foreign 'debt' in the form of government bonds, is not excessive and we have a stable currency. We can issue the money to pay interest on the bonds.
'Bonds' are far more complex to explain than the circulation of money in the domestic economy but I don't think that there is any possibility that 'the market' will stop buying our bonds because they are mostly bought by financial institutions such as pension funds and insurance companies because they need a safe place to invest their funds and the reliable income provided by the interest paid on them. Far from demanding repayment of their principle at any time theses institutions tend purchase fresh bonds when their current ones reach their term. I understand that there is never a shortage of purchasers for any UK government bond issue.
You would be horrified by the value of the bonds which have been issued over the years, but bondholders generally are not knocking at the government doors demanding their money back, They are about the safest investment that can be made. Premium bond are part of the 'debt' but most of the holders hang on to them and would be horrified if the government insisted on paying them back 
The volatility of bond prices and yields happens in the 'secondary' market, which is where existing (as opposed to new' bonds are sold and which tends to be used for speculative purchases. This has no effect on the initial bond price, if you had bought bonds in the initial issue and wanted repayment of them from the government you would be repaid what you paid for them. Nor does it affect the interest paid on them. This is what makes them a 'safe' purchase, unlike stocks and shares which can lose value.
There are a number of reasons why countries might apply for loans from the IMF. The country may not have enough foreign currency reserves to pay for its imports. It may have so much foreign debt that servicing it leaves it with insufficient currency to run its domestic economy. Or it may need help if it is at war or suffers an environmental disaster which it cannot finance out of its own resources.
The UK is nowhere near needing any IMF help. It has a stable trusted currency and sufficient foreign reserves so it can always pay its 'bills'.
It actually 'creates' money every time it spends but there is no fear of hyperinflation so long as there are goods and services available for it to buy, and there are goods and services available for the general population to buy. Prices only become inflated when there is a shortage of resources to purchase and there is too much money issued into the economy by the government. Or, conversely, if the government fails to cancel enough of the money it has issued by not taxing back enough of it.
