In the recent dev diary, developers have informed players regarding a country's treasury. We've talked about what happens when a country has a surplus of Money, but what happens when it is the other way around?
We've already tackled how hoarding wealth, and excessive amounts of gold may prove detrimental to your economy, however counter-intuitive it may sound. But what if you’re running a deficit and your Gold Reserve has all been tapped?
Well, this is when debt comes into play. Beyond that point, each pound spent in excess of your income will result in automatically taking on debt. While this may sound like something that you should avoid at all costs, that isn’t necessarily true.
While you do have to pay interest on your loans, interest rates in Victoria 3 are relatively low, and so long as you avoid hitting your Debt Ceiling, growing your economy through deficit spending can actually be a very valid strategy. This is because the increase in revenues from minting and taxation may very well end up exceeding the interest payments, not to mention the benefits constructing new industries can have for your population.
The Debt Ceiling, unlike the Gold Reserve, is not a soft cap - once you hit it, your country will be in default, which is a terrible state to be in and can only be recovered from if you manage to slash your expenses enough to put your weekly expenses back in the black, or if another country steps in and takes on your debt, which can have its own undesirable outcomes for you.
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It’s also possible to simply declare bankruptcy, but because the money you are borrowing against is actually the cash reserves of your country’s buildings, which is actually what determines the size of your Debt Ceiling, this will have immensely negative consequences for your domestic industry.
