Nations Begin Defaulting On Their Foreign Debt By: Curtis Ophoven 12/14/2008 - 4 Comments The global financial crisis is causing some nations to default of their foreign debt. Your Ad Here Ecuador defaulted on its foreign debt, as President Correa is refusing to make an interest payment due on Monday on its global bonds President Rafael Correa said he had given the order not to approve a debt interest payment due on Monday, describing the international lenders as "monsters". The president said that some of Ecuador's $10bn debt was contracted illegally by a previous administration. Ecuador receives a large part of their income from oil exports and they have enough funds to make the payment. But, with the global financial crisis and dropping oil prices over the past month, they are refusing to make payment.  Ecuador is not the only country under tremendous financial stress.  Many nations that depend on oil as a major source of income are running out of money fast.  If oil prices do not return to above $60-$80/ per barrel soon, many more nations will be defaulting on their foreign debt.  OPEC is considering a major production cut as many of its members are running into financial trouble that may soon lead to riots. These nations do not have the luxury of having a demand for their currency outside of their country and therefore they cannot simply print more of their currency to pay their debt payments.  It is primarily because of the demand for dollars, driven by the increase in demand for oil, that has allows the US to increase the supply of dollars resulting in a world flooded with dollars.  Two-thirds of the dollars in circulation are outside the US. Some day - when the world turns from the dollar, the foreign exchange markets will be flooded with dollars that nobody wants, which will nose dive the value of the dollar.  That day will be devastating for the nations that get stuck holding a lot of dollars, primarily the US.  This week I participated in several blog carnivals They did an excellent job and as usual, there are tons of great articles. If you have the time, I highly suggest you skim through this week’s carnivals. Carnival of Money Stories Edition No. 88 42nd money hacks carnival: laid-off and freelancing edition   Subscribe via RSS Copyright © 2010 PennyJobs.com. All rights reserved. Related Articles Will America’s Research Engine Slow Down? Why We Should Not Give More Control of the Economy to the Government Which is it, Deflation or Inflation? The Nightmare that Nobody Wants to Talk About: The Next Depression Whatever Your Investment Goals Were, Your Screwed << FREE >> Weekly Newsletter... Signup today and start receiving our free weekly newsletter! Reader Comments Comment 1 Maggie Says: on Monday, December 15, 2008 10:11:25 AM could you please explain to us why the price of oil and gas--can possible flucuate over $2 up, and then down, in less that a 6 month span--and also, now that the price of oil/gas is down----why didn't the groceries come down-???? is the middleman hoarding $ here??? Comment 2 Kyle Says: on Monday, December 15, 2008 12:05:44 PM This spells trouble for Ecuador. It's one thing to simply not have the money to pay and beg for debt forgiveness. That has worked in the past for Bolivia, Poland, and others. It's another thing to refuse to pay even though you can afford it. Who would lend them money in the future after showing such bad faith? Comment 3 Adam Says: on Monday, December 15, 2008 1:15:35 PM Shame on Ecuador. Just because their not making the super big bucks right now doesn't mean they should skip a payment. Write a Comment Please keep comments civil and on-topic. Abusive or inappropriate comments will be removed without warning.  Name (required)     Email Address (required)     Website URL  Comment

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