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Nations Begin Defaulting On Their Foreign Debt

By: Steve Johnson

12/14/2008 - 15 Comments

The global financial crisis is causing some nations to default of their foreign debt.

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

Copyright © 2019 All rights reserved.

Gold: The Once and Future Money

Governments and central bankers around the world today unanimously agree on the desirability of stable money, ever more so after some monetary disaster has reduced yet another economy to smoking ruins. Lewis shows how gold provides the stability needed to foster greater prosperity and productivity throughout the world. He offers an insightful look at money in all its forms, from the seventh century B.C. to the present day, explaining in straightforward layman’s terms the effects of inflation, deflation, and floating currencies along with their effect on prices, wages, taxes, and debt.

U.S. Manufacturing: The Engine for Growth in a Global Economy

This volume provides a comprehensive analysis of the essential role of the manufacturing sector of the US economy. The increase in the relative importance of the service sector and the globalization of manufacturing has tended to dull the image of US manufacturing....This volume contains much useful data that has been condensed into tables and charts to provide support to the reader without interrupting the flow of the text.

Debt is Slavery

Michael gets to the point in just over a hundred pages. Most people do not have a good relationship with money. They have never taken the time to figure out how to use money to provide no only the essentials of life, but freedom and opportunity. Michael explains how to have 50% of your salary and gives a step by step example of how to create a budget and eliminate debt.

Overcoming the Spirit of Poverty: How to Know and Fulfill Your Purpose

The book attacks poverty from a spiritual perspective. John explains that God's favor is necessary and without it, a person will never really be rich. Prosperity comes because of favor and favor comes because of relationship. Many cannot recognize the seed that God has deposited in their lives because of the things that happened in their past. This book will give you new inspiration.