As I mentioned earlier, Ecuador has made assertions that much, if not all, of its foreign debt is illegal, claiming that the borrowing was made without proper authorizations and other irregularities.

Well, Ecuadorian President Rafael Correa is now saying that they won’t pay interest on $4 billion in foreign debt, for which they have paid $7 billion in interest since the 1980s with no appreciable paydown in the principal.

Of course, paying $7 billion in interest on $4 billion in debt sounds grim, but it’s only about 6% a year if you assume that the payments were made over 30 years.

By the same token, the infrastructure of international sovereign debt, most notably through the IMF and World Bank, is structured in such a way as to prevent any meaningful payback on those loans.

They require that the economy be restructured to allow extensive foreign ownership and the free flow of capital, and that the internal economy be placed secondary to the export economy.

This means that whenever there is a downturn, and there will always be a downturn, governments are forced to borrow to repay their loans, and the cycle continues.