[quetzalcoatl]

Odious Debt

In international law, odious debt, also known as illegitimate debt, is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

The doctrine of odious debt was formalized in a 1927 treatise by Alexander Nahum Sack, a Russian émigré legal theorist. It was based on two 19th century precedents—Mexico's repudiation of debts incurred by Emperor Maximilian, and the denial by the United States of Cuban liability for debts incurred by the Spanish colonial regime.

The concept of odious debt is usually directed at obviously corrupt dictatorial regimes like Jean-Claude Duvalier or Saddam Hussein. The argument is that taxpayers shouldn't be burdened with paying the debts of previous regimes whose legitimacy is not recognized. The moral hazard argument applies in the following way: international lenders should bear the primary risk of lending money to brutal and corrupt regimes.

I think it would serve a useful purpose to extend the concept of odious debt to include the most horrible examples of non-transparent debt. An egregious example of non-transparent debt would be private banks negotiating loans in secret with oligarchs of troubled nations, with the explicit knowledge that 1) the loans cannot conceivably be paid back and 2) their CBs will nationalize such debt (transferring the risk to the taxpayers of the lending nation) once it becomes evident that it can never be paid.

A loan made to country, which even the most rudimentary analysis shows cannot be repaid, is odious by definition.