Wow, great link.
A few points:
1. Why a foreign country would allow a trial in the US when litigating against a US hedge fund is beyond me.
2. The size of these hedge funds show you just how distorted the capital allocation process has become when they can hold an entire country hostage.
3. rules can be bent but rarely is debt ever forgiven, especially for the big boys. We saw this in the GFC of 2008 when most of the bailout monies were handed over to big boy creditors at the expense of debasing the dollar.
4. Finally, and most importantly, you can see that the only practical solution for most of these crises, especially when they hit the US, will be to print money. It's a one trick pony, the Fed.
1. What makes you think they have a choice? Clearly they do not. The restructured bonds created after the 2001 credit event were written under New York law. Argentina can do whatever it likes within its own legal system, even declare that debt to be invalid. They don;t want to do that, what they really want to do is to continue to pay their restructured debt-holders, whilst not paying anything to the hold-outs that didn't accept the haircut back in 2001.
However because of the pari passu clauses in the (original & restructured) bond contracts, which guarantee 'equal treatment of all bond holders', they cannot legally under the terms of the contract they themselves wrote, pay the restructured holders and give nothing to the holdouts. The substance of the NY court decisions was to reinforce that interpretation, AND to bind third parties under it as well.
This means, for example, that if the Bank of NY (their current payment partner) continues to help Argentina pay its bond holders it will be in violation of the injunction and US law. It may even mean that bond holders themselves, if they accept interest payments without same going to holdout bond holders, may be in violation of the law.
2. Probably right, though supranational corporations are hardly a new thing, and Argentina is a relatively small player in global capital markets mainly because they are generally spurned due to their terrible track record of bad behaviour (this is a case in point!)
3. Debt is very often forgiven. You would do well to look at the history of sovereign credit crises. Hell, haircuts were given on Greek debt as recently as last year. A haircut is textbook 'debt forgiveness'. Also your statement about bank bailouts debasing the currency is a non-sequitur - please elaborate.
4. Yes, money printing is a great way to achieve a 'soft default' via monetary inflation, but only if the debt is denominated in a currency for which you control supply! This debt is USD denominated, so Argentina can print as much money as it likes and it will have no effect on this debt in real terms (but will create rampant inflation and probably reduce NGDP domestically!)
