ML-Implode News - Stiglitz: First Shot Fired in RoW Counter-Attack on American Debt Imperialism; Opportunity for China

Last July, when United States federal judge Thomas Griesa ruled that Argentina had to repay in full the so-called vulture funds that had bought its sovereign debt at rockbottom prices, the country was forced into default, or "Griesafault". The decision reverberated far and wide, affecting bonds issued in a variety of jurisdictions, suggesting that US courts held sway over contracts executed in other countries.. a court in the UK has finally brought some clarity to the issue, ruling that Argentina's interest payments on bonds issued under UK law are covered by UK law, not US judicial rulings.
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The vaunted American rule of law no longer looks so robust. Perversely, it protects the strong against the weak. The Griesafault is only the latest of many decisions and legal changes that have revealed what one might call a symptom of "corruption, American-style", in which lobbying and campaign contributions compromise the entire system, even when no individual official is on the take. The US would be wise to react before the sovereign-debt market migrates from New York.

China should stand ready to pick up the slack. Its savings now far outstrip those of the US, and it is striving to make Shanghai a global financial centre. That ambition has become more attainable in view of the damage to the US system's credibility in the aftermath of the 2008 financial crisis. But, if Shanghai is to emerge as a leader in sovereign lending markets, China should be aware of the shortcomings of legal frameworks elsewhere, and design a more efficient and equitable alternative.

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Stiglitz: First Shot Fired in RoW Counter-Attack on American Debt Imperialism; Opportunity for China