Two years ago we predicted that if distressed debt investors prevailed in their crazy interpretation of the contracts governing Argentine bonds, the market for new sovereign bonds might shift to London, and existing debt might be impossible to restructure.
A half year after the U.S. Supreme Court let that interpretation stand, how do those predictions look? Our first prediction about the market shifting to London overlooked the flexibility of the U.S. capital markets, which have adapted perfectly. But the second worry about future debt restructurings can only be addressed by the public sector, which is far less nimble. With oil selling at half the price Venezuela needs, we might not wait long for another sovereign economic crisis.
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