Good morning, Quartz readers!
Funny the difference a few years makes.
In 2005, when Argentina restructured its debt after its last default, an IMF expert (paywall) compared the “vulture funds” who held out to “mosquitos” that could irritate a sovereign borrower, but never force it to pay up. Now, those vulture funds have forced Argentina into default. Their legal victories, a group of economists says, create a moral hazard by “allowing investors to obtain full repayment, no matter how risky the initial investment.”
Whatever your view on the vulture funds—or on who’s to blame in general—it’s clear to everyone that the system for dealing with sovereign debt defaults is broken. In bankruptcy cases, when a borrower can’t pay, an impartial judge tries to find a compromise. But there is no bankruptcy court for sovereign states, and the American judge who ruled Argentina must pay its holdouts in full wasn’t evaluating competing claims; he simply enforced a contract.
His (controversial) method was to make US banks block Argentina’s debt payments to other creditors. The vulture funds tried this same move in Europe to force Peru and the Democratic Republic of Congo to settle debt holdout claims. But when they tried Nicaragua, the country won a ruling that said banks aren’t responsible for enforcing contracts to which they aren’t parties. Soon after, Belgium and then the UK passed laws enshrining that principle. US lawmakers would be wise to follow suit.
But that probably isn’t enough. As the last 13 years of litigation show, private creditors have little recourse when sovereigns default on them. That, in turn, makes it costlier for poor countries to borrow. And as the European debt crisis showed, an ad hoc coalition of other sovereigns and the IMF doesn’t guarantee effective restructuring, either.
The IMF last considered a fix for sovereign debt restructuring around the same time as Argentina’s 2001 default but took no action; it recently released some new proposals. Let’s hope we’re not still talking about them the next time a government stops paying its bills.—Tim Fernholz
Five things on Quartz we especially liked
What fonts tell us about the economics of the internet. Fonts are a kind of proxy for economic development, explains Nikhil Sonnad: As people get better internet connections and more spending power, they demand better type design. And we’re finally starting to see some really nice non-Latin fonts.
New Delhi’s monkey business. Captive langurs were once used to chase away rhesus monkeys who congregate around India’s parliament. But now using langurs is banned and the monkeys are back in force. So, explains Sunil B.S. on Quartz India, Delhi is hiring 40 men to… walk around making langur noises.
Google is eating Microsoft’s future lunch. Microsoft has long had a near-monopoly in the corporate world. But Dan Frommer looked up some data and found that while only one of the Fortune 50 uses Google’s email software, 92% of a recent class of Silicon Valley startups do. So what do you think happens when they get big?
The wisdom of children’s librarians. A very special trove of knowledge is contained in the untrammeled, for-internal-use-only reviews of children’s books by staff of the New York Public Library, writes Jenni Avins. On a “late-period” Dr Suess: “It is alarming to think of the onslought [sic] that can ensue if these books are continually added to the collection.”
Five things elsewhere that made us smarter
Living with a new face. After years living hideously disfigured, Richard Norris had the most ambitious full face transplant ever attempted. Jeanne Marie Laskas in GQ spent some time with him and writes a haunting, troubling account of his struggles with the medical aftermath and the mystery of living in someone else’s features that you can’t even control.
Why Europe’s Jews are fleeing once again. It’s an ugly irony: Israel’s aggressive tactics in Gaza have spun European anti-Semitism up to such heights that some Jews feel safer in an Israel at war than in their own home countries. Adam LeBor in Newsweek on the reawakening of Europe’s old evils.
Singapore, surveillance playground. Though Edward Snowden revealed a US government spying apparatus of stunning reach, Singapore has built a system of monitoring and control that the NSA could only dream of. Shane Harris in Foreign Policy looks at the work of the world’s biggest big-data laboratory.
Why are disgraced doctors running big drug trials? Those who can, treat; those who can’t, run clinical trials. Peter Aldhous in Medium investigates how American doctors with a record of medical incompetence can end up running trials for the drug industry, covered by a separate system of regulation.
Inside Colorado’s marijuana black market. Wait—didn’t Colorado legalize pot? Yes, writes Tina Griego at the Washington Post; but it’s well to-do-do white folk with clean criminal records who are cashing in, not the poor blacks and Latinos who grew and sold marijuana beforehand, and their business still thrives due to the high taxes and regulation.
Our best wishes for a relaxing but thought-filled weekend. Please send any news, comments, children’s book reviews, and langur imitations to email@example.com. You can follow us on Twitter here for updates throughout the day.