Elliot Capital's position is basically that of a broker buying junk bonds and then chasing after money through the courts when the company inevitably goes under. Sure, it could go your way, but they were well aware of the risks, and honestly the strategy of buying junk bonds on a defaulting country and expecting compensation through courts is not something that seems to be in "good faith".

The 2001 restructuring was reasonable; most of the bondholders agreed with it, and got a fair price for their bonds. The holdouts knew this when they bought the same bonds.

Imagine a court system that applies common sense and equitable principles and tries to interpret contracts in a way that's as fair as possible to everyone involved, rather than going by the strict letter of every contract document. This removes the ability to rip someone off when you spot a hole in their contract, which makes some things less efficient, but I can see it working better overall.

[1] So it's something like: there's a provision in the contract that says that certain guarantees are invalidated if this subsidiary is reabsorbed into its parent corporation and it's sold to a different company, and some other conditions. Which is obviously nonsense because there's no way those things would both happen. But it's also what the contract says.

Of course it does and it should, because there is real risks involved. Banks make their money by evaluating risks correctly.

>For systemic risk to be properly moderated, the individuals or even individual counties must suffer the consequences of their actions. You can opt to not allow this, but you ultimately suffer as a whole when you do.

This would only work if the parties involved would be fully rational. As long as you have imperfect actors with limited information that have limited ability to learn lessons, optimum way to limit the risk for borrower is by bankruptcy laws and procedures so that everyone involved knows the risks.

There was solid international effort to deal with the situation during the Argentine Great Depression and IMF was involved in making the deal. Because there is no bankruptcy law for countries, it was impossible to negotiate bankruptcy deal for Argentine that would bind everyone. These hedge funds are exploiting this. Going forward, we should make example of them. If majority of debtors agree, better to take the deal. This would generate de facto bankruptcy procedure.