When a U.S. court issued a stop-payment order for all of Argentina’s debts, it raised difficult ethical, legal, and economic questions. Most of all, from my point of view as an American, with U.S. courts ignoring the principles of law and instead using it as a mechanism for the strong to retaliate against the weak, would Wall Street lose its favored place in international finance? We can now say that the unraveling has begun, with a U.K. court overturning much of the effect of the last two dozen U.S. court orders in the case. If U.K. courts are lawful while U.S. courts are capricious and vindictive, what does that say to investors? “With the stakes so high and the system so broken, debt markets have little reason to remain in the US,” write Joseph Stiglitz and Martin Guzman in The Guardian:
At this point, if China decides its interests are better protected if debts are issued in Shanghai or any other venue of its choosing, there is nothing to keep those markets in New York. Looking farther ahead, systematic reform is dearly needed, and if this reform is not led by Wall Street then there is every reason to think that Wall Street will find itself on the outside when it is all over.