“Legal Imperialism” Through Public Debt Adjudication

This our weekly discussion of the price level as it relates to Perry Mehrling's money view. The price level is the average price of goods in terms of money or, equivalently, the price of money in terms of goods. But what determines the price level? Why is the price level important? And how does it fit into the money view?

This week, we discuss what happens when the international capital markets are regulated and managed by specific individual countries (e.g. the US and the UK) acting in their own national interests.

To prompt discussion, we're reading a chapter by Jérôme Sgard from the 2020 book A World of Public Debts.

From a Multilateral Broker to the National Judge: The Law and Governance of Sovereign Debt Restructuring, 1980–2015

This chapter analyzes the succession of two sharply contrasted regimes for sovereign debt restructuring. The first one, which reached maturity during the 1980s, was marked by the central role of the IMF, with multilateral negotiations involving political settlements between debtor governments, creditor banks and their national governments. Today, however, this regime has been succeeded by the central role of national judges with jurisdiction over the main capital markets (especially New York) as the final interpreters of disputes over debt contracts. This chapter shows that the consequences are a “re-territorialization” of public debt restructuring, in spite of the globalization of markets; the domination of a discursive regime based on the language of private contract law; and a major strengthening of the rights of private investors, especially minority ones.