{"id":186751,"date":"2013-10-23T21:27:00","date_gmt":"2013-10-24T02:27:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2013\/10\/23\/todays-must-read-12\/"},"modified":"2013-10-23T21:27:00","modified_gmt":"2013-10-24T02:27:00","slug":"todays-must-read-12","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2013\/10\/23\/todays-must-read-12\/","title":{"rendered":"Today&#8217;s Must Read"},"content":{"rendered":"<p>Felix Salmon has a nice survey on how <a href=\"http:\/\/blogs.reuters.com\/felix-salmon\/2013\/10\/21\/the-imf-revisits-sovereign-bankruptcy\/\">the proposed new process for sovereign debt restructuring that the IMF is considering represents a major shift<\/a>:<\/p>\n<blockquote><p><span style=\"color: blue;\">\u2026\u2026\u2026The paper raised quite a few eyebrows, since it marked the first time in a decade that the IMF has talked in public about changing the international financial architecture around debt restructuring. Its last attempt to tackle the subject, known as the Sovereign Debt Restructuring Mechanism, or SDRM, died ignominiously, bereft of any US support.<\/span><br \/><span style=\"color: blue;\"><br \/><\/span><span style=\"color: blue;\">\u2026\u2026\u2026<\/span><br \/><span style=\"color: blue;\"><br \/><\/span><span style=\"color: blue;\">Lipton, in his speech, said that he was worried that \u201cofficial resources, including from the Fund, would be used to pay out other creditors\u201d. He also said that \u201cin cases where the need for debt reduction may be unclear at the outset, in our view the key is to keep creditors on board while the debtor\u2019s adjustment program is given a chance to work\u201d.<\/span><br \/><span style=\"color: blue;\"><br \/><\/span><span style=\"color: blue;\">.<\/span><br \/><span style=\"color: blue;\">This idea is very close to the \u201cstandstill\u201d that was originally  proposed as part of the SDRM; another name for it is \u201cdefault\u201d. And as  veteran sovereign debt advisor Rafael Molina patiently explained later  on in the panel, sovereign debt managers will, as a rule, do <em>anything<\/em> to avoid defaulting on their debt. As a result, tensions are naturally  very high whenever this idea is brought up, despite the upbeat spin that  the IMF puts on it in its paper:<\/span> <\/p>\n<blockquote><p><span style=\"color: blue;\">The primary objective of creditor bail-in would be  designed to ensure that creditors would not exit during the period while  the Fund is providing financial assistance. This would also give more  time for the Fund to determine whether the problem is one of liquidity  or solvency. Accordingly, the measures would typically involve a  rescheduling of debt, rather than the type of debt stock reduction that  is normally required in circumstances where the debt is judged to be  unsustainable. Providing the member with a more comfortable debt profile  would also have the additional benefit of enhancing market confidence  in the feasibility of the member\u2019s adjustment efforts, thereby reducing  the risk that the debt will, in fact, become unsustainable.<\/span><\/p><\/blockquote>\n<p><span style=\"color: blue;\">Translating into English, the IMF here is essentially saying this:  \u201cSometimes we don\u2019t know whether a country\u2019s debt is too high. We need  time to work that out. But if we\u2019re lending, during that period, then  while we\u2019re deciding whether or not the country\u2019s debt is sustainable,  we\u2019re going to force it to default on its private debt.\u201d<\/span><\/p><\/blockquote>\n<p>Read the rest.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Felix Salmon has a nice survey on how the proposed new process for sovereign debt restructuring that the IMF is considering represents a major shift: \u2026\u2026\u2026The paper raised quite a few eyebrows, since it marked the first time in a decade that the IMF has talked in public about changing the international financial architecture around &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1002,1017,985],"tags":[],"class_list":["post-186751","post","type-post","status-publish","format-standard","hentry","category-good-writing","category-international-finance","category-regulation"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/186751"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=186751"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/186751\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=186751"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=186751"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=186751"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}