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Been going on for a while - this is from 2007: Vulture funds buy up sovereign debt issued by poor countries at a fraction of its face value, then sue the count

Been going on for a while - this is from 2007: Vulture funds buy up sovereign debt issued by poor countries at a fraction of its face value, then sue the countries in courts - usually in London, New York or Paris - for their full face value plus interest. https://www.theguardian.com/business/2007/oct/17/debt.law https://www.theguardian.com/business/2007/oct/17/debt.law

mjfl 9y ago
As they have every right to do. Taking out a loan is making a legally enforceable promise to pay back the money, and enforcement actions like that are the only reason that people make the loans in the first place. I sure as hell wouldn't buy a Venezuelan bond.
- deleted 9y ago
  [deleted]
- supernumerary 9y ago
  I think the issue is that the enforcement happens in the West, and not so much that it happens. There are big law firms that stand to make a lot of money from the litigation. Furthermore there is likely a contractual obligation that this be litigated in the West. All of which incentivises buying up dubious debt that needs to be run through the legal system, basically it pays twice... see (mjfl's comment above) Furthermore, in the context of western exploitation/interference with these countries' economies, many of whom have not had recourse to a judicial process for reparations - your notion of what is rightful or fair is perhaps too narrow.
  - varjag 9y ago
    > I think the issue is that the enforcement happens in the West, and not so much that it happens. Well face it, it either happens in the West or is not happening at all. And it's not like some obscure footnote, the arbitrage conditions are fully disclosed beforehand.
- mhuffman 9y ago
  >> and enforcement actions like that are the only reason that people make the loans in the first place. And also that delicious interest. You forget that the lenders already intend on getting something out of it. The reason they are getting interest at all is that there is a risk. If there was zero risk, there would be no need to pay interest.
  - eonwe 9y ago
    Only a part of the interest comes from risk. One important part is that if I were to give you 10$ in 10 years, it has less value to you than me giving you 10$ now (which is the difference between lending you lending to me and you not lending to me if you were 100% sure I would pay back).
    - mhuffman 9y ago
      Time value of money is also based on risk. You are betting that there is an alternative sure thing at which you could earn some expected rate.
    - baursak 9y ago
      The part that comes from risk in this case is the biggest chunk of the interest though. If we assume that AAA-rated have "no risk".
  - imiller 9y ago
    Interest is because of the time value of money and risk, not just risk.
    - mhuffman 9y ago
      Time value of money is also based on risk. You are betting that there is an alternative sure thing at which you could earn some expected rate.
      - euyyn 9y ago
        Mostly on need, though. If I'm hungry, I'm hungry now, not 10 days from now.
jevgeni 9y ago
Isn't it shocking that people dare ask for their money back? Surely, this is some kind of scam. /s
- usrusr 9y ago
  The interesting bit is that the debt buyers are making money from some advantage they seem to have in enforcing repayment relative to the original lenders. Under proper rule of law, the original lenders would have exactly the same chance of getting money back as Goldman, eliminating all need to sell the debt at a massive discount.
  - jevgeni 9y ago
    There is nothing illegal in this, if that's what you are suggesting. There are different reasons why somebody might decide to sell debt at a discount. One reason, for example, is that bankruptcy proceedings, especially international ones are super messy and expensive. If you are not dealing with these things on a regular basis, it might be better to book a small loss now and get and immediate cash flow instead of waiting for decades.
  - deleted 9y ago
    [deleted]

mjfl 9y ago

As they have every right to do. Taking out a loan is making a legally enforceable promise to pay back the money, and enforcement actions like that are the only reason that people make the loans in the first place. I sure as hell wouldn't buy a Venezuelan bond.

deleted 9y ago
[deleted]
supernumerary 9y ago
I think the issue is that the enforcement happens in the West, and not so much that it happens. There are big law firms that stand to make a lot of money from the litigation. Furthermore there is likely a contractual obligation that this be litigated in the West. All of which incentivises buying up dubious debt that needs to be run through the legal system, basically it pays twice... see (mjfl's comment above) Furthermore, in the context of western exploitation/interference with these countries' economies, many of whom have not had recourse to a judicial process for reparations - your notion of what is rightful or fair is perhaps too narrow.
- varjag 9y ago
  > I think the issue is that the enforcement happens in the West, and not so much that it happens. Well face it, it either happens in the West or is not happening at all. And it's not like some obscure footnote, the arbitrage conditions are fully disclosed beforehand.
mhuffman 9y ago
>> and enforcement actions like that are the only reason that people make the loans in the first place. And also that delicious interest. You forget that the lenders already intend on getting something out of it. The reason they are getting interest at all is that there is a risk. If there was zero risk, there would be no need to pay interest.
- eonwe 9y ago
  Only a part of the interest comes from risk. One important part is that if I were to give you 10$ in 10 years, it has less value to you than me giving you 10$ now (which is the difference between lending you lending to me and you not lending to me if you were 100% sure I would pay back).
  - mhuffman 9y ago
    Time value of money is also based on risk. You are betting that there is an alternative sure thing at which you could earn some expected rate.
  - baursak 9y ago
    The part that comes from risk in this case is the biggest chunk of the interest though. If we assume that AAA-rated have "no risk".
- imiller 9y ago
  Interest is because of the time value of money and risk, not just risk.
  - mhuffman 9y ago
    Time value of money is also based on risk. You are betting that there is an alternative sure thing at which you could earn some expected rate.
    - euyyn 9y ago
      Mostly on need, though. If I'm hungry, I'm hungry now, not 10 days from now.

jevgeni 9y ago

Isn't it shocking that people dare ask for their money back? Surely, this is some kind of scam. /s

usrusr 9y ago
The interesting bit is that the debt buyers are making money from some advantage they seem to have in enforcing repayment relative to the original lenders. Under proper rule of law, the original lenders would have exactly the same chance of getting money back as Goldman, eliminating all need to sell the debt at a massive discount.
- jevgeni 9y ago
  There is nothing illegal in this, if that's what you are suggesting. There are different reasons why somebody might decide to sell debt at a discount. One reason, for example, is that bankruptcy proceedings, especially international ones are super messy and expensive. If you are not dealing with these things on a regular basis, it might be better to book a small loss now and get and immediate cash flow instead of waiting for decades.
- deleted 9y ago
  [deleted]