[andyjohnson0]

As I understand it, the problem is that the debtor states are often unable to repay the debt, at least not without taking money away from areas like public health and education.

The loans are often quite old. Presumably the original lenders often decide that the loans are never going to be repayed, and the debtor states budget on that assumption. Years later they find themselves pursued for debts they believed were lapsed.

[Dylan16807]

I have to think that in that case it's the original lender that resurrects the loan, it just took a reminder. A vulture wouldn't buy a loan that was truly dead.

I guess you can blame vultures for incentivizing old lenders to resurrect loans but that's a pretty indirect thing to be upset about.

[molmalo]

As sethg pointed out, there's a difference between privete companies and sovereign countries.

When you lend money to a company and that company can't pay you back, bankruptcy law gets in the game. But when you lend money to a state, you know that there's a calculated risk that they won't be able to pay you and you won't be able to do anything to force them to pay your money back. You protect yourself by adjusting the interest rate. But if the risk is just too high and you lend anyway, it's up to you to take that bet...

If that country can't afford their debt, they can try to renegotiate with you, so you can get paid at least something. If it were a private company and the creditor does not accept the new terms, they could ask for a bankruptcy. As you can't do that with a country, if you reject the new terms, then the sovereign state can say "screw you" and never pay you anything. You had your chance to get something, and you lost it.

Some vulture funds buy this kind of bonds, and then try to reclaim the money... As I said earlier... good luck with that.

Even the U.S. Supreme Court and the US Government agrees with this [1].

That's why they are now trying this kind of weird actions, in some place where they managed to make a judge put his signature to their service... But it's mostly a media show.

[1] Supreme Court Rejects Elliott's Argentina Appeal http://www.finalternatives.com/node/20864

And some more extra info, even mentioning US Administration's support to Argentina's claim: http://marceloballve.wordpress.com/2012/06/27/who-pays-when-...

[Dylan16807]

So the 'screw you' should transfer along with the debt and vultures aren't a legitimate problem?

[molmalo]

If you have a useless paper, and you sell it to someone else, it's still a useless paper...

They are more of an inconvenience, and if they have deep pockets (like in this case), they can keep trying to fight legal battles, over and over for years. Making the other spend money in lawyers. Depending on the amount, it may be cheaper to just pay them and forget the whole thing, just like what happens in some patent cases with the hated patent trolls.

But when there's a huge sum at stake, sovereign states will fight in court. Until now, this fund has lost every case, but they keep appealing the verdicts. A few months ago, the US Supreme Court ended some of the demands, but they have opened a few more.

You get the idea... the kind of lawyers that make their profession look so bad.