To be “sovereign” means that there is no higher legal authority. This is why, historically, sovereign debt is a bad risk: if the sovereign doesn’t want to pay back the debt, there is no authority that can order the debt repaid.
Francis Menton briefly describes Argentina’s journeys through the United States court system as the South American company attempts to evade debt issued in New York. The end game is near and Argentina’s lawyer told the judge what it will be: ”We would not voluntarily obey such an order [to repay the debt].” The Argentinians are essentially echoing Andrew Jackson’s rebuke of the Supreme Court: “They have made their decision, now let them enforce it.”
I suppose that the courts could seize whatever meager assets the broke country might have in American banks, but American courts have no real means to force Argentina to repay the debt. What the court can do is to deny Argentina access to future New York credit markets, which causes Menton to remark:
” . . . getting cut off from credit would probably be the best thing that could ever happen to Argentina, finally forcing a reduction in its wildly bloated state sector and out-of-control crony capitalism.”
The same would be true for the United States, but I fear that we’re going to have to get a lot closer to Argentina’s miserable state of affairs before we accept it.