The Flogging of Punchinello

Month: January, 2015

Pari Passu

Benjamin Remy Chabot
Federal Reserve Bank of Chicago

G. Mitu Gulati
Duke University – School of Law

February 18, 2014

One of the most debated issues in international finance is the meaning of the pari passu clause in sovereign bonds. The clause is ubiquitous; it is in almost every single foreign-law sovereign bond out there. Yet, almost no one seems to agree on its meaning. One way to cut the Gordian knot is to track down the origins of the clause. Modern lawyers may have simply copied the clause from the documents of their predecessors without understanding its meaning. But surely the people who first drafted the clause knew what it meant. Four enterprising students at Duke Law School may have found the very first sovereign bond to contain a pari passu type provision; General Santa Anna’s Black Eagle. This Essay tells the story of that bond and its equal treatment clause.


Composite Central Banking

Coombs’ defence of a composite central bank may appear quaint today, but we have merely fallen victim to a later conventional wisdom. Coombs was trying to build a central bank that was not unthinkingly modelled on the Bank of England or beholden to its values. Rather, he aimed to build a central bank appropriate to Australian conditions. He saw the central banking and commercial arms of the Commonwealth Bank as symbiotic (Schedvin 1992, pp. 160, 281). The commercial arms could also be used for regulatory purposes, including for aggregate demand management, and the central banking personnel could learn from the hands-on experience of the commercial arms. The trading banks saw only the government hiding behind regulation that privileged the earnings of the various commercial arms of the Commonwealth Bank (see fn.7). Coombs argued that the Commonwealth Bank’s commercial institutions were simply out-competing a sluggish private banking sector that was indifferent to innovation.

Wu Tao Zu

‘During the Tang dynasty, the Chinese artist Wu Tao-tzu was one day standing looking at a mural he had just completed. Suddenly, he clapped his hands and the temple gate opened. He went into his work and the gates closed behind him.’ Sven Lindqvist, The Myth of Wu Tao-tzu


Okay, when it’s over, you’ve then got to fill in the rest of your life. Fifty is not that old these days.

I’m not quite going at 50 either. I’ve got a few years yet.


But you know there’s nothing sadder than an ex-national leader. Generally, we don’t know what to do with them, do we?

They are a reasonably I wouldn’t say yes, they are a reasonably sad lot, I suppose.


Tragic, most of them. What are you going to do for the next years?

I don’t want to be one of them. If the Commonwealth can leave me off the invitation lists and forget about me.


We’ll fix it up with the protocol office, it’s easy.


I would be delighted, you see. So one can just fade away to being a person who is allowed to do normal things again. That’s what I’d like to do, and all the things I like. I love I’ve got my wife and family, which are my principal interest in life, and all the other things I like. I like music, I like supporting people in music, I like supporting people in the arts, I like architecture, decoration, all the things I’m into. You know all the things I’m into, you’re into them yourself. And you can go about people say what are you going to do after public life? And I say, because they expect you to line up :for thisfcharity or that charity, and I say, well what I’m going to do is indulge my senses, that’ s what I’m going to do. They say what do you mean by that and I say, exactly what I’ve said. That’s what I’m going to do.