Posted on 06/18/2014 12:51:08 PM PDT by PoloSec
Argentinians, battered by decades of apparently cyclical economic crises, fear a new one following a US supreme court ruling this week that could make the country liable for up to $15bn (£11bn) owed to so-called "vulture funds".
The vultures, led by a US billionaire, are mainly hedge fund investors who snapped up Argentinian bonds at rock-bottom prices following the country's $95bn default on its foreign debt in 2001. The court in Washington DC has ordered that they be repaid in full – and that ruling threatens a new default, possibly within weeks.
Violence erupted across the nation after Argentina declared itself unable to meet its payments in the last week of December 2001. The widespread rioting, supermarket looting and the death of young social volunteers by police fire took their toll on Ochoa. "That's when I had my first panic attacks, which completely affected my life afterwards and even today."
Argentina had lived through hyperinflation up to 12,000% in 1989. There had been economic collapse in 1975 and decades of military rule. But what happened in 2002 was unique, even in comparison to those catastrophes. Bank accounts were frozen and withdrawals banned. Barter clubs sprouted like mushrooms after rain everywhere. Old clothes were exchanged for vegetables, psychology sessions for cuts of meat.
"The 2001 crisis hit me with four kids already," recalls Ochoa. "I met with the parents of other kids outside school to locate nearby barter clubs, count our coins to get there and find whatever we could find, but something at least."
Like many other workers and employees, journalist Italo Daffra found himself thrown out of his job. "I went through an enforced sabbatical in 2002 and 2003," Daffra says. "I was the editor of three magazines and our publisher crashed overnight. I burnt through all my savings
(Excerpt) Read more at theguardian.com ...
In the world in which The Guardian reporters live, people trying to be repaid loans that they made are “vultures.”
Maybe, maybe not.
Argentina is a sovereign nation and there is no way to force them to repay, short of military occupation (right, like THAT will happen).
You can confiscate their overseas assets, however.
By trying to force a moot issue they are just going to make Argentina the object of sympathy in all of these other developing nations, and encourage the spread of more Communism.
Interesting argument:
(1) You should encourage Communism by giving into unjust Communist demands because
(2) If you resist Communist demands, you will be encouraging Communism.
(1) You should encourage Communism by giving into unjust Communist demands because
(2) If you resist Communist demands, you will be encouraging Communism.
_______________
3) If you keep calling everything you happen to disagree with Communist, you are encouraging Communism.
Why did George W. Bush promote African debt forgiveness?
Unless I'm confused, the present owners of these bonds never gave a nickel to Argentina, much less "saved" them.
Back in say, 1990, Argentina sold bonds to (foolish) investors. 10 years later, as it became obvious they were going to default, the original investors, or those they had transferred the bonds to, sold the bonds for pennies on the dollar to the "vulture investors," who gambled the low cost of the bonds vs. their face value against the low change of ever collecting.
The vultures never gave any money at all to the Argentines. That is unless I'm confused about how this works. It wasn't like Bush and Obama bailing out the banks. It's actually a lot more like our first major political controversy, where Hamilton insisted we pay our debts at face value even to speculators.
We have bankruptcy for corporations and individuals, why not for countries?
What is the point of holding debt instruments that are beyond the debtor’s ability to repay?
“apparently cyclical economic crises”
It’s like a train coming down the tracks. There’s nothing we can do, and it’s going to happen over and over again!
“We never trusted our savings to a bank account again,” says Ochoa. “Over 10 years have gone by but nothing makes us suppose our political class have learned anything from what happened. Their arrogance and our classical apathy create a lethal combination for it to repeat itself all over again.”
Yes, it’s their arrogance and our apathy that cause this. It has nothing to do with the unbelievably stupid economic policies that turned this rich nation into a basketcase.
Federal Courts can -- and will -- now force payments made by Argentina to current bondholders to be paid on the same footing as the hedge fund bondholders. In effect, Argentina would either have to default on all payments made through US banks, or continue to pay both.
(1) Because he thought that voluntary debt forgiveness or voluntary debt restructuring was a good gesture.
(2) Because in Africa many dictatorial governments ran up debt without any representative body approving.
(3) Because in many cases, the borrowed money went directly to the pockets and Swiss bank accounts of individuals rather than to the government coffers.
In the case of Argentina, the lenders volunteered to restructure and partially forgive the debt, but they were rebuffed. The debt was also incurred by a representative government, and the government used that debt to spend on government programs favored by Argentine voters.
The two situations are very different.
The existence of speculators, futures markets, and secondary purchasers is an essential means of mitigating risk, without which borrowing would not occur in modern markets to begin with. The claim that “speculators” do not support the original borrowers is false. Hamilton understood that.
Well, obviously every example of the so-called failure of socialism was because those who were implementing it weren’t as smart as the people wanting to implement it here.
Time for a Falklands/Malvinas crisis to divert attention.
Argentina is repaying current borrowers. The essential case before the court was: can an entity which is meeting current obligations under the laws of New York State be allowed to default on past obligations under the same laws? The Court has decided they cannot.
It's not a question about whether they can pay, or when they can pay. It's a question of whom can they pay?
The "vultures" said: "Everyone else thinks that Argentina will not do the right thing and stand up to their debts. We are voting with our wallets that they will do the honorable thing."
Argentina repaid their confidence with contempt - and yet they are "vultures" and bad actors?
Hamilton knew that countries who pay their debts improve their credit and thereby increase their resources and opportunities.
He knew that the best way for America to rise in the world is to demonstrate that US markets had integrity.
The Argentines are proclaiming to the world that they are thieves.
There is such a thing: it's called a debt restructuring.
The difference is this: if a company goes bankrupt or an individual goes bankrupt, I can seize some (in individual cases) or all (in corporation cases) their assets to satisfy my debt.
What is the point of holding debt instruments that are beyond the debtor’s ability to repay?
Argentina has $0.5T in GDP and $50B in annual tax receipts.
These bonds have total value of less than $10B.
This debt is less than 2% of GDP, and an agreed repayment schedule would barely touch Argentina's budget.
The simple fact is that the Argentine government wanted to buy votes by spending more than it had and it decided to make ends meet not by exercising fiscal discipline, but by stiffing lenders.
because we can print more money?
A judgement could attach assets in America
“I thought they basically declared bankruptcy and reorganized.”
The terms and conditions of the loan contract/s explicitly waived Argentina’s sovereign immunity as a consideration for receiving the loan. When Argentina then defaulted on repayment of the loan yet again, Argentina used sovereign immunity to deny repayment of the loan on the original terms and conditions despite the waiver of sovereign immunity.
“This was fought in a US court? Why not in an Argentine court?”
The contract agreement specified U.S. jurisdiction for a dispute.
“Why do they need to comply with a court ruling in another country? (Unless the bonds were sold on that basis?)”
Argentina agreed to do so in the contract/s, and international law supports U.S. jurisdiction in the absence of contract terms to that effect.
“A judgement could attach assets in America”
The seized warship was an antique three-master. I suspect that the state department would step in and try to prevent seizing assets. I don’t know what our present situation is with Argentina, but that would make it head south in a hurry. Also, it might provoke them to again try to seize the Falklands. They are already practically at a shooting war trying to prevent the Brits from drilling for oil.
Yes, I later read that in the article that somebody sent. What a mess. Thanks.
I had in mind arresting a 747 at JFK or maybe MIA
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