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Venezuela Refuses to Default, and Few People Seem to Understand Why

bloomberg.com

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Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#41

Post by mikeyouse »

mc32 wrote: post #39
dublinben wrote: post #4

Earlier quoted context omitted.

Argentina had a record-setting default in 2001, and was able to reach a settlement to issue new bonds this year. There is no such thing as "permanent" in the international debt markets. Someone will eventually be willing to lend you money, at the right price.

Didn't some creditor hold-out hedge-funds fare better than those who initially settled for pennies on the dollar? What was the resolution to that?

It's still being drawn out, Matt Levine's had a few great articles explaining the current happenings, one such:

https://www.bloomberg.com/view/articles/2016-02-22/argentina...

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#42

Post by krapp »

AnimalMuppet wrote: post #32
krapp wrote: post #23

Earlier quoted context omitted.

No offense to Iceland, but the world economy is far less affected by the loss of Icleandic financial institutions than American ones.

But you're moving the goalposts on this discussion. The question wasn't the impact on the global economy; it was the impact on the national one. So the Iceland example is directly relevant.

Part of this discussion seems to be whether or not the Treasury should have done what Iceland did, and I'm just trying to point out that they had valid reasons to do anything but that.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#43

Post by dragonwriter »

venomsnake wrote: post #21
redstripe wrote: post #6

Earlier quoted context omitted.

Can you give some examples of where a country defaulted and was worse off? I think most recently Iceland defaulted and they seem to be doing alright - but maybe given it's size it doesn't really count.

Iceland didn't default. They let their commercial banks die without intervention from the government. Also known as what the US Treasury should have done in 2008. If something is too big to fail - it must be killed immediately.

> If something is too big to fail - it must be killed immediately.

No, if its too big to fail, it must not be allowed to fail -- but also must be as expeditiously as possible broken up into units which are not too big to fail.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#44

Post by venomsnake »

krapp wrote: post #40
SilasX wrote: post #37

Earlier quoted context omitted.

Well, yes, American banks were able to threaten a lot more mutually-assured destruction so as to intimidate the government into continuation of their too-big-to-fail status. Not sure how that's an argument in favor of paying the Danegeld though.

>Not sure how that's an argument in favor of paying the Danegeld though. Because not paying it would likely have tipped an already precarious global economy further towards depression, and that's not acceptable. So you pay the Danes off until you can actually kill them without killing yourself in the process.

Eight years later and the Danes are thriving. We already paid the social costs of total economic meltdown. But we have nothing to show for it.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#45

Post by Analemma_ »

mc32 wrote: post #39
dublinben wrote: post #4

Earlier quoted context omitted.

Argentina had a record-setting default in 2001, and was able to reach a settlement to issue new bonds this year. There is no such thing as "permanent" in the international debt markets. Someone will eventually be willing to lend you money, at the right price.

Didn't some creditor hold-out hedge-funds fare better than those who initially settled for pennies on the dollar? What was the resolution to that?

That's kind of a special case that doesn't apply anymore: Argentina didn't have a collective action clause on its debt, meaning they could not force the holdouts to take the haircut even though 93% of the bondholders agreed to it. Virtually all debt issued by developing countries, and even a lot of developed ones, now has a strong CAC specifically because of the Argentina situation.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#46

Post by homero »

gohrt wrote: post #36
cperciva wrote: post #34

There's another possibility which wasn't mentioned in the article: Maybe the government is quite happy with the food shortages. They have used control of the food supply to reward their supporters and to punish their opponents; this gives them tremendous power, and why should they give up that power just for the sake of a few million starving citizens?

Who are the supporters who are getting food, and opponent who are not? The starving public aren't meaningfully pro or anti any faction in government, they are civilians trying to scratch by.

The political parties. Imagine if registered democrats got food and republicans did not and changing is not allowed

https://youtu.be/5SeVv277d0I

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#47

Post by danharaj »

AnimalMuppet wrote: post #30
danharaj wrote: post #26

The article is fixated on the economic benefits of default, as if economic decisions were only ever decided by economics! Maduro's government is authoritarian and violently imposed. What internal political factors does this dictatorship think preclude the possibility of default? Would default be signaling weakness to competing forces within the country? Is humiliation on the international stage a threat to the ruling…

> Violent dictatorships are seldom rational. Well, they're often rational within their own framework (either an ideological framework or merely the framework of violence and power). That looks irrational to the rest of the world, but it has its own logic. > This article is also written with the tacit acceptance of neoliberal ideology: The only rational choice for an impoverished nation is to submit to foreign capital…

> Will submitting be better or worse than the current situation in Venezuela? If anyone claims that it will be worse, I'd like to see their justification for that statement.

The current situation is shit. Paths forward should be judged against their alternatives and their possibilities. Global powers love that they can coerce the impoverished into decades-long deals of economic servitude and their ideology pushes it as the only reasonable way forward. Dictatorship and submission to global capitalism aren't the only options.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#48

Post by tim333 »

"Never assume malice when stupidity will suffice"

The government, especially under Maduro, has done so much dumb stuff that I lean toward the stupidity explanation. The main reason there is no food / goods is they try to set the price hugely under market so no one can supply at that price. Plus a huge bunch of other similar issues.

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#49

Post by SilasX »

krapp wrote: post #40
SilasX wrote: post #37

Earlier quoted context omitted.

Well, yes, American banks were able to threaten a lot more mutually-assured destruction so as to intimidate the government into continuation of their too-big-to-fail status. Not sure how that's an argument in favor of paying the Danegeld though.

>Not sure how that's an argument in favor of paying the Danegeld though. Because not paying it would likely have tipped an already precarious global economy further towards depression, and that's not acceptable. So you pay the Danes off until you can actually kill them without killing yourself in the process.

Just so we're on the same page, do you understand the logic behind not paying extortionists? The "later" doesn't come, and the payment only makes them better at extorting you, and draws in more people to try the same. You typically won't get a better opportunity.

If you come up with a rationalization for how you absolutely must defer the reckoning today, why won't you come up with one tomorrow as well?

Re: Venezuela Refuses to Default, and Few People Seem to Understand Why

#50

Post by AnimalMuppet »

krapp wrote: post #42
AnimalMuppet wrote: post #32

Earlier quoted context omitted.

But you're moving the goalposts on this discussion. The question wasn't the impact on the global economy; it was the impact on the national one. So the Iceland example is directly relevant.

Part of this discussion seems to be whether or not the Treasury should have done what Iceland did, and I'm just trying to point out that they had valid reasons to do anything but that.

Clarification: Do you mean the US Treasury? If so, yes, I agree with you. And yes, that has been part of the discussion.
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