41–50 of 195 posts
Argentina should never have handled the bonds under NY law and without control of the bondholder's list. That mistake is costing them dearly. The only reason they can't pay everyone but the holdouts [e.g. selective default] is because of the fact they handled them under NY law after the 2001 default. :/
To understand background and potential implication, I found http://dealbook.nytimes.com/2014/07/30/q-a-whats-behind-the-... helpful.
> Argentina issued bonds under New York law. Until I read this, I assumed that international bonds were issued under international law, with the World Bank as the arbitrator. With the US as both lender and arbitrator, it seems to give them a lot of power.
Wow ! Just one investor can bring a country to its knees !
Brazil and Argentina had very similar economic plans to get out of hyperinflation from the 80's - both created a new currency whose value was attached to the USD. There was a subtle difference: Brazil forbade domestic contracts in dollar (with a few exceptions, mainly leasing contracts for imported vehicles). So when the market forces kicked in and Brazil was forced to devalue its artificially priced new currency, th…
To understand background and potential implication, I found http://dealbook.nytimes.com/2014/07/30/q-a-whats-behind-the-... helpful.
> Argentina issued bonds under New York law. Until I read this, I assumed that international bonds were issued under international law, with the World Bank as the arbitrator. With the US as both lender and arbitrator, it seems to give them a lot of power.
Brazil and Argentina had very similar economic plans to get out of hyperinflation from the 80's - both created a new currency whose value was attached to the USD. There was a subtle difference: Brazil forbade domestic contracts in dollar (with a few exceptions, mainly leasing contracts for imported vehicles). So when the market forces kicked in and Brazil was forced to devalue its artificially priced new currency, th…
This is an interesting and often overlooked aspect of monetary policy in the US.
In the US, we are used to the dollar being the single currency domestically for virtually all domestic transactions, and even used to it being used abroad (which extends our purchasing power greatly) as well as in most black market transactions (which essentially acts as a free loan to the government).
It makes monetary policy changes that much more effective, because there is no other currency to compete with directly (not by fiat, as in Argentina, but by custom).
If alternative currencies like Bitcoin take off, the US government will have a very strong incentive to regulate them directly or manipulate them indirectly, because their very presence and widespread use would weaken the ability of the government to use monetary policy as an economic tool.
Argentina should never have handled the bonds under NY law and without control of the bondholder's list. That mistake is costing them dearly. The only reason they can't pay everyone but the holdouts [e.g. selective default] is because of the fact they handled them under NY law after the 2001 default. :/
That's the whole point - if you're a trustworthy borrower, then you can get money on decent terms; but if you're like Argentina then every lender needs all the protection they can get, to try to prevent cases like this one.
Earlier quoted context omitted.
Not exactly the same... patent trolls don't do anything, and more often than not their patents aren't really novel inventions. These funds, however, lent Argentina money, while the country promised to pay back all of it, plus interest. I wouldn't like to get back less than I was promised, or even less than I lent in the first place.
As I understand this funds didn't lent Argentina anything, they bought the bonds in the open market at a huge discount.
Earlier quoted context omitted.
As I understand this funds didn't lent Argentina anything, they bought the bonds in the open market at a huge discount.
Which is how debt collectors work. The hedge fund guys are just debt sharks. They're contributing nothing of value to anyone - possibly not even to themselves, because it's not so unlikely there will be international fallout that massively damages their other holdings.
Except if they didn't exist, then bonds like those sold by the Argentine government would require higher interest rates, because the original buyer would have to assume the entire risk of default, rather than having the option to transfer part of that risk in the future. That'd be bad for national governments trying to raise funds at low cost.
Argentina should never have handled the bonds under NY law and without control of the bondholder's list. That mistake is costing them dearly. The only reason they can't pay everyone but the holdouts [e.g. selective default] is because of the fact they handled them under NY law after the 2001 default. :/
With their economic history, they would have had a much harder time issuing the bonds elsewhere.