I wonder what highly esteemed economics expert Paul Krugman thinks about this.
http://krugman.blogs.nytimes.com/2012/05/03/down-argentina-w...
S.&P. Says Argentina Has Defaulted
81–90 of 195 posts
Re: S.&P. Says Argentina Has Defaulted
#82I'm very sorry for Argentinians - I've been there last year, visiting relatives (I'm from Italy, and my grand aunt moved to Argentina in the 50s - she was a bit over 20 - to escape an arranged marriage in Italy, and came back only in the 80s).
Argentina is a beautiful country, with problems that are very similar to the ones that we have in Italy - but different scenarios, and different economies.
I see this as an opportunity to consider adopting Bitcoin as a national currency, and stop being hostage of 1) banks, and 2) corrupt government officials. I don't know if it would work... But I hope so.
Re: S.&P. Says Argentina Has Defaulted
#83Earlier quoted context omitted.
It's more like, if you keep defaulting on bonds by saying you don't have to pay them because you changed the rules, eventually no on will buy them unless you let someone else set the rules.
That's what it would be like if this were anything but a holdup. The US government is intervening in the market and preventing bondholders who have agreed on a change in rules from receiving their bond payments, rather than letting the market set the prices. That's the opposite of what you describe here. edit: What I'm saying is only crazy within the bubble of this thread. It's also the opinion of the US government a…
Thanks for the links, btw - interesting to see the complexity involved here.
Re: S.&P. Says Argentina Has Defaulted
#84Earlier quoted context omitted.
If they hadn't ceded the legal control to NY law, then they either wouldn't have gotten the money they wanted, or at the very least had a much higher interest for it. 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.
The point is, they are getting hit multiple times with the "untrustworthy borrower bat" for a single incident in 2001 and are now being forced to screw all of their borrowers and not just the ones who refused to play ball in 2001. Because NY law. That is like saying "Oh, you can pay none of your debts until you pay the ones you defaulted on already in 2001." Nope.jpg. That is f'ed up. They defaulted in 2001. You don'…
The reason that they can demand money is that those bonds have a requirement that Argentina will pay all bondholders equally - even if they pay x% of it, then they have to pay every bondholder x%, instead of paying some bondholders more and some less or nothing.
Now Argentina is paying money to some of those old bondholders according to the restructured debt that Argentina itself agreed to. However, all other bondholders - including some that Argentina dislikes and doesn't want to pay - have a valid claim on that money, according to that initial rule. That's it.
Argentina can pay noone (as per a default). Argentina can pay all the bondholders equally. But it's not allowed to choose which bonds to pay and which not to pay.
Re: S.&P. Says Argentina Has Defaulted
#85Let's hope this doesn't precipitate that favoured bread and circuses smokescreen of Argentine politics, viz idiotic sabre-rattling over the Falklands.
Re: S.&P. Says Argentina Has Defaulted
#86Earlier quoted context omitted.
That's what it would be like if this were anything but a holdup. The US government is intervening in the market and preventing bondholders who have agreed on a change in rules from receiving their bond payments, rather than letting the market set the prices. That's the opposite of what you describe here. edit: What I'm saying is only crazy within the bubble of this thread. It's also the opinion of the US government a…
I can see both sides here. What surprised me is not that a judge has decided, but that a US judge has decided. It looks like an American judge decided in an American corporation's favour, and against a poorer country, to hell with the damage it will do the world's economy. On the other hand, if the US doesn't uphold the law, then the world economy would be damaged because lending would become more unpredictable. As i…
I just edited my comment to double down due to downvotes, but this ruling will ultimately damage the US more than Argentina. If we establish that it will be impossible to restructure debt if you issue your bonds in the US, we've established that there's no reason to issue your bonds in the US.
edit: it's important to keep in mind that 93% of bondholders have agreed to the restructuring. The courts look like they're saying that the decision must be unanimous. That's completely unworkable.
Re: S.&P. Says Argentina Has Defaulted
#87Earlier quoted context omitted.
This is the second default in 13 years, with (as you mention) no strong regional bank to support them, and (most likely) in a country without the political willpower to push through reforms to prevent this kind of thing happening again.
From another article linked in the HN comments, it seems that this is really a finalization of the 2001 default. Argentina is not able to pay the (current) bond holders only because the courts won't let it do so.
Argentina is able to pay the current bondholders, it's simply choosing not to pay them because part of that money will go also to those bondholders Argentina dislikes.
Re: S.&P. Says Argentina Has Defaulted
#88Earlier quoted context omitted.
Defaulting is error on both sides, the borrower failed in risk analysis just like the debtor. The problem is that sovereign nations don't have clear bankrupt procedure and these hedge funds are holding country as hostage for their past mistakes despite the fact that majority of borrowers accepted debt restructuring that was arranged and accepted haircuts. If the debt and its interest grows past what country gdp can e…
Nice reply! I love HN sometimes. What impact does this have on contracts in general? When I give my word, I keep it. When I sign a contract, I honor it. There's a social contract that assures me that the counter party will too. There's a court system setup to ensure they do. There is force behind that if it is taken even further. If I should instead shape every contract with a 20% hedge that assumes the counter party…
Umm, that's the entire reason the financial and insurance systems exist. Credits are assigned an interest rate depending on the probability of the receiving party's risk. Credit default swaps protect lenders from defaults.
Elliot Capital's position is basically that of a broker buying junk bonds and then chasing after money through the courts when the company inevitably goes under. Sure, it could go your way, but they were well aware of the risks, and honestly the strategy of buying junk bonds on a defaulting country and expecting compensation through courts is not something that seems to be in "good faith".
Re: S.&P. Says Argentina Has Defaulted
#89Argentina 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. :/
Debtors couldn't rely in the completely corrupt Argentinian judicial system.
And now none of the bondholders can be paid because a hedge fund shopped it around to the right judge. That is so much better.
Re: S.&P. Says Argentina Has Defaulted
#90Earlier quoted context omitted.
Yeah, that's very much not what the World Bank is about.
Well, I hadn't given it much thought. I just assumed that some international body (WTO, IMF, UN) would resolve disputes like this.
You're both partly right: http://en.wikipedia.org/wiki/International_Centre_for_Settle...
The World Bank itself gives loans, advice, and research. But there are a large number of semi-associated agencies, under their own treaties, that do other things, such as settling investment disputes. But it's important to note, as rayiner said elsewhere, that contracts are private law, and you get to choose how to settle disputes unless some public policy decides otherwise.