Argentina's Modest Proposal: Buy Bonds Or Go To Jail

Tyler Durden's picture


While Argentina's recent extraordinary attempts at central planning have been widely documented, ranging from freezing supermarket prices in a (failed) attempt to control inflation, to banning advertising in a (failed) attempt to weaken the private media, so far nothing has worked at stabilizing the economy and preventing the collapse in the domestic currency (if leading to such humorous viral videos as #mequieroir). Ironically, this is both good and bad news. It is good news because as we showed two days ago, even the ludicrous speed rise in the Nikkei has been a snail's pace compared to that other unknown "Nation 1." We can now reveal that while Japan is Nation 2, Nation 1 is that inflationary basket case Argentina, and specifically its Merval stock index.

Of course, the surge in the stock index is nothing more than a reflection of the ongoing collapse in the economy, which in turn is reflected not by the official, government controlled exchange of the ARS (just try buying dollars at the official rate) which closed the week at a rate of 5.24 to the dollar, then certainly the black market one, showing just how weak the currency is for those who actually want to buy dollars in Argentina, which just hit a record high of over 10. In fact, as the chart below shows, when one factors in the 80% collapse in the real, unofficial exchange rate over the same time period, the stock index has barely kept up.

Furthermore, it is merely a time before the runaway inflation pushes corporate input costs so high, that not even the rise in the stock market can preserve wealth.

Still think soaring stock prices in the New Normal are an indication of anything but a collapse in the economy manifested by either current, or discounted, plunges in the purchasing power of a sovereign's currency?

And just to make sure there is no confusion, the full context here is that while the rest of the G-0 world at least has each other's central banks to fund mutual debt purchases, Argentina has been locked out from the global community for a variety of reasons. And yet, like any other Keynesian follower, the nation is desperate to borrow from the future in order to grow government now. However, without access to capital markets how will the country with the imploding currency do this?


Argentina's president Kirchner, a keen observer of recent events in Cyprus, has figured out a way to kill two birds with one stone, namely attempt to put an end to tax evasion, and fund the capex of the recently nationalized state oil company YPF (now that its former owner, Spainish Repsol, is less than keen to keep investing in its former Argentine subsidiary). To do that she will present the local tax-evading population (pretty much anyone with any disposable income and savings) with a simple choice: buy a 4% bond to fund YPF "growth" or go to prison.

From Bloomberg:

President Cristina Fernandez de Kirchner wants tax evaders hiding about $160 billion in dollars to help finance Argentina’s oil-producing ambitions. Her offer: Buy a 4 percent bond or face the prospect of jail time.

The tax authority announced the plan May 7, highlighting its information-sharing agreements with 40 nations and warning Argentines who don’t use the three-month amnesty window that they risk fines or arrest. Evaders have two options for their cash and the only one paying interest will be a dollar bond due in 2016 to finance YPF SA (YPF), the state oil company. The 4 percent rate is a third the average 13.85 yield on Argentine debt and less than the 4.6 percent in emerging markets.

Speaking of YPF's growth, we made it very clear a year ago when we reported on the latest "banana republic" nationalization of formerly efficient and private assets, that it was only a matter of time before an overarching government's epic misallocation of resources, leads to epic inefficiencies, and a liquidity scramble. It is not rocket science: only hardcore socialists can harbor any hope that a government is efficient at allocating capital, especially when one nets out the 50% or so in corruption "externalities" that are incurred along the way, be it in Argentina or the US. Once again we were right:

A year after seizing YPF, Fernandez is funneling more money into the nation’s energy industry as the government struggles to boost production from the world’s third-biggest shale oil reserves. With Argentina already committed to pumping $2 billion of central bank reserves into a fund for energy investments and the highest borrowing costs in emerging markets keeping it from issuing debt abroad, the government is eyeing the billions of undeclared dollars that Argentines hold to help shore up reserves that have dwindled to a six-year low.


“The authorities need to take steps to open up external resources in the energy sector and to finance the Treasury and local governments,” said Sebastian Vargas, a New York-based analyst at Barclays Plc. “The amnesty is not negative for markets but it’s disappointing because they do little to solve balance-of-payment difficulties.”

There are some cynics who will say what Argentina is doing on a semi-voluntary basis is what that other bastion of wealth expropriation, the European Union, did to Cypriot savers. They will be right of course, if only for the simple reason that Argentina does not know precisely where all the "illegal" tax-evading, offshore (and onshore) capital is held.

Argentines have at least $160 billion of undeclared funds, equal to about 36 percent of the nation’s gross domestic product, and $40 billion are hidden inside the country, Vice Economy Minister Axel Kicillof said at the May 7 press conference where he and other senior officials presented the amnesty.


Many Argentines hide assets to avoid a 35 percent income tax and a levy of as much as 1.25 percent on their personal wealth. Undeclared assets are also beyond the reach of the government, which in 1989 seized bank certificates of deposit in exchange for bonds and in 2002 converted dollar deposits into pesos.

In other words, unlike in Europe, where Russia's 'tax-efficient' billionaires had a bright shining red light blinking over Cyprus saying "we are here" (a light that is now blinking over Luxembourg, Lichtenstein and of course, Switzerland, not to mention other global offshore tax havens), in Argentina the government first has to find the money. Which is why its initial recourse is the conventional one: simple threats.

Those joining the plan would be immune from prosecution and won’t be forced to pay past-due taxes, said Ricardo Echegaray, head of the tax agency. The search for evaders, which includes cross-checking information on income and personal wealth reports with purchases of real estate and cars, foreign travel and credit card purchases, will continue, Echegaray said.


“You better bring your dollars back because we will find you,” Echegaray said at the May 7 press conference. Last year, tax collection in South America’s second-largest economy rose to 37 percent of gross domestic product from 16.5 percent in 2002, according to Economy Ministry data.


Former Vice Economy Minister Roberto Feletti, who is now a congressman for Fernandez’s Victory Front alliance, said the government expects to attract at least $5 billion under the program.

Good luck with that - the only thing Argentina will succeed is in forcing tax evaders to hide their money even deeper into the global shadow economy.

The amnesty program will probably fail because its benefits don’t outweigh investors’ mistrust of the government’s ability to rein in inflation, cut spending, attract foreign investment and restore confidence in the currency, according to Moody’s Analytics Inc.


“The problem the government faces is lack of credibility and lack of confidence,” Juan Pablo Fuentes, an economist at Moody’s, said in a telephone interview from West Chester, Pennsylvania. “That money is potentially there, it could come back eventually, but there needs to be a lot of changes. These bonds are not going to have any real impact.”

And in the meantime YPF, which can't afford to wait on capital infusion, will have less and less cash with which to operate and grow, until finally it is mothballed, dimming the one bright light in Argentina's economy, and leading to an even faster economic contraction, even more rapid devaluation of the Peso, if only in the black market of course, and an ever faster surge in inflation.

But at least the stock market will be off the charts: sounds like a fair exchange for yet another economy sent to an early grave by central planners.

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Sat, 05/11/2013 - 11:33 | 3551358 Kirk2NCC1701
Kirk2NCC1701's picture

I propose they ALL "Go to Jail, go directly to Jail, do not collect $200 USD".  Not even 200 Pesos.  Oh wait, aren't they there already?

Sat, 05/11/2013 - 11:42 | 3551386 flacon
flacon's picture

More violence perpretrated by governments... it's just sick. 

Oh and by the way in the neew Monopoly, it's "Collect $2,000,000 if you pass GO". Inflation has even affected Monopoly money. 

Sat, 05/11/2013 - 11:55 | 3551423 Careless Whisper
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The Careless Whisper NO HONOR AMONG THIEVES News Update & Threadjacking


Sat, 05/11/2013 - 13:50 | 3551665 Blano
Blano's picture

AKA the CW kinda late to the party thread cause this has already been on ZH.

Sat, 05/11/2013 - 14:12 | 3551701 malikai
malikai's picture

So let me get this straight. Kirchner wants to get free money to waste on crony oil contracts or whatever and to do this she's telling everyone in the unofficial dollar market to give em up for bonds?

I wonder how she's going to enforce this?

Sat, 05/11/2013 - 16:49 | 3552055 AldousHuxley
AldousHuxley's picture

what do you think Social Security is? even worse return than bonds.


buy ponzi scam or go to jail for failure to pay "taxes"


Sat, 05/11/2013 - 17:23 | 3552113 Lost Word
Lost Word's picture

Ponzi seems good at the beginning.

Too late now, too far gone, to not join and not play the Tyranny Government game.

Sat, 05/11/2013 - 17:05 | 3552072 anonnn
anonnn's picture

YPF Repsol et al plundered the Arg government of its nationsl oil interests after the gov  demonstrated successful production and proven reserves. Reveiw the history of smiling Menem.

Pure plunder and fraud by competent thieves with evil intentions..

 Here's a pretty good documentary at YouTube:

Sat, 05/11/2013 - 12:13 | 3551458 Taffy Lewis
Taffy Lewis's picture

Flacon, have you seen the Monopoly version that has no cash? Instead it has a sorta cash register and debit cards... Learning math by counting money is the strength of Monotony, and I was floored when my mom bought that version for my kids for Christmas. Unfortunately, it quickly got lost.

Sat, 05/11/2013 - 12:44 | 3551511 flacon
flacon's picture

I've seen them at Toys R USA, but I didn't bother to really look at it. I am glad the my kids are learning to count zeros (,000,) so that when they finally become teenagers they will be quadrillionaires. That's the only benefit of Monopoly. Oh, and BUY, BUY, BUY, BUY! Nobody ever SELLS in Monopoly. It's all good for the stock market. "Pump and Pump" scheme in the minds of the youth. 

Sat, 05/11/2013 - 14:17 | 3551715 Mr. Magniloquent
Mr. Magniloquent's picture

Somehow I doubt this historical anecdote will be taught in grade school civics courses. I imagine it might undermine the enitre legitimacy via the "Social Contract".

Sat, 05/11/2013 - 11:43 | 3551391 AlaricBalth
AlaricBalth's picture

The US Treasury's modest proposal: If you want to maintain the tax deferral status of your 401k or IRA, you be required to buy treasury bonds through a government annuity plan.

These thieves will do anything to maintain the ponzi. They must have new money coming in to keep it going. Just like Bernie Madoff.

Sat, 05/11/2013 - 11:51 | 3551402 otto skorzeny
otto skorzeny's picture

Cashing out 401Ks now-lose a little now or a lot/all of it later. "you be required"- are you Charles "we ate ribs wit dis dude" Ramsey?

Sat, 05/11/2013 - 11:52 | 3551413 AlaricBalth
AlaricBalth's picture

Otto. I noticed your comment below after I typed mine.
You are spot on.

Sat, 05/11/2013 - 12:15 | 3551461 otto skorzeny
otto skorzeny's picture

Panic first-panic best.

Sat, 05/11/2013 - 12:50 | 3551524 Gromit
Gromit's picture

Wall street has a powerful lobby and lives off fees on retirement accounts so they'll fight this tooth and nail.

Sat, 05/11/2013 - 13:48 | 3551653 Pure Evil
Pure Evil's picture

Not as long as they're the one's MANAGING the funds.

Vanguard Treasury Fund

Fidelity Funds

And, just think, even the states could get in on the act, meaning that states could require that that state' municipal bonds be included in any retirement accounts.

Municipal Funds

Come on comrads, do your patriotic duty, invest in .gov bonds.


Sat, 05/11/2013 - 11:53 | 3551417 Rory_Breaker
Rory_Breaker's picture

Go to jail and give us all your monies.

Sun, 05/12/2013 - 04:20 | 3553160 samcontrol
samcontrol's picture

Tyler hire me on Argentina, you are somewhat offtrack.

The 4% on the bond thingy is to get This bitch , BAEZ , and all the other money laundrymen in her court to legalize their shit.

0 Argentinians will go with it,,or go to jail,,to funny and NOT going to happen, If the bitch can find it she can have it!

Sat, 05/11/2013 - 11:38 | 3551365 francis_sawyer
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ZH's Modest Proposal:


- How to report offensive comments []

- Notice on racial discrimination []

Sat, 05/11/2013 - 11:39 | 3551376 Uncle Remus
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Wait - iz dat rayciss?

Sat, 05/11/2013 - 11:40 | 3551382 Rory_Breaker
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Enforcement will be on par with SEC standards.

Sat, 05/11/2013 - 11:44 | 3551388 francis_sawyer
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Well... I... For one... Am 100% in FAVOR of this policy... So in favor... In fact... That I'm going to remind people about it every day so as to ASSIST with compliance...


See something, say something bitchez!

Sat, 05/11/2013 - 11:45 | 3551396 otto skorzeny
otto skorzeny's picture

So much for fight club.

Sat, 05/11/2013 - 11:49 | 3551404 Frastric
Frastric's picture

Did fight club having constant jew-bashing?

Sat, 05/11/2013 - 11:50 | 3551409 Rory_Breaker
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Was this just about the jews? If so, maybe some of it was warranted.

Sat, 05/11/2013 - 11:54 | 3551419 Frastric
Frastric's picture

I said this site has a lot of Jewish bashing, but I'm okay with bashing the Zionists since they're as nutty as banksters and Nazis.

Sat, 05/11/2013 - 11:56 | 3551427 Rory_Breaker
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Sat, 05/11/2013 - 12:10 | 3551451 francis_sawyer
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I don't know about any of that... You used the term "bashing"... Does questioning 'asymmetric representation' [with nary...EVER... an answer or conclusion] in something qualify as 'BASHING'?

Sat, 05/11/2013 - 12:13 | 3551456 Uncle Remus
Uncle Remus's picture


Sat, 05/11/2013 - 12:26 | 3551465 francis_sawyer
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It has been argued & concluded here, to my recollection, that the cult of 'Luciferianism' is whats responsible... Now... The only problem that remains is the delicate matter of tippytoeing through the minefield of whether it passes muster in the 'COMPLIANCE COMMITTEE' to criticize [the ostensibly 'religious' order of the Luciferians, or are they a 'race'?]... Or maybe even 'clowning around' needs to cease & desist in the NEW KHAKI PANTS ORDER OF THE BIG BROTHER...

I'm really unclear on all of this... & I'm trying to do my best to be a good & model citizen...

[It's like LEVERED SHORTING paper gold people]...

Sat, 05/11/2013 - 12:33 | 3551486 Uncle Remus
Uncle Remus's picture

Too bad we can't ask Chavez. But, he did leave us a clue.

"The devil came here yesterday," Chavez said, referring to Bush, who addressed the world body during its annual meeting Tuesday. "And it smells of sulfur still today."

Hey wait a minute - does Bush transliterate from the Aramic "Luciferian"?

Sat, 05/11/2013 - 12:38 | 3551495 Jayda1850
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If this is Tyler's way of making the site more mainstream and acceptable to the masses, I'm a little befuddled. No matter how politcally correct this site gets, TPTB will find a way to denigrate the info on this site because it is such a threat to them. For all the posts on internet freedom and free speech, I'm a little concerned about the slippery slope of censorship with this new policy, since it relies on the sensibilites of what is offensive and discriminatory to certain users. God forbid this site starts deleting comments and users due to what might offend users like MDB and Dr. Paul Krugman. I hope the tylers take a lenient view when enforcing this policy

Sat, 05/11/2013 - 12:42 | 3551505 Uncle Remus
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Likely, it's about appearances. Substance ist verboten - kind of like the brick wall at the back of the stage FZ was talking about.

Sat, 05/11/2013 - 13:02 | 3551547 francis_sawyer
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There are only two possibilities [that come to my mind]

1. ZH as been 'SOLD' [& or is courting lucrative ad sponsors]... Just this morning there were HUGE pop-ups from both "Sprint" & "Capital One"... IOW ~ This ain't no longer 'Snorg T Shirt Ville'... Whereby ~ It's a SHAME...

2. I still can't... After 4 years... Imagine a scenario whereby the 'TYLERS' chuck THE FIGHT CLUB meme to the wind & go PC... Maybe it was just a brain fart... In any case ~ even if that was a conscious decision [which would, ostensibly, be revealed by way of BANNING certain USERS, (WHICH IN MY MIND'S EYE WOULD BE THE 'TELLING FACTOR')]... I still can't fathom any decision to DEFAULT to becoming a HUFFPO, YAHOO, OR DRUDGE as a means to GAIN audience... But in any case ~ It's NOT my decision...

If anyone else has any reasonable explanations... Please feel free to tell me how FOS I am...

Sat, 05/11/2013 - 13:52 | 3551668 SubjectivObject
SubjectivObject's picture

3.  The Tyler(s) are being pressured by the same plug pulling empowered forces that control 90% of everything else (well then, effectively 100%).  This may be the action of the rumored secret cabal, called juecers, who liquify anything of substance that annoys them.  A description of the features and characteristics of how it plays out is irrelevant, the Tyler(s) are jueced, and that's all that matters.  Good luck giving credibility for anything else that ... flows ... out of the club.  But before the plug is finally pulled, an expose on how and by who pressure is applied would be ... edifying.  Hi Ben!

Sat, 05/11/2013 - 23:16 | 3552862 thisandthat
thisandthat's picture

There's jurisdictions and jurisdictions - relocating servers is a trivial thing to do.

Sat, 05/11/2013 - 16:14 | 3551985 Jayda1850
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I just made a donation. My thinking is that if #1 is correct, maybe my donation no matter how small may help offsetting the ad revenue and also if we are going down the whole censorship route, I figure the more money I give the more racist I can be.

Sat, 05/11/2013 - 16:26 | 3552012 francis_sawyer
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Thank you for your donation... Your account is hereby terminated...


aka 'YOU'VE been 'Corzined'... bitch...

Sat, 05/11/2013 - 23:13 | 3552857 thisandthat
thisandthat's picture

That would be the worst marketing strategy I've ever seen - worse even than fucking Paypal/Visa vs. Wikileaks (which most likely garnered them plenty patridiot support, btw), but I doubt they're having financial problems (heck, if they're worth even a tenth of the information they publish, they don't even need this site to enjoy a lavish life). Sure beat way to not support a site.

Sun, 05/12/2013 - 16:33 | 3554125 Kobe Beef
Kobe Beef's picture

Just say 5 "Diversity is our Strength"s 



& all your sins will be forgiven, komrade.


In all seriousness, this sucks. "Political Correctness" was first coined by Vladimir Lenin. "Racism" was invented by Leon Trotsky. Now Zero Hedge is on the Bolshevik bandwagon? 


Sat, 05/11/2013 - 13:11 | 3551561 Tango in the Blight
Tango in the Blight's picture

I reported you for this. As a Luciferian I feel shocked and abhorred that this filth is allowed anywhere on the internet lest alone a decent and upstanding site such as ZeroHedge.



Sat, 05/11/2013 - 14:27 | 3551741 francis_sawyer
francis_sawyer's picture

Well therefore ~ Now that I can count on THE DEVIL being against me... I'm sure the 'CEASE & DESIT' order will be placed on francis_sawyer forthwith... Despite compliance with THE RULE...

Sat, 05/11/2013 - 14:37 | 3551776 Whatta
Whatta's picture

you've been reported to the New Alliance of Zionist Interventionists...or NAZI's for short.

Sat, 05/11/2013 - 11:55 | 3551421 AlaricBalth
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"Any user found to be discriminating against ANY race, religion, or affiliation, will be banned immediately, and have their comments removed from the system."

It's like a FEMA camp for comments, where they disappear into an undisclosed location never to be seen again.

Sat, 05/11/2013 - 12:15 | 3551462 Buckaroo Banzai
Buckaroo Banzai's picture

1st RULE: You do not talk about FIGHT CLUB.
2nd RULE: You DO NOT talk about FIGHT CLUB.

3rd RULE: If someone says "stop" or goes limp, taps out the fight is over.

4th RULE: Only two guys to a fight.

5th RULE: One fight at a time.

6th RULE: No shirts, no shoes.

7th RULE: Fights will go on as long as they have to.

8th RULE: If this is your first night at FIGHT CLUB, you HAVE to fight.

I don't see anything in there about "discrimination."

Sat, 05/11/2013 - 12:19 | 3551471 francis_sawyer
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As of yesterday...

Sat, 05/11/2013 - 12:44 | 3551510 Buckaroo Banzai
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Indeed, I am aware of the "new rule". My point is, it doesn't fit into the original spirit of this website.

Sat, 05/11/2013 - 14:38 | 3551622 PC Load Letter
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It's clear now that this site has gone mainstream. No more ads for Japanese girls or graphic t-shirts, we now get Trade Station and Sprint. Damn shame - I used to like the fringe nature of ZH. We've gone from Fight Club to UFC

Sat, 05/11/2013 - 14:50 | 3551815 Dyhana
Dyhana's picture

Truly is a shame PC, mainstream is anathma to me, but on the upside, someone else may start a blog with the ZH spirit and without the censorship. I don't believe in censorship, to me it's right up there with book banning, if people don't like it, they don't have to read it.

Do NOT follow this link or you will be banned from the site!