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For Argentina, Default Is Minor; The Real Problem Is Much Worse

Tyler Durden's picture




 

Submitted by Pater Tenebrarum via Acting-Man blog,

The Default is a Minor Problem – Argentina's Real Problem is Something Else Entirely

By now it is well known that Argentina has been declared in default by the major credit rating agencies. This has happened in spite of the Argentine government actually depositing the interest payment intended for those creditors who have grudgingly accepted the post 2001 default restructuring because they thought they had no other choice. After all, they couldn't very well invade Argentina and sell its government assets. That is the problem with lending to governments: they not only assuredly waste the money they borrow, but when push comes to shove, creditors often find themselves left out in the cold.

However, the so-called “hold-outs” -  a group of investors that didn't accept the terms of the debt restructuring – have continued to fight the Argentine government in court to get restitution, and have won several cases. At one point, they even had an Argentinian warship confiscated in a Ghanaian port.  The latest court case won by the hold-outs has led to the current impasse and subsequent default.

“Standard & Poor’s declared Argentina in default after the government missed a deadline for paying interest on $13 billion of restructured bonds.

 

The South American country failed to get the $539 million payment to bondholders after a U.S. judge ruled that the money couldn’t be distributed unless a group of hedge funds holding defaulted debt also got paid. Argentina, in default for the second time in 13 years, has about $200 billion in foreign-currency debt, including $30 billion of restructured bonds, according to S&P.

 

Argentina and the hedge funds, led by billionaire Paul Singer’s Elliott Management Corp., failed to reach agreement in talks today in New York, according to the court-appointed mediator in the case, Daniel Pollack. In a press conference after the talks ended, Argentine Economy Minister Axel Kicillof described the group of creditors as “vulture funds” and said the country wouldn’t sign an accord under “extortion.”

 

“The full consequences of default are not predictable, but they certainly are not positive,” Pollack wrote in an e-mailed statement. “Default is not a mere ‘technical’ condition, but rather a real and painful event that will hurt real people.”

 

Kicillof, speaking at the Argentine consulate in New York, told reporters that the holdouts rebuffed all settlement offers and refused requests for a stay of the court ruling. He said Argentina couldn’t pay the $1.5 billion owed to the hedge funds because doing so would trigger clauses requiring the country to offer similar terms to other bondholders.”

(emphasis added)

Given the nature of the current government of Argentina (financial repression is its bread and butter), we love to see its neo-Marxist “economy minister” Axel Kiciloff squirm. On the other hand, creditors to governments occasionally deserve to be taught a lesson about lending to governments, and one must fear the ultimate victims of the tussle will be the people of Argentina (of course, they could have voted for someone else, but it is not certain that it would have made any difference).

Be that as it may, the default is really a sideshow to Argentina's real problem, which is a profligate government financing its spending increasingly via the printing press, while publishing severely falsified “inflation” data in order to mask this fact.

The Merval Index has exploded higher in recent years, and just as is the case with stock market rally in Venezuela, it is not a sign of a healthy economy at all – on the contrary, it is actually a sign that a hyper-inflationary crack-up boom is anticipated by its captive audience (captive due to exchange controls that include “dollar sniffing dogs” being deployed at border crossings).

 

Merval(Monthly)20140804100056

The Merval Index (monthly) is anticipating a hyper-inflationary crack-up boom as the printing presses are doing overtime in Argentina. Back in 2001, this index traded at 200 points. Its surge has nothing to do with the economy's health, as any visitor to Argentina can easily confirm first hand – click to enlarge.

The official exchange rate of the peso looks bad enough as it is, but it doesn't tell the whole story:

 

USDARS(Weekly)20140804095852

The official exchange rate of the peso to the US dollar, weekly – click to enlarge.

 

The Sobering Reality

Professor Steve Hanke from John Hopkins University runs the “troubled currencies” project at the Cato Institute.  One of the things he is doing is to look at the black market exchange rate in countries that have currency controls in place to determine the “implied inflation rate” of its consumer price index. Even though one must acknowledge that such measurements are inherently difficult, as it is not truly possible to measure the purchasing power of money in the first place, the method gives us a rough idea how far removed from reality the official data are. In this particular case, very far indeed.

 

exchange-rates-and-inflation

Official and black market currency exchange rates of Argentina and Venezuela, as well as official vs. implied inflation rates as of July 24 – click to enlarge.

 

Obviously there is a rather big gap between the officially admitted annual CPI rate of change of 15.01% and the implied rate of 51%. Given the action in the Merval, we can state with some confidence that the 'implied rate' is probably a lot closer to the truth. Here is a chart comparing the peso's official to its black market rate (inverted). This chart has been last updated in early July, so the most recent swoon in the currency is not yet shown on it:

 

argentine-peso

The official vs. the “blue” (black market) peso-dollar rate – click to enlarge.

 

And finally, here is Professor Hanke's chart of Argentina's implied annual inflation rate over time (note that due to the calculation method, implied rates below 25% are considered unreliable):

argentina-inflation-rates

The implied inflation rate is highly volatile, but has been far higher than the official one for an extended time period. Since this is a year-on-year measure, the effect is compounding over time, hence the growing flight into 'real values' in Argentina. People are not only buying stocks, but also real estate and other hard assets – click to enlarge.

 

Such inflation rates represent an unmitigated economic disaster. Not only for the obvious reason that they make economic calculation practically impossible and rob savers of their hard-earned money, but because they also undermine people's productivity and their morals. Once a nation's entire population is forced to spend a lot of effort on a daily basis looking for ways to escape the ravages of inflation, its economic productivity is invariably sapped.

By robbing savers, government moreover undermines the moral fabric of society at large, while creating a new underclass – comprising all those who rely in some way on fixed incomes.

As Hans Sennholtz once wrote (and although this was written in the context of the Federal Reserve's inflationary policies, it is readily applicable to such policies everywhere):

“[...] many victims readily conclude that thrift and self-reliance are useless and even injurious and that spending and debt are preferable by far. They may join the multitudes of spenders who prefer to consume today and pay tomorrow, and they may call on government demanding compensation, aid, and care in many forms. Surely, the hurt and harm inflicted by inflation are a mighty driving force for government programs and benefits.

 

In their discussions and analyses of various problems, economists usually avoid the use of moral terms dealing with ultimate principles that should govern human conduct. Ever fearful of being embroiled in ethical controversies they seek to remain neutral and “value-free.”  They do counsel legislators and regulators on the cost-efficiency of a policy but not on its moral implications. They may offer professional advice on the efficiency of money management but not on the morality or immorality of inflationary policies. They dare not state that inflation is a pernicious form of taxation which most people do not recognize as such.”

 

[…]

 

The biggest debtor also is the biggest inflation profiteer.

 

[…]

 

The primary beneficiaries of the new order are its own managers: legislators, regulators, and a huge army of civil servants. They are first in power, prestige, and benefits.

 

[…]

 

Evil acts tend to breed more evil acts. Inflationary policies conducted for long periods of time not only foster the growth of government but also depress economic activity. Standards of living may stagnate or even decline as growing budget deficits thwart capital accumulation and investment that are sustaining the standards.

(emphasis added)

Conclusion:

Inflationary policy is and always will be extremely destructive. In the developed world, a situation like that observed in Argentina has so far been avoided, but that doesn't exactly mean that central banks in the industrialized nations are slouches in the money printing department.

Their actions buy us what appear to be “good times” by diverting scarce resources into various bubble activities, but in reality they impoverish us. In this respect, there is no difference with Argentina. The latter has merely gone a step further, attempting to keep its government flush and the boom going by going completely overboard with its inflationary policy. The end result in either case is economic devastation, there are merely differences in degree, but not in substance.

 

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Mon, 08/04/2014 - 14:47 | 5044960 Tao 4 the Show
Tao 4 the Show's picture

Already happening. Nearby countries do not want their pesos. Glad they had some success in the World Cup. Poor Argentinians are going nuts with bad govt policy.

Mon, 08/04/2014 - 14:48 | 5044972 y3maxx
y3maxx's picture

...Argentina will reclaim the Falkland Islands in 3,2,1...

Mon, 08/04/2014 - 15:03 | 5045018 DoChenRollingBearing
DoChenRollingBearing's picture

Dollar-sniffing dogs cannot sniff-out Bitcoin, especially wallets at https://blockchain.info/.  As CrashisOptimistic has written, perhaps BTC's highest and best value is the fact that it can carry substantial value easily across borders.

I know a guy who takes BTC with him to Argentina to make his trip cheaper and help out his tech buddies there.

* * *

Yes, I agree with the author, deficit spending and a Socialist government are Argentina's real problems.

Same here in the USA.

Mon, 08/04/2014 - 17:26 | 5045931 Escrava Isaura
Escrava Isaura's picture

DoChen,

You ought to know better.

Liberals are NOT socialists. They can’t, Period!

Liberals are linked to welfare state. Conservatives are linked to corporatocracy.  

Welfare State: Concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens.

Corporatocracy: An economic and political system controlled by corporations or corporate interests. 

Socialist Nations: Workers through cooperatives own all industry. Socialist primary aim is to end the exploitation of men by men. Public services may be commonly or state owned, such as healthcare and education.

Fascist Nations: Heavily on patriotism and national identity. It exalts nation and race above the individual and stands for severe economic and social regimentation, and forcible suppression of opposition.

 

The financial problem of Argentina: They borrowed in dollars and they don’t have oil anymore to export [link here]

Mon, 08/04/2014 - 17:59 | 5046113 TMLutas
TMLutas's picture

You borrow in a currency not your own because nobody trusts that your currency will retain enough value to matter during the life of the bond. And now they're proving once again that they're not to be trusted. 

Mon, 08/04/2014 - 18:29 | 5046235 Escrava Isaura
Escrava Isaura's picture

TMLutas,

Men, you don't get, do you?

So let me break the news to you, Buddy:

Lutas, REN, at Real Currencies.com:

Nature of debt money [dollar], specifically that created by hypothecation.

The hypothecation mechanism takes the borrower’s credit and assigns it to the banker. The banker then creates bank money, even though the debtor provided his asset or future labor. Banker’s risk is also low, as the debtor’s assets can be foreclosed.

This banker money splits into two parts at birth: A debt instrument is created i.e. loan documents, mortgage or some sort of debt claim. Simultaneously, the banker creates ‘his new’ money as an output of the loan. This money is called banker.

However, the instrument may travel a path different [where this fraud/loot gets in high gear]… The two entities may be disallowed from returning to each other, and hence they cannot cancel out. This is a clear danger…These two paths, and disallowing is not comprehended well by economists.

In the case of Germany circa Versailles treaty, a three way triangular flow was created. The allies had to pay back dollar denominated debts to America for war material borrowed. Germany in turn was put on the debt hook to pay dollars, gold, pounds or Francs to the Allies.

The U.S. didn’t allow much in the way of German goods importation, so Germany could not acquire dollars in trade to pay allies, who wanted dollars to pay their debts. Ultimately, Germany borrowed (more debt) from wall street to pay into the triangular flow. This triangular flow led to the hyperinflation, and ultimately a populist (Hitler) being elected.

Germany issued bonds to create credit money in Wall Street. Credit dollars found their way from Germany and ultimately to the U.S. treasury, as if they were going from one U.S. pocket to the other. However, Germany, England and France all had dollar debts that were outside of their legal system. They had difficulty acquiring the dollars to satisfy the debt instrument outside their country. This ultimately led to WW2.

It should be a cardinal rule in economics; never let your debts point outside of your legal system. How many need to die before this rule is learned? Debt money, even without usury is dangerous if not kept under control.

Lately, the U.S. has used debt instruments to create empire. A foreign country. lets say Bolivia, is hooked on dollar loans. The dollar denominated debt instruments are attached to the whole country and population. The BM [Bank Money] soon leaves the economy as much of it becomes bribe money for leaders, and the rest goes overseas to buy the power plant, or road construction machinery, etc.

The rosy economic picture of the World Bank projections never materializes, hence no dollars are available in local economy to cancel the debt instruments. Bolivia does not have enough dollars and the Bolivian currency comes under pressure.

At that time bear raiders [speculators] borrow BM money into existence and attack, causing the local money to collapse. Predators [US banks] can then enter with dollars and buy up the country, leading to Oligarchy. Or, dollar zone countries (U.S. with its military) may go in and demand their pound of flesh, i.e. resources such as oil extraction, in exchange for the debt relief.

So, usury turbocharges the debt problem, as there is not enough money to pay off the instruments. But, also there is a big problem of path, where the BM [Bank Money] is not available… it has disappeared.

Mon, 08/04/2014 - 19:56 | 5046607 sylviasays
sylviasays's picture

"It should be a cardinal rule in economics; never let your debts point outside of your legal system. How many need to die before this rule is learned? Debt money, even without usury is dangerous if not kept under control. Lately, the U.S. has used debt instruments to create empire. A foreign country. lets say Bolivia, is hooked on dollar loans."

Why are socialist countries like Boliva, Venezuela, Ecuador, Argentina, etc. hooked on loans?

It's because the authoritarian socialist dictators of those countries have bankrupted their countries. They stole their country's wealth for themselves and their cronies.  They promised their people entitlements and subsidies that their countries could never afford in order to get elected into office. Their country’s productive sector have been decimated after nationalizations and expropriations. They print money. When skyrocketing inflation occurs, they react by imposing draconian price controls and raid businesses they accuse of hoarding. They rule by decree. They control all the news media with an iron fist. Dissent is not allowed. 

Venezuela and Argentina were once South America’s richest countries, taking in immigrants from all over the world. After corrupt socialist dictatorial regimes, Venezuela and Argentina turned into authoritarian basket cases that thousands try to escape every year.

Mon, 08/04/2014 - 20:33 | 5046768 Escrava Isaura
Escrava Isaura's picture

Sylvia,

Your points could have being taken more seriously, until you started regurgitating nonsense, such as "authoritarian socialist dictators".

You need to get your nouns correctly. Let us assist you:

Welfare State: Concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens.

Corporatocracy State: An economic and political system controlled by corporations or corporate interests, such as GE, Boeing, Military contractors, investment banks, and so on.

Socialist Nations: Workers through cooperatives own all industry. Socialist primary aim is to end the exploitation of men by men. Public services may be commonly or state owned, such as healthcare and education.

Fascist Nations: Heavily on patriotism and national identity. It exalts nation and race above the individual and stands for severe economic and social regimentation, and forcible suppression of opposition.

Mon, 08/04/2014 - 22:12 | 5047223 sylviasays
sylviasays's picture

Escrava must be a delusional socialist fool if she does not believe that Central American countries like Venezuela, Bolivia, Ecuador, etc. are not controlled by CORRUPT authoritarian SOCIALIST dictators!

Venezuela went to hell with the election Hugo Chávez from the United SOCIALIST Party of Venezuela. Chavez aligned himself with the Marxist-Leninist governments of Fidel and then Raúl Castro in Cuba and the socialist governments of Evo Morales in Bolivia, Rafael Correa in Ecuador, and Daniel Ortega in Nicaragua. 

 

 

 

Mon, 08/04/2014 - 14:52 | 5044985 Harbanger
Harbanger's picture

The real problem with Argentina is and has been, Peronism(socialism) and it's anti-capitalist movement.  No amount of money can fix that.

Mon, 08/04/2014 - 15:03 | 5045024 El Vaquero
El Vaquero's picture

Yup.  That shit never works.  But they keep on trying.

 

Fuck the bondholders for being dumb enough to "invest" in Argentina.  Fuck the holdouts for not playing ball with reality.  Fuck the judge for not acknowledging reality.  Fuck the Argentinian government for spending more than it can repay.  Fuck'em all.  The Argentinian people should place Kirchner's head on a pike, but I suspect that too many want socialism for it to do any good.

Mon, 08/04/2014 - 15:45 | 5045253 Coke and Hookers
Coke and Hookers's picture

A large part of the original debt comes from the old military junta that ran Argentina back in the day. But besides that, the origin of most of the debt can be traced to a policy by the US and the western financial system to enslave countries all over the world by offering virtually unlimited loans. This is simply a larger version of what has been done to the US middle class. The end result is bankruptcy of individuals and nations after their wealth has been transferred to Wall Street.

This works because people almost always accept cheap loans if they can get them. That's human nature regardless whether you are an individual buying a new car in Michigan or a government official in Argentina. This regrettable aspect of human nature has been utilized by the financial system for a long time. Blaming this on Argentina and its "socialist" government is bullshit. We might using the same logic blame the asset stripping through debt of the US middle class on its socialism, which would be stupid because it's mostly conservative.

The point is that there is no difference between some guy borrowing for a new car he doesn't need and can't pay back and a politician who wants to bribe his voters with borrowed money. The problem is that financial institutions can lend to people and governments regardless of whether they can service the loans and then count on Uncle Sam's Kangaroo courts, the IMF and the US Government to collect for them. This is irresponsible lending which should bankrupt the lenders but the lenders know they can always collect so there's no responsibility. The whole model is based on irresponsibility and threats.

The Argentinian government should refuse to pay both the holdouts and other parties. They should default in full and tell everybody to go fuck themselves. So should all other governments being threatened by Uncle Sam and the IMF. The only way to break this model is to resist the "threat aspect" of it and refuse to pay. The result will be a lot of bankruptcies (hopfully including that fucking vulture Paul Singer) in the financial sector and less availability of borrowed money in the future to bribe voters and fake economic growth all over the world.

Mon, 08/04/2014 - 16:33 | 5045622 Escrava Isaura
Escrava Isaura's picture

Coke and Hookers,

You said: "... traced to a policy by the US and the western financial system to enslave countries all over the world by offering virtually unlimited loans. This is simply a larger version of what has been done to the US middle class. The end result is bankruptcy of individuals and nations..."

You're making too much sense, in too few words.... Watch out for the arrows.

Mon, 08/04/2014 - 17:12 | 5045850 RaceToTheBottom
RaceToTheBottom's picture

Serf Countries

Mon, 08/04/2014 - 18:02 | 5046124 TMLutas
TMLutas's picture

Can Argentina live within its means today without inflating its money? Obviously not. Argentina would have done much better to save and give out loans rather than borrow and default. 

Mon, 08/04/2014 - 18:34 | 5046258 Escrava Isaura
Escrava Isaura's picture

Lutas,

How will Argentina, US, and England save?

Please, enlighten us, here, at Zero Hedge.

Mon, 08/04/2014 - 18:27 | 5046223 Snake
Snake's picture

Glad to see someone doing honest and clever analysis Coke and Hookers.   In fact, Argentina is in great financial and economic shape; has amazing natural resources and a very, very resilient population.  The 2001 crisis, an avant-garde of the world's 2008 crisis, taught them a good lesson they do and will not forget.  

Now that Kiciloff sent Griesa and the US Judicial System packing, a turning point in world financial history (another Argentine turning point after sending the IMF et al packing years ago) the kleptocracy and wannabe banksters need "another, much worse problem".  

 "The nature of the current government of Argentina (financial repression is its bread and butter)"  Here read not "repression" but regulation, the regulation needed to prevent another 2008. That's what irks them.

"Be that as it may, the default is really a sideshow to Argentina's real problem, which is a profligate government".  Here, the Argentine government's unforgivable sin was/is the use of capital, money (subsidies, for example) to help -not the banksters as in the US and EU - but main street, the people, employment, wages, the only thing that does, could, will resolve the economic and financial crisis of much of the "developed" world. 

 Also, US wannabe banksters (et al) have a very hard time understanding and accepting the deoccidentalization of today, the new geopolitical reality of a multipolar world.  That also irks them in Argentina and most of Latin America.  They wish for a return of XVIII century tea time(s), old, gone hegemonies. The react (as in reactionary) to a forward going history of inevitable change.  No?

 

Mon, 08/04/2014 - 19:25 | 5046454 Coke and Hookers
Coke and Hookers's picture

Escrava Isaura posted a good analysis above on the dangers of borrowing in foreign currency and then being unable to obtain said currency to service the debt. But that's not the whole story. The dollar is not only reserve currency for international trade, it is the default debt currency of the world. Those who control the currency, control the debt. If a country like Argentina borrows in dollars, the people who control the dollar can to a large extent control its access to dollars to pay the debt. The local currency then crashes under the weight of the debt and the country can be bought for next to nothing - in dollars. Countries can rarely export their way out of the pit because dollar loans are more likely to be granted for other sectors than the export sector - usually infrastructure that is then privatized by command of the IMF and then bought by Wall Street for 5 cents on the dollar.

This of course also applies to foreign debt in other currencies but there's a giant enforcement and control mechanism in place to push dollar debt on countries and then to collect with the use of force. Economic hitmen working for the US Government / corporate consortium go in and bribe officials to take loans to build something. Then the debt collectors (IMF, US courts and the US Government) take over and asset strip the country. Lending is safe because lenders have the biggest and baddest debt collector on their side, Uncle Sam. This is a giant racket based on bribes and threats, enabled by the greed of the borrower and the dollar's reserve currency status.

The most recent method is the immense pressure applied on countries to nationalize privat foreign debt. Private corporations go bust and can't pay their foreign (usually dollar) debt and then the enforcers (IMF, US, EU etc) show up and threaten the country's government with anything they can think of if the debt is not nationalized and paid in full in dollars. We have seen this a lot since the 2008 crash. The plan is always to use the private debt to bankrupt the government and then seize control of the country's economy and assets.

Mon, 08/04/2014 - 19:43 | 5046555 Escrava Isaura
Escrava Isaura's picture

Coke and Hookers,

These two explanations below should help:

In 1944 came Bretton Woods: Dollar as World’s Reserve Currency. It means: United States would use the convertible financial system to trade at a tremendous profit with developing nations, expanding its industry and acquiring raw materials. It would use this surplus to send dollars to Europe, which would then be used to rebuild their economies, and make the United States the market for their products. This would allow the other industrialized nations to purchase products from the Third World, which reinforced the American role as the guarantor of stability.

http://en.wikipedia.org/wiki/Bretton_Woods_system#Dollar_shortages_and_the_Marshall_Plan

 

The international market gave the U.S. unprecedented freedom of action in pursuing its foreign affairs goals. A trade surplus made it easier to keep armies abroad and to invest outside the U.S., and because other nations could not sustain foreign deployments, the U.S. had the power to decide why, when and how to intervene in global crises. The dollar continued to function as a compass to guide the health of the world economy, and exporting to the U.S. became the primary economic goal of developing or redeveloping economies. This arrangement came to be referred to as the Pax Americana, in analogy to the Pax Britannica of the late 19th century and the Pax Romana of the first. (See Globalism)

http://en.wikipedia.org/wiki/Bretton_Woods_system#Cold_War


Tue, 08/05/2014 - 09:33 | 5046892 Snake
Snake's picture

Indeed.  In fact the key notion here is "Then the debt collectors (IMF, US courts and the US Government) take over and asset strip the country".  Regarding Argentina, with its wealth in natural resources, they are furious about a government protecting said assets.  One can do business with Argentina, but fair, legal business that keep people (and not banksters) as ultimate beneficiaries of the natural resources of the country.

Tue, 08/05/2014 - 09:31 | 5046959 Snake
Snake's picture

.

Mon, 08/04/2014 - 16:49 | 5045475 Gromit
Gromit's picture

--

Mon, 08/04/2014 - 16:26 | 5045550 AchtungAffen
AchtungAffen's picture

I'm sorry to correct you here, but Peronismo is not Socialismo, but Fascismo. Perón was a follower of Il Duce. And Argentina, thanks to the kicking of the "imberbes" from the Plaza de Mayo, is one of the few countries with right-wing leaning unions (Perón hated communism and it's close ideologies).

Mon, 08/04/2014 - 16:35 | 5045640 autofixer
autofixer's picture

So its the state control of private means of production vs. state control and ownership of the means of production?  Big difference there.  <sarc> 

Mon, 08/04/2014 - 16:48 | 5045719 Dull Care
Dull Care's picture

There is no right-wing in Argentina these days.

Mon, 08/04/2014 - 17:16 | 5045873 AchtungAffen
AchtungAffen's picture

Hah, sure mate. The Big Unions. The Barrabravas and the Fútbol mafia. Those are pure fascists by default. If you want more of a traditional conservative right wing, that also exists, a lot. You can find many of them reading "La Nación", for ex.

Mon, 08/04/2014 - 16:55 | 5045745 Harbanger
Harbanger's picture

Achtung, pay attention, fascism IS a form of socialism. Are you making the case that leftwing socialism is better than rightwing socialism?  Are you saying that it's not "true" socialism, unless it's leftwing socialism?  Is Venezuela better than Argentina,  Were the soviets better than the Nazi's?  There's no such thing as a good socialism.  Why can't you imagine a society that is not centrally planned by sociopaths with their schemes of fairness. Central planners start out by being nice, I thought you huns were smarter than that.

Mon, 08/04/2014 - 17:11 | 5045842 Escrava Isaura
Escrava Isaura's picture

Harbanger,

You said: "Achtung, pay attention..."

Harbanger, Pay attention, you are an idiot, Buddy!

Mon, 08/04/2014 - 17:22 | 5045918 Harbanger
Harbanger's picture

I would argue with you but you can't form a thought beyond your IQ.  So I won't waste my time.

Mon, 08/04/2014 - 20:13 | 5046674 sylviasays
sylviasays's picture

Escrava Isaura lives in Washington, D.C. and no doubt has a cushy, well-paying government job that allows her to sit on her fat, lazy, socialist ass all day and post insults and spew delusional rants in defense of her socialist masters. 

Mon, 08/04/2014 - 20:40 | 5046805 Escrava Isaura
Escrava Isaura's picture

Sylvia,

Your poor little thing.... I am very skinny.

Anyway, you made your stupid point. So let’s move on. The people came to this thread expecting much more from us. 

Mon, 08/04/2014 - 21:59 | 5047164 sylviasays
sylviasays's picture

Escrava, is as delusional about her weight as she is about socialist dictators.

Anyway, you made your stupid point. So you move on. 

Mon, 08/04/2014 - 21:59 | 5047165 sylviasays
sylviasays's picture

Escrava, is as delusional about her weight as she is about socialist dictators.

Anyway, you made your stupid point. So you move on. 

Mon, 08/04/2014 - 17:20 | 5045902 AchtungAffen
AchtungAffen's picture

Fascism takes stuff from socialism, but I don't think they're the same. Socialism is not necessarily vertically state driven, although some may interpret it that way. While fascism requires verticality in political decision making (for ex.). You can have social policies that actually do good, like those evil socialist nordic states. But the deification of a couple individuals (be it Perón, Evita, Néstor or Crista) and an army of genuflex, para-official organizations doing methastais like cancer invading every public sphere... well, that's pretty much fascism. A requirement almost. Venezuela is a total autocracy based on populism. Argentina is milder than that (real autocracy hasn't been achieved by the K's).

Mon, 08/04/2014 - 17:30 | 5045960 Harbanger
Harbanger's picture

If you argue that smaller government is one of the key routes to a bigger economy, the response is: what about the Nordics? Don’t the Nordic economies show that you can combine big government and firm growth? Or more forcefully, don’t they show that high levels of tax and redistribution are important to prosperity? No they don’t.

The Nordics flourish when they are more liberal, and go off the rails when higher taxes and more regulation are imposed. Precisely because of extortionate tax rates and an overbearing state, the Nordics became progressively more uncompetitive during the 1970s. It got worse in the 1980s – and Abba broke up as well! With public spending reaching 70 per cent of GDP in Sweden, the region also had its own financial crisis in the early 1990s. Socialism hadn’t been kind.

Crucially, they didn’t put the crisis to waste. These countries instigated dramatic reform. Subsidies and taxes were cut, and public services reformed. OECD estimates of potential output growth show significant increases across Sweden, Norway and Finland in the decade after supply-side reforms.

In the 15 years to the Great Recession, the Nordic economies have performed well. But this wasn’t stimulated by an expansion of government. Quite the contrary. Between 1993 and 2008, public spending fell by more than 20 percentage points of GDP in Sweden. That could have added at least 1 percentage point to its GDP growth rate. The smallest fall in the share of public spending to GDP was in Denmark, where it still managed to drop by 10 percentage points. OECD figures show that total tax and non-tax revenues were around 60 per cent of GDP in Sweden in the mid 1990s, but will be just over 50 per cent this year. Imagine if the UK had slashed 10 percentage points of GDP off the tax burden over the same period.

Mon, 08/04/2014 - 18:16 | 5046188 AchtungAffen
AchtungAffen's picture

GDP growth and living well aren't equivalent. You can have a country with the smallest of governments, the biggest of GDP growth and at the same time being completely unequal and unjust.

Mon, 08/04/2014 - 18:53 | 5046312 Harbanger
Harbanger's picture

A gov being completely equal and just is a figment of your imagination.  Society needs equal justice, not equality through redistribution of a fair gov, that's crazy.  But it keeps the sheep believing in unicorns and gladly handing over their individual liberty to their gov.  The other statist lie that life would fall apart without the gov to intervene.  History proves exactly the opposite.

Mon, 08/04/2014 - 19:10 | 5046375 AchtungAffen
AchtungAffen's picture

Nobody is perfect and no human creation can boast about that either. Rather than getting lost on zingers like "sheep", evil "redistribution", "statists", etc...; I'd rather go with the facts. When you pay taxes and those are then spent on public services, it's called "redistribution". If not on public services, on what would you like taxes spent then? Society through government bodies creates a legal framework, play rules. If those rules level the playing field, the better. That's your initial equality (I believe Rawls was the one speaking about that, right?). I do believe that's necessary for justice to exist. Rules that only mantain inequalities, are a road that only ends in catastrophe. Extremely unequal societies are unjust societies.

Mon, 08/04/2014 - 18:51 | 5046309 Monty Burns
Monty Burns's picture

The Nordics' success is not due to any system, rather to the Nordics themselves. They'd be wealthy and well-ordered no matter what system they operated under. That will change of course now that they'll be majority African/Muslim withing 50 years.

Mon, 08/04/2014 - 20:35 | 5046635 sylviasays
sylviasays's picture

"The Nordics' success is not due to any system, rather to the Nordics themselves."

The Nordics' current success is due to North Sea oil. Those generous welfare entitlements will disappear if the oil stops flowing. 


Tue, 08/05/2014 - 07:07 | 5047935 AchtungAffen
AchtungAffen's picture

Sure mate... the "superior race"... Oh the anachronism. Maybe someone should remember history lessons and realize that when Nordics where almost nomadic and living in stinky shacks, those eeeevil and brown Muslims where the centre of civilization. They bathed everyday and even had water heating and piping at home.

Mon, 08/04/2014 - 17:39 | 5046005 Escrava Isaura
Escrava Isaura's picture

AchtungAffen,

You said: "Fascism takes stuff from socialism, but I don't think they're the same"

You can't tell the difference?

The link below will help. By the way, I set it up to the topic. Enjoy it.

https://www.youtube.com/watch?v=D1PtLjwPZrE#t=1h20m16s%E2%80%9D

Mon, 08/04/2014 - 18:18 | 5046191 AchtungAffen
AchtungAffen's picture

Well, certain terms (different according to country/language barriers) tend to be so bastardized that you end up not knowing what they're really about. I get the impression everytime I hear people talking about "socialism" here @ZH, that for them the term is just an array of all the bad things they can think about; rather than a socio-economic theory...

Mon, 08/04/2014 - 18:25 | 5046216 Escrava Isaura
Escrava Isaura's picture

new AchtungAffen,

Good point.

Anyway, don’t give up on Zero Hedge.

Just make your point then, stop listening to stupid people. There are some great people at Zero Hedge. Just have some patience. You will find them!

Mon, 08/04/2014 - 20:08 | 5046655 sylviasays
sylviasays's picture

How about stupid socialists?

AchtungAffen and Escrava Isaura need to get a room (paid for by someone else of course!) 

Mon, 08/04/2014 - 20:42 | 5046818 Escrava Isaura
Escrava Isaura's picture

Letting your mouth run off without thinking.

Your stupidity never ceases to amuse me.

Mon, 08/04/2014 - 21:56 | 5047153 sylviasays
sylviasays's picture

Escrava

You're always letting your silly socialist mouth run off without thinking.

Your stupidity never ceases to amuse me.

 

Tue, 08/05/2014 - 07:11 | 5047939 AchtungAffen
AchtungAffen's picture

Stupid is as stupid does, Forrest.

Mon, 08/04/2014 - 17:52 | 5046076 ThroxxOfVron
ThroxxOfVron's picture

Uselessly arguing over the labelling of these criminal cabals does not change the substance of the crimes they commit.

A combination of the Government and the Bankers are using debt to expropriate the real wealth of the populace.  

Wealth is not aggregated through ingenuity and productivity but by force and subterfuge.  The largest debts are compiled by the government via the capture of the fiscal/monetary matrix.  

ALL govenment debt is odious debt; a transfer of wealth that functions on several levels including via compunding inflation.

Debt-based fiat makes this confiscation easy as there is no limit to the source of backing for emmissions under the banne of 'popular' social programs, 'necessary' military expenditures, 'developement', 'maintinaing systemic stability', etc...

 

Facsists, Communists, Socialists, Democratic Statists: ALL are ememies of honest and productive people.

Mon, 08/04/2014 - 18:19 | 5046192 Escrava Isaura
Escrava Isaura's picture

ThroxxOfVron,

You said: "Facsists, Communists, Socialists, Democratic Statists: ALL are ememies of honest and productive people."

How about Republican Statists?

Mon, 08/04/2014 - 14:44 | 5044955 Dr. Engali
Dr. Engali's picture

"Inflationary policy is and always will be extremely destructive."

No fucking shit captain obvious. Thank you for that original tidbit of information.

Mon, 08/04/2014 - 15:22 | 5045113 Harbanger
Harbanger's picture

Big government leftists don't believe in maff, they believe in unicorns, so they always run deficits.  Then they ALWAYS hyperinflate their currency to pay off their debt, at the expense of their Country.  Captain obvious shit that few people see, the US is no different.

Mon, 08/04/2014 - 14:46 | 5044962 NoDebt
NoDebt's picture

Any time your population looks upon the lousy US Dollar as a safe store of value and they are in demand for trade at street-level, you know your own currency has long since jumped the shark.

Mon, 08/04/2014 - 14:50 | 5044980 Make_Mine_A_Double
Make_Mine_A_Double's picture

The Merval sure as hell looks like an S&P chart.

Mon, 08/04/2014 - 14:51 | 5044981 Joebloinvestor
Joebloinvestor's picture

Argentina will be issuing mortgages on state property in the future.

Their bonds are equal to foreign aid (in their opinion).

Mon, 08/04/2014 - 14:52 | 5044988 Gromit
Gromit's picture

"How do Argentinians differ from terrorists?

Terrorists have sympathizers."

Mon, 08/04/2014 - 15:26 | 5045138 Kirk2NCC1701
Kirk2NCC1701's picture

I award you some Wensleydale cheese for that one, Gromit lad.

Mon, 08/04/2014 - 14:55 | 5044999 jackstraw001
jackstraw001's picture

Coming soon to a Red, White and Blue country near you...

Mon, 08/04/2014 - 15:01 | 5045019 carbonmutant
carbonmutant's picture

Argentinians are suffering from Stockholm Syndrome...

Mon, 08/04/2014 - 15:03 | 5045022 bid the soldier...
bid the soldiers shoot's picture

 

 

"Argentina's real problem, which is a profligate government financing its spending increasingly via the printing press, while publishing severely falsified “inflation” data"

If they could borrow $17 trillion, they'd be doing a complete burlesque of America since Reagan took the oath in 1981.

We should be honored.  

Imitation is the sincerest form of flattery.

Mon, 08/04/2014 - 15:05 | 5045029 mastersnark
mastersnark's picture

Who would have thought that lending to a group of people [a government] that make their money off of robbery and extortion [taxation] would turn out badly?

If an investor can't trust a person whose only business model is to steal, who can they trust?

Mon, 08/04/2014 - 15:06 | 5045041 Sick
Sick's picture

I recently learned that the "Mind Your Business" slogan was on the first USA coins designed by Benjamin Franklin, since replaced with "In God We Trust"  We are so messed up.

Mon, 08/04/2014 - 15:19 | 5045099 Bossman1967
Bossman1967's picture

This country can Not mind its own business nor does it trust in god. Its not in Barak we trust.

Mon, 08/04/2014 - 15:18 | 5045097 slightlyskeptical
slightlyskeptical's picture

The whole problem is that debt was used to create the money in the first place. We need to move past a debt based money system on an entire world basis. Let exchange rates determine how much printing is too much printing and let it come straight from each countries treasury. There can be a world central bank, but their duty would be limited to accounting for the units of currency outstanding and calculating exchange rates. Back it all with the resources and productivity of each country.

Recover some monies through taxes: Tax rate is flat and is set at the annual rate of inflation for an average middle class household.  Pay extra on high wealth when the allocation gets swayed too high on the top, call it an incentive to raise up the lower classes.

Ultimately each country needs to take control of its resources and plan for more sustainable futures. Thus controls have to be in place or else our wants for today will lead to scarcity in the future.

Mon, 08/04/2014 - 16:23 | 5045463 Escrava Isaura
Escrava Isaura's picture

slightlyskeptical,

Dream on!

Nice try.

US Private Debt (Not including financials and government) = $42 trillion dollars / 316 million Americans = $133 thousand each man, woman, and child.

Mon, 08/04/2014 - 15:19 | 5045106 Duffy
Duffy's picture

Repudiate....  turn to China and Russia, pay for some commercials about how awesome the wine and steaks are in Patagonia...

Mon, 08/04/2014 - 15:24 | 5045114 Kirk2NCC1701
Kirk2NCC1701's picture

I'm getting to the point of scanning articles, or just reading the first few and last few sentences, to see if I should bother with the rest.  If the blog comments go off into the weeds or add no value, I tend to scan past them also. 

 

p.s. Note to self: There HAS to be a life beyond ZH! 

p.s. Tyler, can you ban me for a month, since I can't last that long on my own?

Mon, 08/04/2014 - 15:26 | 5045141 syntaxterror
syntaxterror's picture

Shouldn't this scanning apply to any online content — including the vaunted Jew York Times?

Mon, 08/04/2014 - 17:16 | 5045884 RaceToTheBottom
RaceToTheBottom's picture

Self control is a virtue.

It really does pay to not only go cold turkey for a few days/week.

But it also pays to go read other sources.  I did and thought I had gone to an alternate universe...

Enlightening.

Mon, 08/04/2014 - 15:25 | 5045118 syntaxterror
syntaxterror's picture

"... real problem ... is a profligate government financing its spending via the printing press, while publishing falsified 'inflation' data in order to mask this fact."

Gee, who does that sound like? Ring any bells? Starts with a U and ends with an A.

Mon, 08/04/2014 - 15:23 | 5045122 crzyhun
crzyhun's picture

The Default is a Minor Problem – America's Real Problem is Something Else Entirely.

How about that for a headline? More better.

Mon, 08/04/2014 - 15:24 | 5045123 WTFUD
WTFUD's picture

Previously i had to make do with the middle of the road Argentinian hookers but now due to this act of god i pick'n'mix at the top end.

Mon, 08/04/2014 - 15:25 | 5045133 syntaxterror
syntaxterror's picture

Pix?

Mon, 08/04/2014 - 16:10 | 5045425 WTFUD
WTFUD's picture

$3.95 P&P C/O NSA

Mon, 08/04/2014 - 15:29 | 5045137 WhyWait
WhyWait's picture

Argentina is a technologically fairly advanced country with a well educated work force which should be able to afford strong public services, a strong social insurance system and safety net. Why can't it seem to?  This article doesn't tell us enough of what we need to know.  We can blame the problem on peronism, but many other countries face similar crises, with or without a history of strong socialistic movements. 

The overall debt burden can be a problem, and we should see those statistics.  But the problem may well be dollars.  If Argentina's problem is an insatiable need for dollars to service its external debt, squeezing the work out of the people to buy dollars may require austerity, sharply repressing living standards while pushing foreign sales.  If a country is politically incapable of doing this the IMF is there to impose it.  This is often devastating to a country's internal economy, which may have troubles of its own.  Local companies producing for local markets are driven out of business. The downward economic spiral often requires military repression, even a coup, which often enough is organized with the help of the US Embassy.

The answer to this dilemma could begin with de-dollarization, working with BRICS to restructure debts and payments in other currencies, and resisting extraterritoriality like France is doing now.  Some of this is discussed at:

  http://www.globalresearch.ca/us-judicial-system-upholds-wall-street-frau...

 

 

 

Mon, 08/04/2014 - 16:17 | 5045369 Gromit
Gromit's picture

Argentina decided in the forties not to partner with the US and its fellow travellers (neutral in WW2) and paid and continues to pay the price for its independent positioning.

Argentina's public debt today is one third of what it was in 2001 - whereas most Western countries several hundred % higher.

The IMF have no power to influence Argentina, which now has a very healthy balance sheet and huge mineral resources which it is currently unable to exploit due to inability to finance.

,

 

Mon, 08/04/2014 - 20:22 | 5046709 sylviasays
sylviasays's picture

"Argentina's public debt today is one third of what it was in 2001."

Sort of. Argentina defaulted on $20 billion worth of debt obligations. This occurred after Argentina failed to make a $539 million interest payment. The bonds in question were issued prior to 2001, the same year it defaulted on more than $80 billion in sovereign debt.

Three countries with the highest inflation rates? Argentina is in third place behind Venezuela and Iran.  

 

 

Mon, 08/04/2014 - 15:42 | 5045178 Kirk2NCC1701
Kirk2NCC1701's picture

They 'just' need to do 5 things, and everything else will take care of itself...

 

(1) Nationalize their CB,

(2) Anchor their currency to Precious Assets (PA), which have universal and perpetual global value

      where PA = PM (Gold, Silver, Platinum, Palladium), Oil, Gas, Electricity, non-GMO Foodchain/Ecosystem

(3) Enact a self-activating, Automatic-Treason law for any politician who as much as proposes a fiat or private banking system

(4) Join a S.Am. Defense Treaty, since foreign attacks are bound to follow from colonial powers.  Limiting the impact of the Colonial Propaganda Machine (and its 5th Column) are key also.

(5) The country's Old Guard (powerful Oligarchs) must swear allegiance to "Country over Foreign Interests", or lose assets.

Tue, 08/05/2014 - 06:48 | 5047924 Escrava Isaura
Escrava Isaura's picture

Kirk2NCC1701,

Very good baseline!

Mon, 08/04/2014 - 16:28 | 5045579 AchtungAffen
AchtungAffen's picture

There's a big point missing in this post, which doesn't surprise me considering where it's coming from. NML and other funds who didn't go into the debt restructuring of 2005-2010; bought defaulted debt at dirt cheap prices and then used their unduly influence in the US system to force Argentina to repay them at full (when over 90% of the rest of creditors had already agreed to the restructured debt). That's pretty much usury.

Mon, 08/04/2014 - 20:28 | 5046741 sylviasays
sylviasays's picture

Usury?

The corrupt socialist Kirchner regime took on the bond debt willingly and then defaulted. End of story. 

Meanwhile Cristina Fernández de Kirchner and her leftist cronies live like royalty while the people of the country suffer. 

 

 

Tue, 08/05/2014 - 08:12 | 5048014 AchtungAffen
AchtungAffen's picture

Forrest! How about some shrimps? Because on everything else you need to go back and hit the books.

The debt that was defaulted in 2001-2002, was mostly generated during the MeXem years (1989-1999) and before. All during the days when Argentina wasn't called "socialist" by people like you, but an "example of economic progress" by Chicago School economists.

Mon, 08/04/2014 - 16:37 | 5045650 autofixer
autofixer's picture

Oh Argentina!  I thought this article was about Amerika.  Ooops! 

Mon, 08/04/2014 - 16:41 | 5045673 SweetDoug
SweetDoug's picture

'

'

'

Is it just me, or am I so jaded after 4-5 years of reading about crap in the financial world, 13 billion bucks is just chicken-shit?!

 

Give'm a loan. Go away.

 

Wait until the real defaults start happening!

 

•?•
V-V

Mon, 08/04/2014 - 17:18 | 5045894 TNTARG
TNTARG's picture

Tu quoque, Cato!

The Cato Institute is a think tank founded by Charles G. Koch and funded by the Koch brothers.

 Media mogul Rupert Murdoch has served on the board of directors of Cato.

Funders...

Castle Rock Foundation (Formerly Coors Foundation)
Charles G. Koch Charitable Foundation
Earhart Foundation
JM Foundation
John M. Olin Foundation, Inc.
Claude R. Lambe Charitable Foundation
Lynde and Harry Bradley Foundation
Scaife Foundations (Sarah Mellon Scaife, Carthage)
As Social Security reform has become a more prominent issue, the Knight Ridder newspapers reported that the Institute, a strong advocate of privatization, had received backing from "the American International Group, an insurance and financial services company whose business includes managing U.S. retirement plans." <6>

And somebody says here:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x4791665

They are pure evil - father funded the John Birch Society.

They do NOTHING unless there is a political power payoff to it.

They are BFEE through and through.

When I discovered that they made the Vermont Yankee deal with Dean, I knew it was a setup against Dean. Most politicos knew he wanted to run for prez since 1997.

The Bush way is to set up compromising deals with Dems they think will run against them. They targeted Clinton right after Poppy took office in 89, but he never got caught up with any of the deals they presented him at the time. (see The Hunting of the President)

Koch Industries bought Vermont Yankee. I have no doubt that had Dean been the nominee that the Koch brothers would have "found" some incriminating memo that they somehow passed through and Dean signed or even one they would have forged or Dean generated innocently, but was later manipulated into some unethical position by the Koch's.

Anyway, it would have fed a whole media frenzy and Dean would have been forced to open all his books and previously sealed files. And he probably wouldn't have had the time necessary to prove his innocence.

That's how they operate, folks. They've been doing it for decades. They are doing it now in preparation for 2008.

That's what they do.

And the Koch brothers are two of their most active manipulators.

Mon, 08/04/2014 - 20:32 | 5046761 sylviasays
sylviasays's picture

Meanwhile, the evil George Soros has given billions to radical far-left groups and was a major supporter of Obama and his cronies.  

http://newsbusters.org/blogs/mike-ciandella/2013/08/12/george-soros-turn...

http://www.discoverthenetworks.org/Articles/Organizations%20Funded%20Dir...

Mon, 08/04/2014 - 17:45 | 5046034 taggaroonie
taggaroonie's picture

Get some metal Argentina - your namesake silver will do

Mon, 08/04/2014 - 19:46 | 5046568 paddyirishman
paddyirishman's picture

don't you know that paul singer is another tribe member, dirty money changing bastards.

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