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Argentina – Sliding Down A Slippery Slope

Tyler Durden's picture


Update: The official and black-market Peso has collapsed further today to new record lows.


which can mean only one thing...


Submitted by Pater Tenebrarum of Acting-Man blog,

Planned Bond Exchange Declared Illegal

You bet it is illegal – in its continued attempt to welsh on its creditors, Argentina's  government has attempted to move its debt out of the reach of US courts by swapping its debt for new debt issued under local law. The problem is of course that “local law” can be made up to the government's liking. Simply put, investors would never have lent the government money in the first place if these bonds had not been issued under US law. By entering clauses that determined that New York would be the relevant jurisdiction, Argentina's government enticed investors to lend a lot of money to it at what were then quite favorable terms.

Obviously, for the government to attempt to alter these clauses retroactively by means of a swap makes a complete mockery of these contractual agreements. Hence, judge Griesa's determination that such action would be illegal is perfectly justified and correct (for details on the legal backdrop, we refer you to our previous article  “Argentina – Deadbeat State Goes on the Attack”). In the interest of achieving a settlement, the judge wisely refrained from issuing a contempt of court finding (he can't very well throw Argentina into jail anyway). It is obvious that judge Griesa just wishes the issue would go away, but to his credit, he continues to stand firm on the law.

According to a recent Bloomberg report:

“Argentina’s plan to pay its restructured debt beyond the reach of U.S. courts is illegal, said the judge overseeing litigation stemming from the nation’s 2001 default, while declining to hold the country in contempt.


U.S. District Judge Thomas Griesa said in Manhattan federal court today that the proposal, announced Aug. 19 by Argentina President Cristina Fernandez de Kirchner, is “invalid, illegal and in violation of current court orders and injunctions.”


Griesa declined a request by lawyers representing investors holding Argentina’s defaulted bonds that he find the nation in contempt of court. The judge told lawyers for both sides that a contempt finding wouldn’t add to the prospects of a settlement between Argentina and its creditors.


“The thing that is of paramount necessity is to have a settlement,” Griesa said. “There must be a settlement.”

(emphasis added)

We must once again emphasize here that it does not matter that many of the current owners of Argentine debt that comprise the so-called “hold-outs” are denounced as “vulture funds” because they have bought the defaulted debt cheaply. It is completely immaterial to the legal questions at hand whether some of the original creditors have capitulated and sold their claims in the secondary market. Anyone who becomes a bondholder inherits all the rights connected with the bonds.

We must stress once again that we are a bit torn on the issue for the reason that we believe that lending money to governments is somewhat dubious per se. After all, those who lend to governments do so in the knowledge that the State is the only entity in the market economy that legally obtains its income by coercion. Certainly investors would benefit from being taught the lesson that lending to governments is not as risk-free an activity as is widely assumed. The fact that Argentina's tax payers will pay the price for their government's folly is undoubtedly deplorable.

On the other hand, we are talking about a government here that has just raised its spending by 56% in a single year, is hell-bent on destroying the country's economy and is abridging the economic liberty of its citizens ever more. As a result, there may actually be unexpected benefits for Argentina's citizens from the action of the hold-outs as well, as it is likely to restrict the government's room to maneuver.


Next “Official” Peso Devaluation Imminent

The renewed default is actually a sideshow to the ongoing economic catastrophe induced by the government's policies in Argentina. Its economy minister is a declared central planner, who actually believes markets to be surplus to requirements. As Nicolas Cachanosky writes:

“Argentina’s economic minister, Axel Kicillof, has become famous for his assertion that it is possible to centrally manage the economy now because we have spreadsheets such as Microsoft Excel. This assertion comes from the mistaken view that the cost of production determines final prices, and it reveals a profound misunderstanding of the market process.


This issue, however, is not new. The first half of the twentieth century witnessed the debate over economic calculation under socialism. Apparently, Argentine officials have much to learn from this old debate. The problem is not whether or not we have powerful spreadsheets at our disposal; the problem is the impossibility of successfully creating a centrally-planned market.”

(emphasis added)


CFK and Kicillof

Argentina's president Christina Fernadez-Kirchner and her economy minister Axel Kicillof.

(Photo credit: DyN)


Indeed, Mises showed already in his 1920 monograph “Economic Calculation in the Socialist Commonwealth” that there was a fundamental problem all central planners were confronted with that could not possibly be overcome. Without markets and market-determined prices, economic calculation becomes impossible – therefore no rational economic choices are possible either. As the debate between Marxists, Mises and Hayek in the decades following the publication of Mises' article showed, none of the attempts to rescue central economic planning from this fundamental challenge were successful. In fact, it often seemed that Mises' and Hayek's opponents did not even fully grasp what the nature of the problem was. How powerful one's computers are is for instance completely irrelevant to the issue. As Mises noted later in Human Action:

The paradox of "planning" is that it cannot plan, because of the absence of economic calculation. What is called a planned economy is no economy at all. It is just a system of groping about in the dark.


There is no question of a rational choice of means for the best possible attainment of the ultimate ends sought. What is called conscious planning is precisely the elimination of conscious purposive action.”

(emphasis added)

All socialist economic planning schemes presuppose the existence of the fictional state of equilibrium (which is merely a mental tool, but has no counterpart in reality) and a static, unchanging economy, which is just as unrealistic. Even if one were to simply attempt to preserve all existing economic processes and end all economic and technological progress, change would still occur (population numbers will change, the weather will be different from year to year, mineral deposits will run out, etc.). Almost needless to say, even if such a fictional “equilibrium economy” were attainable, it wouldn't be worth having. It would be completely contrary to the human spirit.

Argentina's “economy minister” has something in common with France's Arnaud Montebourg – he is economically illiterate, to put it bluntly. In fact, the entire Argentinian government is apparently laboring under the misconception that it can successfully “plan” the economy.

For instance, deputy economy minister Emanuel Alvarez Agis believes he knows what the “correct” exchange rate for the Argentine peso is (note that the currency has lost as much of its value in the past ten years as the US dollar in an entire century). As rumors about an imminent devaluation begin to circulate – which is undoubtedly unavoidable, not only due to the renewed default, but simply due to the combination of enormous government spending and unbridled money printing that characterizes Argentina's economic policy – Agis asserts that this is “not the plan”. Of course his vehement denial essentially cinches it, based on the “never believe anything until it is officially denied” principle.

“Argentina’s deputy economy minister, Emanuel Alvarez Agis, rejected the idea that the country is heading for another devaluation.


“We won’t apply that program,” Alvarez Agis said in an interview with Radio Del Plata yesterday. “The exchange rate has to be competitive enough to benefit regional economies, but not so high that it makes imports too expensive.”


Economy Ministry spokeswoman Jesica Rey didn’t respond to an e-mail and telephone call seeking comment about another possible devaluation this year.


Argentina’s central bank controls the peso rate by buying and selling dollars in the spot and futures markets almost daily, as well as limiting foreign exchange purchases. Yesterday the bank sold $10 million, according to preliminary data.


The peso is poised for further declines, Alan Ruskin, the global head of Deutsche Bank AG’s Group of 10 foreign exchange in New York, said in an interview on “Bloomberg Surveillance.”


“Guys like ourselves are saying the currency could still lose something like 25 percent,” Ruskin said. “It still is one of the big shorts on the currency side.”

(emphasis added)

Argentina's citizens meanwhile are buying as many dollars as is legally possible for them. Citizens may exchange up to 20% of their salary or income into dollars, provided they leave the dollars on deposit with a bank for a minimum of one year. Otherwise, a 20% tax is imposed on the purchase (i.e., if the dollars are taken out in the form of cash currency). Dollars that are kept on deposit remain of course easily accessible for the government, which is not exactly a paragon of regime certainty, to put it mildly. Argentinians have lost their savings more times than we care to count, whether by inflation or by confiscatory deflation. They evidently know what is coming next:

“People have seen this before and they know there will be fewer and fewer dollars, while more pesos flow into the economy as the government increases spending,” Buscaglia said in an interview from Buenos Aires. “The natural reaction is to buy more dollars.” Government spending surged 56.5 percent in June from a year earlier.


Peso forwards showing trader expectations for the currency in three months declined 2.2 percent this week to 9.3 pesos per dollar.


The perception that Fernandez is radicalizing her policies is also driving investors to the dollar on concern she’ll tighten existing currency controls, according to Olaiz.

(emphasis added)


ARG peso-ann

The official (green line) and black market (blue line) peso rates, via The gap between the two continues to widen, a sure sign that the official rate will soon “catch up” a bit – click to enlarge.


The Argentine government meanwhile once again demonstrated its contempt for property rights by suing the subsidiary of a US company for daring to declare bankruptcy after having been ruined by the government's very own policies. The government is using an “anti-terrorism law” to attempt to reverse the bankruptcy. What is there to reverse one wonders? The company is insolvent. As an aside to this, it seems that the government also wants to introduce price controls and begin to “regulate profit margins” on a broad basis:

“Since defaulting, Fernandez has said she will use an anti-terrorism law to file a legal case against the local unit of Chicago-based RR Donnelley & Sons Co. (RRD) for “upsetting economic and financial order” after the printing company filed for bankruptcy and wrote off its assets in Argentina.


RR Donnelley said in a statement on Aug. 16 distributed by Globe Newswire that its Argentine unit wasn’t solvent and faced rising labor costs, inflation, materials price increases, devaluation, inability to pay debts and other issues that led to its decision to file for bankruptcy.


After Fernandez’s speech, securities regulator Alejandro Vanoli later said Argentina would seek to reverse the bankruptcy using a law against economic crimes.

Fernandez is also attempting to change a supply law that would seek to regulate prices and profit margins of goods.

(emphasis added)

In short, Argentina now has all the hallmarks of a full-blown Zwangswirtschaft based on the fascist model. Private property still exists on paper, but what may be done with it is decided by government bureaucrats. Ms. Kirchner's economic policy ideas obviously still had some room to get even worse than they already were. 



It is actually quite sad to watch the continued downfall of Argentina's economy under the inept ministrations of its government. The only good thing that can possibly come from this is that it will set yet another example for others so they may avoid making similar mistakes. Unfortunately the example is being set on the backs of the country's citizens, who are seemingly forced to live from crisis to crisis. Politicians rarely pay the price for their atrocious policies, and we are quite sure Ms. Kirchner and her cronies have feathered their nests in ways the average citizen cannot even dream of (most recently, corruption allegations have caught up with Ms. Kirchner's vice president. Rampant government corruption has long been a hot topic in Argentina under Ms. Kirchner's rule). It is not as though Argentina didn't have great potential. If only politicians would leave its economy alone and stopped inflating the currency into oblivion, the country could easily and quickly regain its former prosperity.


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Wed, 08/27/2014 - 13:43 | 5149959 Grande Tetons
Grande Tetons's picture

When the slope is vertical line is it still a slope? 

Wed, 08/27/2014 - 13:48 | 5149978 knukles
knukles's picture

Downwards yes, for the peons.
Upwards for the PTB, the chosen few, the Illuminati; no, it's called freedom, progress, ain't shit great for you!

(Yeah yeah yeah, I know its judgmental, but WTF, they do look like dumb and dumber)

Wed, 08/27/2014 - 13:52 | 5150008 Grande Tetons
Grande Tetons's picture

I wonder what he is whispering to her? 

Quieres chupar mi pene mas tarde? 

Wed, 08/27/2014 - 13:58 | 5150036 J S Bach
J S Bach's picture

"If only politicians would leave its economy alone and stopped inflating the currency into oblivion, the country could easily and quickly regain its former prosperity."


It's not just the local politicians who are to blame.  They're merely the front men.  Most of the problems stem from meddling by unseen international banksters who manipulate foreign currencies and suck the life's blood out of nations and then disappear like vampires with the dawn.

Wed, 08/27/2014 - 14:21 | 5150211 john39
john39's picture

agreed. almost every country is caught in the usury trap that has been laid for all of us.   that is the goal the system, not a by product.   Sure certain countries and corrupt leaders get there faster, but the real blame goes to those who designed and control the system.

Wed, 08/27/2014 - 15:01 | 5150544 Publicus
Publicus's picture

Fuck the west.

Wed, 08/27/2014 - 15:14 | 5150628 Nick Jihad
Nick Jihad's picture

So, feckless Argentine voters had nothing to do with it?

Wed, 08/27/2014 - 16:07 | 5150939 MalteseFalcon
MalteseFalcon's picture

That's right.  They didn't.

Wed, 08/27/2014 - 14:32 | 5150307 Syrin
Syrin's picture

But what I don't understand is how this could happen?   Socialism has worked wonders everywhere it's been tried, right ?!?!?!   That's why the liberal f'heads keep pushing for it here, right ?!?!?!

Wed, 08/27/2014 - 15:59 | 5150894 Theosebes Goodfellow
Theosebes Goodfellow's picture

¡Mamame la verga, abuelita!

(She is, after all, 61 or so. And has been quite lonely since Néstor kicked the bucket in 2010.)

Wed, 08/27/2014 - 14:13 | 5150156 Kirk2NCC1701
Kirk2NCC1701's picture

Prediction:  If Axel Kicillof has good oral/verbal skills and gives her good advice, he will get a head.

Wed, 08/27/2014 - 13:47 | 5149983 Dr Strangemember
Dr Strangemember's picture

Like a slug on glass...

Wed, 08/27/2014 - 13:51 | 5150000 Serfs Up
Serfs Up's picture

The only mistake is borrowing in a currency that is not your own.   Corruption can only sink a country so far....for complete ruination you have to involve the IMF.

Once again Acting Man blog has come up with a trite knee-jerk analysis of a slightly, but not overly, complex problem.

Wed, 08/27/2014 - 14:15 | 5150148 Relentless101
Relentless101's picture

Window (vertical line), meet slug (Argentina). Slug, meet salt (IMF).

Wed, 08/27/2014 - 14:33 | 5150315 Syrin
Syrin's picture

Plenty of nations ruined themselves before the IMF existed.

Wed, 08/27/2014 - 13:56 | 5150024 junction
junction's picture

Judge Griesa's latest decision involved a lawsuit aginst the producers of the movie "Lovelace" for copyright infringement, filed by the current owners of the movie "Deep Throat."  Griesa's ruling, stating that the Weinstein Company did not violate the copyright thanks to "fair use," was a reasonable application of the law.  Unlike Griesa's decision in the Argentinian bond case, where Griesa went off the rails and issued an insane decision that has cost bondholders an installment payment of about $547 million.  Griesa even attacked the New York Times and the Wall Street Journal for printing ads that attacked Griesa's competence. Griesa has now assumed the personna of the Red Queen in "Through The Looking Glass." 

Wed, 08/27/2014 - 14:23 | 5150223 john39
john39's picture

federal judges are not used to being questioned.  tyrants in black robes...

Wed, 08/27/2014 - 14:09 | 5150128 doctor10
doctor10's picture

Argentina would be on the receiving end of some "freedom" if it weren't for Putin and Assad

Wed, 08/27/2014 - 14:31 | 5150301 what's that smell
what's that smell's picture

host removes leech and leech screams bloody murder.

amurka bombs host until host re-attaches leech.

leech happy again.


Wed, 08/27/2014 - 13:48 | 5149989 NoDebt
NoDebt's picture

"The problem is of course that “local law” can be made up to the government's liking."

Does anyone else see the incredible irony in that statement?

Wed, 08/27/2014 - 13:49 | 5149990 Dr Strangemember
Dr Strangemember's picture

What's up with Axel's hipster chops?  Come on man!!!!!!

Wed, 08/27/2014 - 13:49 | 5149992 Jack Sheet
Jack Sheet's picture

You griesa my palm (or my ass)...
Christina should start an honest diaper business....

Wed, 08/27/2014 - 13:51 | 5150001 Peter Pan
Peter Pan's picture

So we have a catch 22. The creditors think they will be paid and Argentina thinks it will get away with paying its debt.

The old adage, "neither a lender nor a borrower be" has more relevance today than when it was first uttered.

Wed, 08/27/2014 - 13:52 | 5150011 Johnbrown
Johnbrown's picture

Let's hope politicians the world over choose to replicate Argentina's example of stiffing their creditors.

Screw you for investing with them.

Wed, 08/27/2014 - 13:55 | 5150018 tawdzilla
tawdzilla's picture

"It is actually quite sad to watch the continued downfall of Argentina's economy under the inept ministrations of its government."

i think you mean menstruations of government.

Wed, 08/27/2014 - 13:55 | 5150020 praps
praps's picture

An overcompensated lackey of the 0.1% who own all this debt wrote this article.

Wed, 08/27/2014 - 13:56 | 5150025 DullKnife
DullKnife's picture

"On the other hand, we are talking about a government here that has just raised its spending by 56% in a single year, is hell-bent on destroying the country's economy and is abridging the economic liberty of its citizens ever more."


Yeah, but what about Argentina?



Wed, 08/27/2014 - 13:56 | 5150027 Dr. Venkman
Dr. Venkman's picture

OT: did they close the markets early today?

Wed, 08/27/2014 - 14:00 | 5150041 fuu
fuu's picture

Pater Tenebrarum, bankster apologist.

Fun anagrams:

Utter Barmen Rape
Mute Raper Banter

Wed, 08/27/2014 - 14:03 | 5150061 kchrisc
kchrisc's picture


As Mises noted later in Human Action:

The paradox of "planning" is that it cannot plan, because of the absence of economic calculation. What is called a planned economy is no economy at all. It is just a system of groping about in the dark.

While Mises writings and ideas are spot on, the one thing he missed or avoided is that those involved with "planning" are not planning at all, but stealing. I.e. any and all involved are only involved so as it serves themselves.

Any and all actions by government are ALWAYS about money and power.

An American, not US subject.

Wed, 08/27/2014 - 14:24 | 5150230 The Wizard
The Wizard's picture

Who is to blame? Moron politicians whose primary concern is for their own ass and function with a "me first" central planning system. Or, the bankstas they are beholden to that churn out debt instruments at will. Where was Argentina's complaint of the crony fiat system when they signed up for the debt instruments? Don't these moron politicians realize the international bankstas control their planning mechanisms via fiat? Central planning continually stymies innovation. Off with their heads.

Wed, 08/27/2014 - 14:50 | 5150469 kchrisc
kchrisc's picture

"Who is to blame?"

The people for obeying and paying.

"Save yourself, quit obeying and paying."


The most powerful weapon the American people have is Rejection.

 The system of fraud and theft that has been built up upon the backs of the American people is dependent upon out backs. Withdrew our backs, and the whole thing collapses. This is our greatest weapon.

 Quit Paying--put it into food, and precious metals, etc.They stole what ever "debt money" they loaned you in the first place )fractional reserve banking) and soon you won't be able to pay them anyways.

Quit Obeying--If they are in violation of the Constitution then they are not legitimate anyways.

Quit Playing--Quit being a tool for them to use.


The Four Rs
Rejection: Quit paying, quit obeying , quit playing
Revolution: It is inevitable, so prepare, as they are.
Retribution: Is there really any place for these sociopaths and criminals in a
restored civil and Constitutional society?!
Restoration: Restore the Constitutional republic.

Wed, 08/27/2014 - 18:44 | 5151579 The Wizard
The Wizard's picture

I can't argue with your logic. It's our voluntary acceptance of the fictional elitist system that keeps the wheel turning until one day it stops.

Wed, 08/27/2014 - 14:05 | 5150086 U4 eee aaa
U4 eee aaa's picture

How long before this woman is .... uhhh ....removed from office?

Wed, 08/27/2014 - 14:08 | 5150111 carbonmutant
carbonmutant's picture

Kicillof, like most economists, believes that you can solve non-linear problems with linear solutions.

Wed, 08/27/2014 - 14:14 | 5150162 Joebloinvestor
Joebloinvestor's picture

Why don't they just pull a USA and buy their own fucking bonds with self printed money?

They would if they didn't need shit from other countries.


Wed, 08/27/2014 - 14:14 | 5150163 youngman
youngman's picture

Elections are next year....I think....but she will cheap like all Socialists do...she loves the power and wealth she has......she thinks she is doing fine..its everyone else who is screwing with her...

Wed, 08/27/2014 - 15:09 | 5150598 Monty Burns
Monty Burns's picture

Yes, and if she promises more free shit they'll vote for her.  I truly believe that countries get the governments they deserve.  

Wed, 08/27/2014 - 14:13 | 5150169 Spungo
Spungo's picture

Serious question: why don't they just pay the money back?

Wed, 08/27/2014 - 15:01 | 5150539 Johnbrown
Johnbrown's picture

Define "they"

Wed, 08/27/2014 - 14:32 | 5150296 pashley1411
pashley1411's picture

Its simply too bad that we aren't in the 13th century anymore.  

Argentines, having exhausted their own economy, clearly need to invade someone, dammit.

Wed, 08/27/2014 - 14:35 | 5150340 DOT
DOT's picture

Auction coming Sept. 2nd I believe.

Will be very interesting if not delayed again.

Wed, 08/27/2014 - 14:44 | 5150410 no more banksters
no more banksters's picture

"This is a unique opportunity for Argentina and Latin America to show to other debt-enslaved countries that there is an alternative against the money market tyranny."

Wed, 08/27/2014 - 14:49 | 5150466 Absalon
Absalon's picture

The swap is not illegal in Argentina.


Griese has painted himself into a corner by trying to prevent Argentina from paying its creditors other than the vulture funds.   That's why he is screaming at the parties to settle - to get him off the hook.


Just a matter of time before the European Courts hand Griese a rebuke and say that an American court cannot prevent Argentina from paying European creditors in Europe.


American courts' pretensions of extra-territoriality are not well received around the world.

Wed, 08/27/2014 - 15:06 | 5150571 JR
JR's picture

“In 2001, Argentina collapsed; after many years of apathy in the country, the insurrection exploded. As TopDocumentary notes, the spontaneous revolt of 'faceless' people meant saucepans were being banged in every neighborhood.The cry: ‘I don’t want a state of siege or to be a pawn of the International Monetary Fund.’” – Tyler Durden

The noise, the fires, the police riding raging horses bearing down with clubs and whips on the protesting Argentineans...

Take note… from this video… of the ravages and impoverishment of debt -  of the terrifying reality of where mankind is headed if the growing pile of manufactured debt and usury by the international bankers is not stopped, of the betrayal of millions of workers to the policies dictated by the World Bank and the IMF…

 A chronicle of treason: the promises of the leaders not to bow to the international financial powers and the privileged local groups and the betrayal …

Where international corporations use their economic influence to bribe and otherwise manipulate government officials to pillage the country's wealth and send the people into dire poverty… of a country on its knees that formerly produced 95% of what it consumed…unable to compete, hundreds of factories and workshops closed, millions of workers and pensioners sacrified, a country that must henceforth import…

The results of how the bankers and the IMF and corrupt government sank Argentina can now be believed in America after two decades of massive corruption and coverup by the bankers and their banker-bought elections and politicians…

Random snatches of the commentary are now all too familiar in the United States and the EU:

What happened in Argentina?  How was it possible that in so rich a country so many people were hungry… the country ransacked by a new form of aggression… a daily and silent violence… of never-ending debt…of impoverishment and corruption and scandal… to enrich Argentinean financiers… to control finance and empty the country of its wealthan alliance of foreign banks and multinationals come to powerplunder…pillage of the people…with government complicity…the police protecting the thieves… the media praised…the elderly facing losses of all their savings… a swindle to make the government responsible for the debts of the banks…

and the dying children...

You think it can’t happen here?  Think again; it’s already happening:

The vulture funds that corner Argentina also come for Spain, by Jérome Duval, Fatima Fafatale

July 31, 2014 - 16:52

"Vulture funds" refer to companies that buy insolvent debts for a song and later try to cash in on them by force. Billionaire Paul Singer has made it his specialty. Today he is intent on consolidating his fortune at the expense of the Argentinian people, while already setting his sights on Spain.”

Wed, 08/27/2014 - 15:15 | 5150638 Seize Mars
Seize Mars's picture

Inept? No, they're ept.
Having the government be in charge of your purchasing power means it gets stolen.
Future generations will wonder why we put up with this shit.

Wed, 08/27/2014 - 15:35 | 5150739 kevinearick
kevinearick's picture

Tammany Hall, Community Organizers in-Chief, & Membranes

Get a government check, get into public housing, and buy a government car (or Harley). Welfare is all there is at the end of an empire cycle, whether you work for Boeing, School, Hospital or Fed. That’s just the way it is. And the printing cycle has come full circle, again, back to Germany, which is playing last-to-lose better than others, again.

Dog’ll have the Beagles tree the bear, and ISIS is a derivative, new sh-show same as the old sh-show. Whether authority or stupidity came first is irrelevant. Bank prints for the ‘elite’ and legislature forms the credit gradient in the sewer line. The process goes round and round, until no one with experience remains, when rent to busy-work income peaks.

So, the pot growers have commoditized themselves and are trying to make their mortgage on the backs of renters, and the proffered solution is to print more money for the consumers, surprise.

Regardless of job, it’s always the same. The critters want privilege without responsibility, so the authority generated takes the privilege and sends the responsibility downhill, with objective-based management implementing best business practice, printing until all the resources are gone and the demographic boom busts.

Normally, there is an informal authority, with experience, which the majority turns to when the expected emergency arises, and then crucifies upon recovery. Turn your phone off, and you won’t have to worry about a call in the middle of the night, telling you what you already know, that the critters are at war, again.

You are much better off paying the critters to go play golf, where they can be politically correct together. You warn them, you show them, and then you let them learn for themselves. The ‘market’ measures pressure in the sewer line.

Don’t expect Jesus.

Regardless of what you let the critters steal, they are going to turn it into a weapon, to increase the toll at the booth.

Yes, membranes exist for a reason, transport.

Wed, 08/27/2014 - 15:37 | 5150749 JR
JR's picture

Jeffrey Sachs himself, an American economist and director of the Earth Institute at Columbia University and an expert on nations that had transitioned from communism to market systems, has labeled the IMF as, “the Typhoid Mary of emerging markets.”

And then there are the vultures who get their cover and protection from being insiders.

The Argentinian Debt Crisis in Historical Perspective

August 26, 2013

Brenna Owen

This article begins:

The Argentinian economy has long perplexed economists and political scientists studying 20th century Latin American development. At the turn of the 19th century, Argentina, a country both rich in agricultural resources and plagued by labor shortages, represented an attractive destination for central and southern European immigrants. By 1915, it had become the world’s tenth wealthiest country per capita, and its population had outgrown Canada and other ‘developed’ countries as immigrants arrived in droves.”

And concludes:

For a brief period of up until mid-1993, the country appeared to be recovering, as GDP and employment rates grew. Inflation was reduced and the value of Argentina’s currency preserved when the Argentinian peso was fixed to the USD, allowing for the free conversion of pesos into dollars at Argentinian banks. However, the fixed exchange rate allowed goods to be imported more cheaply, resulting in loss of industrial infrastructure and jobs. By 1999, a major economic downturn had materialized.

In addition to economic crisis, Argentina was plagued by corruption. The International Monetary Fund (IMF) continually lent the country money and extended its payment schedules, a situation that was taken advantage of by corrupt politicians who laundered money, evaded taxation and moved funds into offshore bank accounts. In 2001, the government of Argentina defaulted on a large portion of its public debt, roughly totaling 132 billion USD.

The 2001 default looms large over the Argentinian economy and its foreign relations today. Argentina’s latest loss in US courts over this default was announced just last week, when a federal appeals court ruled that Argentina must repay a group of bond investors the full amount of their defaulted loans.

Led by hedge funds Elliott Management and Aureluis Capital Management, this small group of investors constitutes about 7 percent of the total value of Argentina’s 2001 debt. The group refused to consent to a deal restructuring the debt at a discount, while Argentina was able to negotiate discounted repayment rates with a number of other creditors. Argentina has vowed not to pay off its loans leading up to 2001 at face value, considering the terms by which they were imposed. “We’re going to keep paying as we have until now, on the same terms,” stated Argentinian Minister for the Economy, who went on to call the court ruling “an attempt to bring the country back to [the economic hardship] of 2001.”

A number of the other 93 percent of creditors, some of whom agreed to accept less than 30 cents on the dollar, have expressed concern that Argentina’s refusal to pay hedge fund investors despite the court ruling could halt payment on restructured or renegotiated bonds as well. The IMF and other international organizations and governments have supported Argentina on the grounds that the ruling could set a precedent making the restructuring of unmanageable debt more difficult for struggling countries.

Close to a century after Argentina welcomed hundreds of thousands of immigrants into its culture and economy and seventy years after Juan Peron’s first presidency, the state of Argentina’s economy remains puzzlingly ambiguous. According to current Argentinian President Cristina Fernandez, the country’s economy rose 7.8 percent between May 2012 and May 2013. However, there’s reason to regard so optimistic a figure with suspicion, as the World Bank and other international financial powerhouses have often criticized the Argentinian government for a lack of credibility in its official statements on the country’s economy and finances.

President Fernandez’s government has been promoting economic growth via consumer spending, a policy that did prompt an upward trend in Argentina’s GDP between 2003 and 2011. However, President Fernandez herself tends to avoid talking about the prices of consumer goods; they have been rising by an average 21 percent annually over the last decade.

It is clear that inflation persists as a significant bane of the Argentinian economy. Through privatization and nationalization, military and civilian governments, populism, fiscal restraint, world recession and the post-war boom, inflation has never failed to rear its head. Until inflation is effectively tackled, it will continue to pose the danger of sending the Argentinian economy back to the brink.

Wed, 08/27/2014 - 15:51 | 5150826 ghostzapper
ghostzapper's picture

Drop the humans. Adopt Bitcoin. This ain't rocket science fellas.

I understand nations with such esteemed "power", "resources", and "wealth" resisting and/or delaying it but come on these clowns will never get it right. Just go to BTC now and deal with it.

Wed, 08/27/2014 - 16:01 | 5150910 JR
JR's picture

Could this be pay back for Argentina recently opening up diplomatic ties with Iran? 

Jewish Vulture Capitalists, Armed with US Court Ruling, Target Argentina; Country’s Bankruptcy Said Possible

Posted on July 27, 2014 by Richard Edmondson

[ Ed. note: No one seems to be posing this question, including the author of the otherwise very informative piece below, but I will pose it here: is the economic assault upon Argentina motivated strictly by greed on the part of a Jewish hedge fund capitalist, or are there other considerations at play as well? And if the latter, could it possibly involve pay back for Argentina's opening up of diplomatic relations with Iran, including in the matter of investigating the 20-year-old AMIA bombing?]

By Conn Hallinan

It is no surprise that right-wing Republican and hedge fund billionaire Paul Singer should be trying to wring hundreds of millions of dollars out of Argentina for a debt that Buenos Aires doesn’t really owe him. He screwed tens of millions of dollars out of poverty-stricken Peru and the Republic of Congo using the same financial sleight of hand. What may surprise people, however, is that key leaders in the administration of former President Bill Clinton are helping him do it.

Singer, who owns Elliot Management, a $17 billion hedge fund, is the leading “vulture investor”—a financial speculator who buys up the bonds of debt strapped nations for pennies on the dollar and then demands payment in full. When Argentina defaulted on its foreign debt in 2001, Singer moved in and bought up $48 million in bonds. He is now demanding that those bonds be paid at full-face value—$1.5 billion—plus interest and fees. It is a move that could derail Argentina’s long climb back into solvency, as well as undermine debt settlements worldwide.

A recent decision by federal District Judge Thomas Griesa in Manhattan may not only force Argentina to pay the vultures, it could unravel a 2006 debt deal between Buenos Aires and other creditors. Under the highly controversial principle of “pari passu” (“equal ranking among creditors”), if the vultures are compensated, so must all the other creditors, even those who settled back in 2006. That bill could reach $15 billion. Given that Argentina has only about $28 billion in foreign reserves, the tab could send Buenos Aires into a recession or force the country into bankruptcy.

The “sleight of hand” involves the fact that the countries the vultures prey on are not really in debt to creditors such as Singer and Eric Hermann of FH International Asset Management LLC. The hedge funds look for distressed countries, then buy their debt at bargain basement prices and sit on it. In the meantime, other creditors cut a deal to take a reduced payment on their bonds, which in turn helps improve the debtor’s economy and allows it to emerge from default.

That’s when the vultures sue, threatening to shut down outside aid programs, seize assets and freeze debtor nations out of international finance if they don’t pay up. Recent examples involving Singer include the Republic of Congo being forced to pay him $90 million on a $10 million investment. Singer’s investment of $48 million in Argentina’s debt would net him a 1,608 percent profit if Buenos Aires pays in full. Peru was similarly plundered.

It is more than dollars and cents at stake in all this. As journalist Greg Palast points out, “In Congo-Brazzaville [the capital of the Republic of Congo] last year, one-fourth of all deaths of children under five were caused by malnutrition.” That $90 million might have made a difference.

Singer’s rap sheet is consistent with hard-nosed vulture tactics. He is a leading Republican fundraiser, and a member—along with former Vice President Dick Cheney and Iraq War designer Richard Perle—of the right-wing Jewish Institute for National Security Affairs. He helped bankroll Swift Boat Veterans for Truth and is a bitter critic of “unpayable” social welfare programs, including Social Security, Medicare and Medicaid.

But the people who head up the main lobbying organization behind Singer’s current campaign, the American Task Force Argentina (ATFA), sit on the high councils of the Democratic Party and would likely be part of any Hillary Clinton administration.

The task force is essentially a front for several vulture funds, conservative and libertarian business groups, and agricultural organizations, like the U.S. Cattlemen’s Association, which would like to damage Argentina’s cattle export business. And its executive director is Robert Raben, former counsel for liberal Congressman Barney Frank, Democratic counsel for the House Subcommittee on the Constitution and assistant attorney general in the Clinton administration.

ATFA’s two co-chairs are Clinton’s former undersecretary of commerce, Robert Shapiro, and Clinton appointee to the United Nations Nancy Soderberg. Shapiro was an adviser to Bill Clinton’s 1992 presidential campaign and a senior adviser to Al Gore’s 2000 run for the White House. Soderberg, who served as a senior foreign policy adviser to Sen. Edward Kennedy, was also a member of Clinton’s National Security Council and an alternative representative to the U.N. with the title of ambassador. She is currently a Democratic Party activist in Florida and a member of the Council on Foreign Relations.

Raben, Soderberg and Shapiro have written numerous opinion pieces on Argentina using their Clinton administration credentials and, depending on the publication, have not always disclosed their lobbying ties. The three snookered the progressive Huffington Post into running opinion pieces until journalists Christina Wilkie and Ryan Grim uncovered their ties to ATFA. HuffPo subsequently removed the articles from its website.

Because of the huge debt burdens borne by nations from Latin America to Europe, the Griesa decision has opened up a Pandora’s box of trouble. A number of financial institutions and countries—including the International Monetary Fund and organizations representing 133 nations—have condemned the vultures or filed amici curiae briefs on behalf of Argentina, fearing that the decision could chill future debt negotiations and threaten economies trying to work themselves out of the red.

Given the ongoing hangover from the 2007-08 international meltdown, there is a lot of vulture food out there.

The key role being played by important Democratic Party activists in this cruel business—for there is no other word to describe taking money from countries struggling to emerge from debt and recession—may seem contradictory. And yet it was the Clinton administration that deregulated national and international finance and fought so hard for policies that ended up impoverishing some of the countries the vultures are now preying on.

In the 1990s, the Clinton administration pushed Argentina to privatize its state-owned industries, tie its currency to the dollar and institute the “Washington Consensus” of combining tax cuts with austerity. The result was economic disaster. From 1998 to 2002 Argentina’s economy shrank 20 percent and half the population fell below the poverty line.

Buenos Aires defaulted on its $100 billion debt in order to staunch the hemorrhage and pull the country out of an economic death spiral., In 2006, it negotiated a deal with 92.4 percent of its debt holders to pay 30 and 50 cents on the dollar. It was that deal that drew the vultures which swooped in, scooped up some of the debt and then refused to accept the settlement.

The 2001 default blocked Argentina from tapping into international finance to tide it over until the economy recovered, but policies to end austerity and increase government spending eventually did the job. The economy grew at an average rate of 6 percent from 2002 to 2012 and Argentina paid off the IMF in 2006 and the Paris Club countries (representing the world’s 20 largest economies) in 2014.

But the vultures now threaten to undo much of this.

The Obama administration has come down on the side of Argentina because it is worried that financial institutions will shift their business to London if “pari passu” is allowed to stand. Hillary Clinton, however, has been quiet on the subject of international debt and Argentina. Given that her husband’s administration helped push Argentina off the cliff, that is hardly a surprise.

What is disquieting is that Clinton and people such as Raben, Shapiro and Soderberg have an economic philosophy that many times marches in step with that of Wall Street.

According to The New York Times, the financial sector was the second largest contributor to Hillary Clinton’s 2008 run for the White House. She is also close to the center-right Third Way think tank that advocates cutting Social Security and tends to be allergic to financial regulations. It is hard to imagine a Hillary Clinton administration stacked with Wall Street insiders and hedge fund lobbyists coming down on the vultures.

Clinton’s most recent comment on the debt crisis was to complain that she and Bill were “dead broke” when they left the White House in 2001, rhetorically putting herself in the same boat as tens of millions of indebted people in the U.S. and around the world. “Dead broke” in Chappaqua, N.Y., is not quite the same as “dead broke” in Brazzaville, or in the growing number of homeless encampments around the U.S.

Argentina is currently negotiating a compromise with the vultures, who have Buenos Aires over a barrel. The country desperately needs outside financing to exploit its huge Vaca Muerta gas reserves and to underwrite agricultural exports. “These hedge funds are equipped with an instrument [the New York court decision] that forces struggling countries into submission,” says Eric LeCompte, executive director of the anti-poverty religious organization Jubilee USA Network.

Countries are wising up to the hedge funds. Many of them now require that a debt agreement include a collective action clause (CAC), in which a majority or two-thirds vote by creditors is binding on all and would block a handful of vultures from tying up agreements. Because they signal economic fragility however, the CACs will string out negotiations and may result in higher interest rates.

In the meantime, the vultures have backed Buenos Aires against the wall. At a minimum, Democratic candidates for the presidency should make it clear that they stand with Argentine President Cristina Fernandez de Kirchner. One way would be to endorse campaigns by organizations such as Oxfam and Jubilee to forgive foreign debt, and to make it clear they will also press for financial regulations to block vulture speculation.

In the world, vultures are estimable creatures. There is a “yuck” factor, but at least they wait until their prey are dead before making a meal of them, and they do clean up after themselves. The vultures of Wall Street prey on the living and leave behind an unspeakable mess.

Read more of independent journalist Conn Hallinan’s work at his blog, Dispatches from the Edge.

Wed, 08/27/2014 - 16:23 | 5151030 NEOSERF
NEOSERF's picture

Axel is clearly doing Christina and Christina is clearly doing bondholders.  Expect civil war in Argentina once the rest of the hot money leaves Argentina in 3...2....1....

Wed, 08/27/2014 - 17:40 | 5151180 RaceToTheBottom
RaceToTheBottom's picture

I kinda have to go with anyone who is against WS, especially when talking about debt.  I guess it is a bias, but they should have taken the risk into account.

Every country should pull a Iceland.

Wed, 08/27/2014 - 17:05 | 5151213 rwe2late
rwe2late's picture

The article is pro-bankster Acting-Man spin.

So, what is the real situation with regard to Argentina?

"Argentina is already foreclosed from international capital markets, so it doesn’t have much to lose by thwarting the US court system. Similar bold moves by Ecuador and Iceland have left those countries in substantially better shape than Greece, which went along with the agendas of the international financiers."

Wed, 08/27/2014 - 17:49 | 5151363 JR
JR's picture

A great find, rwe2late. 

Ah, the joy of global fianciers and interlocking megacorporations legally robbing the poor… As your article dated yesterday by Ellen Brown points out:

The Endgame: Patagonia in the Crosshairs

The deeper implications of that infernal debt cycle were explored by Argentine political analyst Adrian Salbuchi in an August 12th article titled “Sovereign Debt for Territory: A New Global Elite Swap Strategy.” Where territories were once captured by military might, he maintains that today they are being annexed by debt. The still-evolving plan is to drive destitute nations into an international bankruptcy court whose decisions would have the force of law throughout the world. The court could then do with whole countries what US bankruptcy courts do with businesses: sell off their assets, including their real estate. Sovereign territories could be acquired as the spoils of bankruptcy without a shot being fired.

Global financiers and interlocking megacorporations are increasingly supplanting governments on the international stage. An international bankruptcy court would be one more institution making that takeover legally binding and enforceable. Governments can say no to the strong-arm tactics of the global bankers’ collection agency, the IMF. An international bankruptcy court would allow creditors to force a nation into bankruptcy, where territories could be involuntarily sold off in the same way that assets of bankrupt corporations are.

For Argentina, says Salbuchi, the likely prize is its very rich Patagonia region, long a favorite settlement target for ex-pats. When Argentina suffered a massive default in 2001, the global press, including Time and The New York Times, went so far as to propose that Patagonia be ceded from the country as a defaulted debt payment mechanism...

Wed, 08/27/2014 - 17:56 | 5151393 Atticus Finch
Atticus Finch's picture

I thought the article was lacking any discussion about loans from international banks as having any factor in the discussion. How can any analysis be made without a serious discussion of accepting loans in currencies other than one's own and the horrensous consequences this has made on numerous countries throughout the world.

Wed, 08/27/2014 - 18:46 | 5151584 Redstone
Redstone's picture

That’s exactly right. When the corruption of the IMF -the Fed - and the special relationship they have with their favorite oligarchs are not part of a default story then a major part of the root causes are left out
With the expanded confusion and litigation surrounding issues of credit, corruption plays a huge part in punishment of innocence. Such was the case centuries ago in England where proper rules had to be clearly set down for protection against deception.
Consider this final dictate in 1215 of the Great Charter, the Magna Carta:
“If anyone who has borrowed from the Jews any amount, great or small, dies before the debt is repaid, it shall not carry interest as long as the heir is under age, of whomsoever  he holds; and if that debt falls into our hands [the Crown], we will take nothing except the principal sum specified in the bond.”
Also: “And if a man dies owing a debt to the Jews, his wife may have her dower and pay nothing of that debt; and if he leaves children under age, there needs shall be met in a manner in keeping with the holding of the deceased; and the debt shall be paid out of the residue, saving the service due to the lords. Debts owing to others than Jews shall be dealt with likewise.”

Wed, 08/27/2014 - 23:13 | 5152476 dkjm
dkjm's picture

Argentina has tried to pay its restructured debt and has been prevented from doing so by a judge who has essentially declared that there is no risk in bonds by requiring 100% payment. This can hardly be described as welshing on its debt. The illegal action here seems to be the judges' decision to create a new class of bonds that are risk free.

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