Should Argentina Default On Its Debt?

Should Argentina Default on its Debt?

  • Yes, she should default

    Votes: 6 17.1%
  • No, she should NOT default

    Votes: 16 45.7%
  • There is a "Third Way"

    Votes: 7 20.0%
  • No Opinion

    Votes: 6 17.1%

  • Total voters
    35
Your vulture shirt

You want to buy a new shirt, and in the street you see a shop, which advertizes: "Shirts. 75 percent off!"

You enter the shop, and find a shirt you like. The shop owner says "the price was 100, and with 75% off you get it for 25 - but that is without the usual guarantee".

Do you pay 25 or do you say "no, no I'll pay full price, 100, and without the usual guarantee"?

Well, do you pay 100 - or are you a vulture, who buy your shirt at the price offered?

The hedge funds bought assets at the offered price somebody else wanted to sell because they had given up on having Argentina fullfill its obligations.

Was the "obscenely low rate" the Vulture funds paid less than the obscenely low rate paid by Argentina to the other creditors?
 
Indeed, Griesa is a Republican... And Singer finances A LOT Goppers through offshore places (He himself his one).

Not the first time too Griesa settles in favor of private interests (big corps) against the public interest (we, you, I), even in the US I believe?

Argentina has honored all the payments since the debt restructuration. It is also said that Griesa got mad because his vacations were interrupted by this? WTF???
Oh, here we go: judge Griesa is corrupt. An attempt at character murder without any evidence.

Although Argentina continues to argue that the restructurings were negotiated solutions, they were not mutually agreed ones.
Bondholders had to accept or reject the offers with the alternative being the promise of no restitution at all.

Argentina has honored all the payments on a "take it or lose" basis.
 
AP take on Argentina's debt situation:

Argentina's 13-year fight with creditors erupted in U.S. courts last week, and the results were messy.
Argentina had asked the U.S. Supreme Court to overturn a lower court's ruling that it must pay $1.5 billion to hedge funds that own bonds the country had defaulted on back in 2001. The Supreme Court refused to hear its appeal — a victory for the hedge fund investors whom Argentina's president, Cristina Fernandez, calls "vultures."
Fernandez had said Argentina couldn't afford to pay off the hedge funds while also making regular interest payments to other lenders. Late last week, signs of a possible resolution emerged. Fernandez said she will seek a U.S. judge's support for resolving all of Argentina's unpaid debts in one grand bargain.
But the time for a resolution is running out. Argentina has one week before it's supposed to make an interest payment to its other bond holders on June 30. The U.S. court said that if Argentina made those interest payments, it also had to give the plaintiffs their due. And if Argentina refuses to comply, the ruling bars U.S. banks from handling the government's debt payments.
One misstep and Argentina could slide toward another default, an event likely to spread trouble beyond its shores.
Just how did Argentina wind up in this mess? Here are some questions and answers:
Q: What happened after the Supreme Court turned Argentina down?
A: A lot. The Supreme Court also decided to let bondholders subpoena banks in U.S. courts to track down Argentina's assets abroad. The decisions drove the country's Merval stock index down 11 percent last Monday.
The next day, the rating agency Standard & Poor's cut Argentina's rating further into junk territory — to CCC-, S&P's lowest grade for any country.
For most countries, the rating agency's move would be a harsh blow. It would inflate borrowing costs and make it harder to finance budgets. But Argentina's troubles are so well-known that the downgrade came as little surprise. Argentina hasn't borrowed from the bond markets since its default in 2001.
Q: Who are the players?
A: In one corner, Argentina's government. In the other, a group of investors led by NML Capital, a subsidiary of Elliot Capital Management, run by billionaire Paul Singer. Singer, a lawyer by training, has in the past successfully sued the governments of Peru and the Republic of the Congo to make good on their bonds. In this case, NML and other funds bought bonds left from Argentina's default in 2001.
Q: What do they want?
A: When the hedge funds bought the defaulted bonds, they joined the ranks of Argentina's creditors. Now, like lenders everywhere, they want the borrower to repay its debts on the original terms.
The problem is, other creditors had already agreed to cut Argentina a break in 2005 and 2010 by swapping their bonds for new ones worth less. This helped Argentina's government slash its debts.
The bonds acquired by Singer's group were among those left over. In 2012, U.S. District Judge Thomas Griesa in New York ordered Argentina to pay the holdouts. They're now owed $1.5 billion in principal and interest.
Q: Why is a US court telling a foreign government what to do?
A: When a big business goes bust, it winds up in bankruptcy court. By contrast, sovereign countries have no dedicated international court to help them strike deals with creditors. So in agreements involving bond sales, language typically stipulates that any legal battle must occur in one of the two biggest financial capitals: New York or London. "That's where the money is," said Anna Gelpern, a professor of international law at Georgetown University and an expert on government debt.
Q: Why does this matter?
A: One worry is that forcing Argentina to pay the holdouts would set a dangerous precedent. The thinking is that it could encourage bondholders to play tough when struggling countries try to restructure their debts. Last week, the International Monetary Fund warned that the Supreme Court's decision could have far-reaching repercussions. "We are concerned about possible broader systemic implications," the IMF said.
Another concern is that the ruling upends the usual order of things. In the past, when some creditors had to take precedence over others, sovereign governments typically came before investment funds, said Mark Blyth, a professor of international political economy at Brown University.
"The old hierarchy really no longer applies," he said.
In negotiating with lenders, governments had the threat of default on their side. Creditors accepted restructuring deals in the certainty that they would at least receive something. Now, it seems, "the courts are taking away the possibility of default," Blyth said. "It's part of this wider push to put investors ahead of everyone else."
Q: How big is Argentina's economy?
A: It's South America's second-largest behind Brazil, according to the IMF. The IMF puts the country's economic output for this year at $404 billion, or $9,639 a person. By contrast, the United States has a $17 trillion economy, or $55,000 a person, according to the IMF's data.
Q: Argentina isn't poor. Why doesn't the government just pay off the holdouts and be finished with them?
A: It's not that simple. Argentina is supposed to make an interest payment to bondholders June 30, and the judge's verdict requires it to pay the holdouts their $1.5 billion at the same time. If that were the entire bill, it wouldn't be a problem.
"$1.5 billion isn't going to break Argentina," said Siobhan Morden, head of Latin American strategy at the investment bank Jefferies. "The problem is all the other litigants that could join in."
Paying the hedge funds in full would likely trigger lawsuits from other bondholders demanding to be paid on similar terms. Buenos Aires estimates that the liability could run up to $15 billion. Morden said it could approach $20 billion.
With nearly $29 billion in foreign reserves, Argentina appears to have the money to pay its bills. But those reserves include loans to other countries, deposits with the IMF and other assets that aren't easily used. Take those away, and Argentina has roughly $16 billion on hand.
Troubled countries often find bond investors willing to lend to them to pay other creditors. But Argentina has been locked out of the bond markets for more than a decade. Some investors would probably step up to lend it money — at painfully high interest rates.
"You can see why they have some financial reservations about paying the holdouts," Morden said.
Q: How are traders treating Argentina?
A: They're keeping a safe distance. Judging by recent trading, bond buyers seem to think another default is imminent. In the market for credit default swaps, Argentina's government debt is among the most expensive to insure in the world.
To insure $10 million in Argentine bonds for five years, investors must pay $4.4 million up front, then an additional $500,000 a year, according to Markit, a data provider. Those figures imply a 71 percent chance that Argentina will default within five years.
Taking out insurance on debt from Brazil looks cheap in comparison. The cost to insure Brazil's debt runs $139,000 for five years, and investors have to pay nothing up front.
Q: So if Argentina defaulted on its debts again, would it spread turmoil to other countries?
A: Not immediately. Argentina is already isolated from global credit markets, the usual route for financial turmoil to spread, because traders have been wary of just such a threat.
Over the long term, however, a default could still cause problems for other countries. Gelpern said her concern is that Argentina's experience would make it harder for smaller countries to emerge from trouble. "Other weaker countries can't afford to wage fights for 13 years," she said


One figure to keep in mind...!! from above article

[background=rgb(252, 252, 252)]..."Those figures imply a 71 percent chance that Argentina will default within five years."[/background]
 
Don Alberto is a National Hero a freedom fighter, in the General San Martin tradition, who fought the de facto dictatorships...
 
One figure to keep in mind...!! from above article

[background=rgb(252, 252, 252)]..."Those figures imply a 71 percent chance that Argentina will default within five years."[/background]

Argentina should seek cash infusion from the PRC, why not, the French took in US$20 bill plus. A few weeks ago,
the Brits borrowed excess of US$25 bill to finance the High velocity train system and allowing PRC to operate it.
 
Argentina should seek cash infusion from the PRC, why not, the French took in US$20 bill plus. A few weeks ago,
the Brits borrowed excess of US$25 bill to finance the High velocity train system and allowing PRC to operate it.
You seem to assume the Chinese are complete dimwits :)
Nobody in their right mind will lend Argentina anything unless the money is paid "back" in advance.
 
Q: How big is Argentina's economy?
A: It's South America's second-largest behind Brazil, according to the IMF.
The IMF is out of touch with South American reality - why am I not surprized?

The second-largest South American economy is Colombia, which is currently growing by 6.4% while Argentina's grew a modest 2.9% in 2013 and contracted 0.2% in 2014 Q1.
 
Invoke pari passu clause for a ratable payment which will insure a default with the settled bond holders. Makes sense to me. Turn those screws as tight as you can Singer.

Once upon a time there was a law in New York State known as the "Champerty Doctrine" which basically makes it illegal to purchase a distressed bond, debt with the sole purpose of bringing a lawsuit. Well, old Singer about lost a case with Peru over this pesky New York law. With the help of of his good old boys, Giuliani and Spitzer, he got it amended by the New York legislature. Champerty now only applies to debts that are less than $500k. We cannot impede these pricks in anyway shape or form. I like a level playing field, it is the American way. Nothing like having more failed States to keep these guys in business.
 
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