Alberto,
You seem to have a weird concept of the "morality" of investing. Not even bringing the "vultures" into this, the original bondholders instead of buying US-TBills at 2.5% decided to go for the big money instead and invest in risky Argentina. The reason why they got an interest rate almost triple as high was because countries like Argentina have much higher chances of defaulting.
Higher interest comes from higher risk. There's no crying in baseball.
Investment has very little to do with morality and everything to do with risk (well unless you're JP Morgan). I have no truck with your crocodile tears for the investors who had to take a haircut and are now crying about Argentina's "moral obligations". If they wanted something risk-free they should've bought FDIC-backed CDs.
You seem to be under the weird misapprehension that the
more than 500,000 bond holders were somehow financial experts, with a clear understanding of risk assessment and management.
Retail investors owned some 44% of the value (36 000 million US$). Retail investors are Guiseppe and Gertrude who wants to get a higher yield than they get in a bank, and the 90.9% who were
not US Americans wouldn't know that US-TBills existed and how to buy them, and besides, why should they when most of them lived in Europe. The world is not the United States, which has less than 5% of the world's population.
Guiseppe and Gertrude would never have heard of US-TBills, but they read in the newspapers how Argentina was an up-and-coming developing country now that it had become a democracy.
Argentine bond holders: 38.4%
Italian bond holders: 15.6%
Swiss bond holders: 10.3%
German bond holders: 5.1%
Japanese bond holders: 3.1%
Netherlands bond holders: 1.0%
US bond holders: 9.1%
(Unidentified bond holders: 12.8%)
Ask yourself why Argentina didn't buy the bonds at "outrageously low rates" when the hedge funds started buying them at "outrageously low rates".
The simple answer can be deduced from Argentina's financial dispositions between 1999 and 2002.
When this crisis hit, the Argentine government’s strategic planning for default was already well advanced. To insulate itself from efforts by foreign creditors to arrest Argentine assets abroad, the government had secretly moved its reserves and other financial assets from Deutsche Bank in New York to BIS (Bank of International Settlements) or to banks in Argentina, where they were protected against creditors. It had also set up special trusts and other intermediary arrangements to carry out its offshore payments and arranged to pay government employees abroad through direct deposits in Argentine banks or payments sent in diplomatic pouches.
In spite of the obvious fact, that Argentina clearly was planning to cheat the investors of their money, they issued new bonds for huge amounts.
Of the US$ 81 836 million in defaulted bonds 51% (41 473 million) were issued during the period 1999 to the default in 2002.
Argentina had no intention of paying its debt, but increased it constantly, issuing about half of the bonds after it was clear to the Argentine government, that they were going to default.
Instead of buying their own bonds at "outrageously low rates", Argentina laughed smugly because they had no intention of ever paying those (like Hank van Blokland who had invested US$ 39,200 and Ricarda Böhme with her US$ 61,100), who could not afford to accept Argentina's "take it or lose".
Talk about morality.
