Should Argentina Default On Its Debt?

[Rich One]

Yes, but you would need to change your nickname to "Very Rich One"

ECONOMÍA
El dólar libre sube 30 centavos: llega a $12,55


Dólar oficial[background=rgb(252, 250, 249)]: $ 8,135[/background]
Dólar ahorro: $ 9,76
Dólar Blue: $ 12,55
Dólar Turista: $ 10,98
Contado con Liqui (promedio bonos): $ 10,72
Contado con Liqui (promedio acciones): $ 10,68
Dólar MEP: $ 11,41
Euro oficial: $ 11,27
Euro blue: $ 16,86
Euro turista: $ 15,21

 

[EdRooney]

There's a piece of your puzzle that your missing Chet: the "Vulture" funds buy the bonds after the country has already defaulted on them, with the idea that they have enough lawyers/lobbyists to get a favourable legal solution. It's not like Elliot bought the bonds in good faith in Argentina would pay them. Thus they are called "vultures" because they swoop in when their prey is nearly dead and try to salvage something from it that other animals wouldn't touch.

Secondly, as we discussed in another thread, the reason why people wanted to buy Argentine bonds instead of say German ones is that Argentine ones pay a much higher interest rate because there is a higher risk that Argentina would default. If those investors wanted some kind of rock-solid guarantee that they would get their money back, they should have invested in something that paid less interest but which was more secure.

I think you're making this about morality, when it's not; it's about how much risk investors are willing to take.

 

[ARbound]

I don't think this is as clear cut as all of us think/want/hope it is.

There are what? Basically 3-4 ways of going forward?

1) Argentina defaults on it's sovereign debt (again) except this time 100% and goes full monty, real bankruptcy with no
side payment agreements. Hyper interest loans are the only ones available, and the IMF loans cash conditionally on slashing
plans and subsidies.

2) Argentina somehow continues to make the 92% payments via a 3rd country or directly, outside of US Jurisdiction. The
holdouts continue to get nothing, but in return Argentina is cut out of a majority of the world's (US) banking system. The peso
officially is devalued and the blue skyrockets.

3) Argentina pays the holdouts too in addition to making the 92% payments somehow without the 92% getting greedy/pissed.
Access to international loans remains/expands, but the BCRA and AFIP are forced to limit further the dollars available officially
and possibly try and move on the blue.

4) Argentina strikes a grand bargain with the 92%, the holdouts, and the Judge in NYC that prevents a bankruptcy and default,
and keeps access to international loans.

Of all the scenarios I've mentioned, I personally think Argentina will try to do it in the following order: 4, if that fails they will move to
2, if that fails then 3, then finally, if it doesn't work/is too painful, 1.

I may be way off on this, but at least while Cristina is queen president I don't see her wanting her legacy to be "The Kirchner that grew
the country and the Kirchner that declared bankruptcy".

I think we can all agree that as much as everyone wants to dethrone her, I really wouldn't want to take her seat given the issues being
faced today.

 

[Gringoboy]

Apparently, Judge Griesa has granted the lawyers an audience for this afternoon at 1500.

 

[Chet]

There's a piece of your puzzle that your missing Chet: the "Vulture" funds buy the bonds after the country has already defaulted on them, with the idea that they have enough lawyers/lobbyists to get a favourable legal solution. It's not like Elliot bought the bonds in good faith in Argentina would pay them. Thus they are called "vultures" because they swoop in when their prey is nearly dead and try to salvage something from it that other animals wouldn't touch.

Secondly, as we discussed in another thread, the reason why people wanted to buy Argentine bonds instead of say German ones is that Argentine ones pay a much higher interest rate because there is a higher risk that Argentina would default. If those investors wanted some kind of rock-solid guarantee that they would get their money back, they should have invested in something that paid less interest but which was more secure.

I think you're making this about morality, when it's not; it's about how much risk investors are willing to take.

Agree that buying up the bonds after default is high risk and in fact the risk taken on by investors is often an overlooked bit in all the discussion of financial markets.
I don't think you can really take all the 'moral' issue out of this.
Paying off actual vultures is creating a moral hazard (something we already have in great excess). Its right in there with bailing out banks - imo.

 

[dennisr]

A real ugly part of this thing is all foreign assets of Argentina are theoretically up for grabs to satisfy the Vulture claim. Supreme Court allowed the predators to go on a mining expedition for assets. This thing puts the YPF/Repsol deal in jeopardy to just name one. Lot of worldwide entities have skin in this thing. Do not know what the solution is but leaving this thing up to one judge seems a bit preposterous at the moment. Thing will take on a life of its own. Would suggest the IMF get involved but Argentina blames them for about everything and anything and refuses to deal with them. Somehow Ireland and Portugal were able to work with them but Argentina, no f.. way. So many missteps.

 

[ajoknoblauch]

Apparently, Judge Griesa has granted the lawyers an audience for this afternoon at 1500.

Doesn't sound confrontational enough for Argentina.

 

[sleslie23]

This poll was a test in disguise of the economic literacy of BAexpats. You failed.

For example, CFK hinted at a third way out of this debt crisis. I put in a trick question as to how many people believed in a third way. And if you did believe in a third way, what exactly is it? More than 30% voted for a third way - not one explained what the third way is. Not one!

Those that voted for a third way are perhaps expecting a unicorn flying across the sky with a rainbow shooting out of its ass to come save Argentina.

For those who voted for a third way, your score: a big fat F.

http://en.wikipedia.org/wiki/False_dilemma

 

[ArielFabian]

Who is responsible for Argentina's Debt Problems?
All Argentines
--------------------------------
Is an Argetninean toddler responsible for the debts? Do you think Favaloro who helped in saving millions of lives was responsible for the debts?

I do not think it is a good idea to blend nationality, corruption and responsibility here.

 

[ajoknoblauch]

Who is responsible for Argentina's Debt Problems?
All Argentines
--------------------------------
Is an Argetninean toddler responsible for the debts? Do you think Favaloro who helped in saving millions of lives was responsible for the debts?

I do not think it is a good idea to blend nationality, corruption and responsibility here.

In a strictly legal sense, all Argentines are responsible. Whether that's fair or not is another question entirely.