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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsArgentina fears new crisis as vultures circle after US supreme court ruling
Argentina may be liable for up to £11bn owed to so-called 'vulture funds', after court order that investors be repaid in full.
Argentinians, battered by decades of apparently cyclical economic crises, fear a new one following a US supreme court ruling this week that could make the country liable for up to $15bn (£11bn) owed to so-called "vulture funds".
The vultures, led by a US billionaire, are mainly hedge fund investors who snapped up Argentinian bonds at rock-bottom prices following the country's $95bn default on its foreign debt in 2001. The court in Washington DC has ordered that they be repaid in full and that ruling threatens a new default, possibly within weeks.
Argentina descended into chaos after the 2001 financial crisis, then the largest in world history. "My husband and I were never the same afterwards," said María Inés Ochoa, a schoolteacher from the small city of Funes in the central province of Santa Fe.
Violence erupted across the nation after Argentina declared itself unable to meet its payments in the last week of December 2001. The widespread rioting, supermarket looting and the death of young social volunteers by police fire took their toll on Ochoa. "That's when I had my first panic attacks, which completely affected my life afterwards and even today."
http://www.theguardian.com/world/2014/jun/18/supreme-court-orders-vulture-investors-repaid-argentina
Nuclear Unicorn
(19,497 posts)sabrina 1
(62,325 posts)Nuclear Unicorn
(19,497 posts)badtoworse
(5,957 posts)When you sell bonds, have you been scammed if the bond holders expect you pay interest and repay principal?
What is really bullshit on DU is the assumption that anytime a borrower can't repay a loan, they've been screwed by the lenders. There really are such things as deadbeat borrowers and Argentina is a great example.
sabrina 1
(62,325 posts)happened in Argentina, what is happening in Greece, what happened in Iceland, what happened in Ireland, Portugal, not to mention all the Third World countries they were 'operating' in with their financial scam BEFORE they started on the Second, and now the First World.
You've heard the phrase 'selling your country down the river'. Well you can't do that if you don't have vultures waiting in the wings to buy what your corrupt government is selling.
I hope they all lose everything, which is unlikely, but not paying them seems like some form of justice to compensate for the people of Argentine's losses which have not been repaid. Pay back the people FIRST. Disgusting, all of it.
Nuclear Unicorn
(19,497 posts)It defaulted on its repayment of those bonds due to the consequences of its own actions. Investors attracted by the interest rates Argentina offered at higher rates paid the original bond holders pennies on the dollar but required the bonds be issued through a US jurisdiction. Argentina agreed. Argentina also continued to drive its economy into the ground so it failed again to make good its repayment schedule.
If the situation is as diabolical as you suggest than Argentina has elected to forego numerous opportunities to withdraw itself from the machinations of the plotters.
"Somebody wrote a book!" is not an excuse for institutions that are supposed to defend law to become thieves that steal billions of dollars.
Fred Sanders
(23,946 posts)high interest was the risk of default. Without that risk they could not have been bought so cheap.
The bond holders want to have their cake and eat it too by retroactively removing the risk they took on.
Demo_Chris
(6,234 posts)sabrina 1
(62,325 posts)along with Argentina's corrupt leaders who enabled the scam that toppled their country's economy.
snooper2
(30,151 posts)Igel
(35,191 posts)When Arg defaulted, their value plummeted.
This is a frame of reference problem. The issue of the bond--Argentina--has one frame of reference. The initial holder of the bond has a second one. And the buyers of the bonds when Arg was defaulting have a third. All the frames of reference are equally valid. Arg pays the same interest rate it agreed to and agrees to buy back the bond at the same price, even as the initial holder takes a bath in losing money and the rebuyers of the bonds have a third--one with a very high rate of return. The moderate Arg interest rate and the very high rebuyer interest rate turn out to be the same amount of money.
Take some bond my mother owned in 2008. I forget who issued it. It had been issued at a normal interest rate, and that's what the issuer "saw". Let's say she had a $50 bond issued at $2 in interest per year, for a total of 4% interest.
At some point it had increased in value, so the interest rate my mother perceived was lower. It was worth $60 but still only paid $2 in interest. That's less than 4%, if she'd sold it at that price.
Then the bond became nearly worthless and was worth $1. It still, nominally, paid $2/year, for a return of 200%. But the issuer defaulted and failed to pay. It still had a face value--at the end of so many years it would be recalled or redeemed. It was an irritation in the account, I was closing it, so I sold it all.
Somebody bought it. That person would have bought it for $1 in hopes that one day it would be redeemed at face value (giving him $50 for his $1 investment) and along the way produce $2 in interest per year. His locked-in rate of return was 200%. Typically a bond is worth pretty much exactly face value just before it's due to be redeemed unless there's some problem with the issuer. The risk was there when he bought the bond: Would the issuer go broke and never pay another cent of interest and ultimately not redeem the bond? Or would the buyer have to forgo some interest payments? Either way, there's risk. Whatever happened in the years after I sold the bond has no effect on the risk he took.
Note that all of the increases and decreases of that particular bond are invisible to the issuer. The issuer is on the hook straight along for the initial agreement: Pay out so many $ per year in interest and redeem the bond when it's due.
Argentina has to pay no more interest than they initially agreed to. If the real interest rate increased as a result of the bond's devaluation, it's not reflected in the amount that Arg has to pay. Arg just wanted never to have to repay the debt. It considered it unfair--a previous regime's debt, a millstone around its neck, a problem to be disposed of (and all the better if it hurts some danged oppressive ferner). But since they continued the same government in the same country, they're stuck (under the relevant laws) with its debt.
Fred Sanders
(23,946 posts)hfojvt
(37,573 posts)If they had, themselves, bought up many of the bonds when they were selling for $1.
Nuclear Unicorn
(19,497 posts)The other option is to print money leading to hyper-inflation.
Fred Sanders
(23,946 posts)CREDIT MARKETS
Argentina Will Negotiate With Creditors Holding Defaulted Bonds
Its Lawyer Tells U.S. Judge That Officials Will Go to New York; Argentine Bonds Surge
The bond prices are at 3 month lows, hardly a crisis of huge proportions it is made out to be.
Nuclear Unicorn
(19,497 posts)...for bonds they had already defaulted on once. How many times do you think they be able to take billions of dollars and yell, "SUCKERS!" before people decide to stop lending them money?
And then what?
I've no money to invest but if I did I wouldn't put it in that money hole.
Fred Sanders
(23,946 posts)Nuclear Unicorn
(19,497 posts)COLGATE4
(14,732 posts)Argentine government.
Laelth
(32,017 posts)-Laelth
Moliere
(285 posts)... A foreign country's debt obligations? Argentina should tell those hedge fund dicks to go eff themselves. Iceland's been a wonderful role model on this.
Fred Sanders
(23,946 posts)poor people in a poor country, is that what this site now?
neverforget
(9,433 posts)Some of the comments are
To some, the money owed is more important than the health and welfare of a community or a country.
Fred Sanders
(23,946 posts)hack89
(39,171 posts)since their governments were so unstable and no one trusted the Argentine courts to enforce bonds against their own government. The Argentine bonds were issued in America under the jurisdiction of US Law.
Nuclear Unicorn
(19,497 posts)hack89
(39,171 posts)sabrina 1
(62,325 posts)cause these greedy opportunists to think twice before taking advantage of other people's disasters.
Go read about Argentina and what caused the collapse of their economy.
Iceland handled its 'unstable' economy exactly RIGHT. They threw out the corrupt government which was aligned with crooked bankers and Wall St. speculators, arrested them and their banker friends, and is the ONLY economy that has survived the vultures who preyed on their economies.
Argentina needs to do the same thing, start investigations of those who caused their government's collapse, then let's see who is owed money and who is not. I would first in line are the people of Argentina themselves.
And we're still waiting for some serious prosecutions here in this country of those who trashed OUR economy. They've taken their corrupt practices around the world and destroyed millions of lives. They should be grateful that so far, they got away with it. So Far!
hack89
(39,171 posts)Last edited Thu Jun 19, 2014, 07:41 AM - Edit history (1)
It predates their economic crisis by 20 years.
If they ever want access to global financial markets then they will have to honor their debts.
sabrina 1
(62,325 posts)destroyed by those Global Markets to stay out of them from now on until THE GLOBAL MARKETS start holding their Corrupt, thieving Bankers and Wall St crooks accountable.
They're not too popular around the world these days, dating back to when WE DEREGULATED everything so they became free to cheat and steal and con nations like Argentina among others.
Let the Global Markets get their act together because frankly imho at this point in time, they are way too corrupt to trust anyone's money with
sabrina 1
(62,325 posts)economy. I am thrilled they are losing. When you bet on the destruction of human lives, you take your chances. People here either have no clue what happened in Argentina, or worse, and hopefully it's the former, they support the 'Shock Doctrine' policies that have destroyed so many lives while the rich get richer, acting like vultures, which is what they are. I have zero sympathy for greedy vultures who profit from other people's misfortunes, caused by corrupt politicians and their cohorts from Wall St.
The Magistrate
(95,237 posts)The idea that people who by securities with high risk premium, and engage in speculation, should be immune from loss is not only risible, it is an afront to honest investing.
sabrina 1
(62,325 posts)Nye Bevan
(25,406 posts)but the most likely outcome is that a mutually beneficial settlement will be negotiated. Either that, or they will try to distract people's attention by invading the Falkland Islands again.
COLGATE4
(14,732 posts)will probably dissuade them from trying the military venture in the Falklands again.