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dipsydoodle

(42,239 posts)
Wed Jun 18, 2014, 07:17 PM Jun 2014

Argentina 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

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Argentina fears new crisis as vultures circle after US supreme court ruling (Original Post) dipsydoodle Jun 2014 OP
Repaying borrowed money? That's just crazy talk! Nuclear Unicorn Jun 2014 #1
When you are caught in a scam you are not obligated to pay the scammers. sabrina 1 Jun 2014 #18
What scam? Nuclear Unicorn Jun 2014 #20
So what was the scam? badtoworse Jun 2014 #23
Shock Doctrine. If you have not read Noami Klein's book you should. Then you will understand what sabrina 1 Jun 2014 #25
Argentina sold bonds by choice to cover debts incurred by its own policies. Nuclear Unicorn Jun 2014 #30
The bonds were bought for a song, and thus carried very high interest return. The risk for this Fred Sanders Jun 2014 #2
No, they just want the cake they are owed. nt Demo_Chris Jun 2014 #4
They are owed nothing, except maybe a thorough investigation and some long overdue prosecutions sabrina 1 Jun 2014 #19
Maybe Maduro can give them some insight how to run a economy for the PEOPLE! snooper2 Jun 2014 #35
Who knows what interest rate they were issued at. Igel Jun 2014 #8
Nice explanation. And most of the bonds are to be repaid in 2033. Fred Sanders Jun 2014 #14
and they sort of could have easily done it hfojvt Jun 2014 #33
Their choice is to repay the bonds or lose the ability to run deficits. Nuclear Unicorn Jun 2014 #11
Well, that would be a hyper exaggeration: Fred Sanders Jun 2014 #13
"Negotiate" is spin-speak for pay pennies on the dollar... Nuclear Unicorn Jun 2014 #15
Well, that is your choice. Many choose to buy the bonds because of the higher interest rate. Fred Sanders Jun 2014 #16
P. T. Barnum must feel all warm and fuzzy inside. Nuclear Unicorn Jun 2014 #17
There's a sucker born every minute - says the COLGATE4 Jun 2014 #29
k&r for exposure. n/t Laelth Jun 2014 #3
I'm sorry but WTF does SCOTUS have to do with... Moliere Jun 2014 #5
People on DU defending the vulture capitalists and want them kept fed and fat, over the millions Fred Sanders Jun 2014 #6
Did you see the thread on cutting off water in Detroit? neverforget Jun 2014 #9
I did not read it. Seemed too comical to bother with. Fred Sanders Jun 2014 #10
The Argentine bonds were issued in America under the jurisdiction of US Law hack89 Jun 2014 #7
I presume there is some form of security kept here that the Argentinian government wants back? Nuclear Unicorn Jun 2014 #12
Not that I know of nt hack89 Jun 2014 #31
Know anything about why Argentina was so unstable? I hope the vultures get nothing, maybe that will sabrina 1 Jun 2014 #22
Argentina has issued their bonds in NY since 1976 hack89 Jun 2014 #32
Maybe the Global Markets have become so corrupt it's better for nations who were sabrina 1 Jun 2014 #34
Exactly! I can't believe I'm seeing people here defending the vultures who destroyed Argentina's sabrina 1 Jun 2014 #21
I Agree, Ma'am: The Vulture Funds Should Not Get One Thin Dime The Magistrate Jun 2014 #24
Thank you! n/t sabrina 1 Jun 2014 #26
Lots and lots of huffing and puffing from Argentina, Nye Bevan Jun 2014 #27
I think their last experience with the British COLGATE4 Jun 2014 #28
 

badtoworse

(5,957 posts)
23. So what was the scam?
Wed Jun 18, 2014, 10:52 PM
Jun 2014

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)
25. Shock Doctrine. If you have not read Noami Klein's book you should. Then you will understand what
Wed Jun 18, 2014, 11:01 PM
Jun 2014

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)
30. Argentina sold bonds by choice to cover debts incurred by its own policies.
Thu Jun 19, 2014, 06:26 AM
Jun 2014

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)
2. The bonds were bought for a song, and thus carried very high interest return. The risk for this
Wed Jun 18, 2014, 07:35 PM
Jun 2014

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.

sabrina 1

(62,325 posts)
19. They are owed nothing, except maybe a thorough investigation and some long overdue prosecutions
Wed Jun 18, 2014, 10:40 PM
Jun 2014

along with Argentina's corrupt leaders who enabled the scam that toppled their country's economy.

Igel

(35,191 posts)
8. Who knows what interest rate they were issued at.
Wed Jun 18, 2014, 09:02 PM
Jun 2014

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.

hfojvt

(37,573 posts)
33. and they sort of could have easily done it
Thu Jun 19, 2014, 02:32 PM
Jun 2014

If they had, themselves, bought up many of the bonds when they were selling for $1.

Nuclear Unicorn

(19,497 posts)
11. Their choice is to repay the bonds or lose the ability to run deficits.
Wed Jun 18, 2014, 10:17 PM
Jun 2014

The other option is to print money leading to hyper-inflation.

Fred Sanders

(23,946 posts)
13. Well, that would be a hyper exaggeration:
Wed Jun 18, 2014, 10:20 PM
Jun 2014
http://online.wsj.com/articles/argentinas-bond-prices-fall-to-three-month-lows-1403104194

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)
15. "Negotiate" is spin-speak for pay pennies on the dollar...
Wed Jun 18, 2014, 10:26 PM
Jun 2014

...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.

Moliere

(285 posts)
5. I'm sorry but WTF does SCOTUS have to do with...
Wed Jun 18, 2014, 07:46 PM
Jun 2014

... 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)
6. People on DU defending the vulture capitalists and want them kept fed and fat, over the millions
Wed Jun 18, 2014, 08:14 PM
Jun 2014

poor people in a poor country, is that what this site now?

neverforget

(9,433 posts)
9. Did you see the thread on cutting off water in Detroit?
Wed Jun 18, 2014, 10:13 PM
Jun 2014
http://www.democraticunderground.com/10025118923

Some of the comments are

To some, the money owed is more important than the health and welfare of a community or a country.

hack89

(39,171 posts)
7. The Argentine bonds were issued in America under the jurisdiction of US Law
Wed Jun 18, 2014, 08:21 PM
Jun 2014

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.

sabrina 1

(62,325 posts)
22. Know anything about why Argentina was so unstable? I hope the vultures get nothing, maybe that will
Wed Jun 18, 2014, 10:51 PM
Jun 2014

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)
32. Argentina has issued their bonds in NY since 1976
Thu Jun 19, 2014, 06:38 AM
Jun 2014

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)
34. Maybe the Global Markets have become so corrupt it's better for nations who were
Thu Jun 19, 2014, 02:35 PM
Jun 2014

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)
21. Exactly! I can't believe I'm seeing people here defending the vultures who destroyed Argentina's
Wed Jun 18, 2014, 10:44 PM
Jun 2014

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)
24. I Agree, Ma'am: The Vulture Funds Should Not Get One Thin Dime
Wed Jun 18, 2014, 10:59 PM
Jun 2014

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.

Nye Bevan

(25,406 posts)
27. Lots and lots of huffing and puffing from Argentina,
Wed Jun 18, 2014, 11:13 PM
Jun 2014

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)
28. I think their last experience with the British
Thu Jun 19, 2014, 12:04 AM
Jun 2014

will probably dissuade them from trying the military venture in the Falklands again.

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