
S.&P. Says Argentina Has Defaulted - Ashan
http://dealbook.nytimes.com/2014/07/30/s-p-says-argentina-has-defaulted/
======
scardine
Brazil and Argentina had very similar economic plans to get out of
hyperinflation from the 80's - both created a new currency whose value was
attached to the USD.

There was a subtle difference: Brazil forbade domestic contracts in dollar
(with a few exceptions, mainly leasing contracts for imported vehicles). So
when the market forces kicked in and Brazil was forced to devalue its
artificially priced new currency, the impact was not that big.

In Argentina, most contracts were underwritten in dollars, so the government
delayed devaluation as much as possible. As the result, when it finally
adjusted the exchange rate to more realistic values, the guy who bought one
home was bound to pay 3 or 4. The government solution was the first default
(by passing a law saying you could pay these contracts with a huge discount).
This is why they are in this mess, some creditors are fighting to receive the
full value.

~~~
epx
Also, Brazilian Real was born to be around 1:1 with USD, but the exchange rate
was never fixed, it floated from day one. Argentinian coin (don't remember the
name) was 1:1 by force, which made the delay even more catastrophic.

~~~
estebank
> Argentinian coin

Argentinian Peso. Before that it was Austral.

~~~
lazyant
and before austral it was peso

------
sciurus
To understand background and potential implication, I found
[http://dealbook.nytimes.com/2014/07/30/q-a-whats-behind-
the-...](http://dealbook.nytimes.com/2014/07/30/q-a-whats-behind-the-battle-
over-argentinas-debt/) helpful.

~~~
blowski
> Argentina issued bonds under New York law.

Until I read this, I assumed that international bonds were issued under
international law, with the World Bank as the arbitrator. With the US as both
lender and arbitrator, it seems to give them a lot of power.

~~~
rayiner
In a transaction like this one, the parties get to choose the law that
applies. Indeed, they are free to choose privately-formulated law and have the
disputes resolved by private arbitration organizations (there are several
examples of each). That said, it is quite popular to choose New York law to
govern international transactions, and litigate issues in New York courts,
even when the transactions have nothing to do with New York. That's because
New York law is well understood, there is a deep body of precedent involving
sophisticated financial transactions, and the courts have a lot of experience
resolving financial disputes.

~~~
davidw
Likely, the bonds cost a little bit less if they're in a jurisdiction where
it's going to be relatively easy, straightforward and fair to sort things out
in the event things go wrong.

------
dieg0
Everybody involved in the 2001 default knew this was going to happen. And it
can even be said that Argentina didn’t plan to pay what they promised from the
beginning, although I cannot attest to it.

One detail I want to add to the discussion is that in the past few years the
global panorama changed for Argentina, they sit on top of the second largest
shale gas reserve in the world, and plan to extract it. They need money to
start working and suddenly felt the urge to settle this issue.

Known fact: There is the Argentinean way of doing things, not straightforward,
which is why talking about the bondholders like victims sounds naïve. They saw
they might get their money now, and with Argentina’s shell gas urge probably
felt the call to make more.

To me there is a larger scope, take a look at tech companies like Google and
Facebook, they placed their head regional offices in Argentina. Both companies
knew well in advance that the political and judicial system in Argentina is
completely corrupt but still decided to direct their regional efforts from
Buenos Aires. Why would anyone place offices in Argentina, when there is
Chile, Perú or Colombia, countries that have greater political, social and
economic stability, extremely better infrastructure, better weather and even
tastier food.

I could be going paranoid but I believe it is simple; it looks like the big
guys like to get in bed with the naughty ones, rather than the honest and
better-behaved gals around the corner. This makes sense to me, after all, the
bigger the risk the greater the possible reward.

The country is extremely wealthy, but that wealth is not getting to everyone
(not that uncommon), and maybe that’s why the demonization of the
international monetary funds has so much appeal locally. The certainty is that
by the end of this story, it will be the Argentinean people who will be paying
for this.

~~~
brohee
Colombia is in what could be called a civil war without exaggerating too much,
it's not like a FARC like organization controls large swath of Argentina. Why
do you call Colombia more stable?

~~~
dieg0
You are right, things have changed in Colombia, but might be too early to say
it is more stable

------
pessimizer
This is how much money has been spent lobbying US officials in order to make
this happen.

[http://www.opensecrets.org/lobby/clientsum.php?id=D000047065...](http://www.opensecrets.org/lobby/clientsum.php?id=D000047065&year=2014)

edit: I summed the years and got $5.3 million since 2007. The UI doesn't seem
to help you sum at all.

edit2: [http://www.cepr.net/index.php/blogs/the-americas-
blog/nnfarm...](http://www.cepr.net/index.php/blogs/the-americas-
blog/nnfarmer-education-groups-to-anti-argentina-lobby-uh-who-are-you)

excerpt from WSJ article included:

"Mr. Matlack is president of American Agriculture Movement, a farmers'
advocacy group that was listed among about 40 members of American Task Force
Argentina, whose stated mission is to help investors recoup money from
Argentina's 2001 bond default and subsequent restructuring.

"But Mr. Matlack and some leaders of other groups representing ranchers,
teachers and farmers, are baffled about why the task force listed their
organizations as members 'united for a just and fair reconciliation' of
Argentina's default.

"Reached while he was planting wheat on his farm, Mr. Matlack said he had
never heard of American Task Force Argentina. 'We don't have anything to do
with Argentina's debt,' he said.

"Also perplexed are leaders of the Colorado conference of the American
Association of University Professors, which was listed under members and
supporters. 'This is absolutely foreign to me,' says Ray Hogler, legislative
director of the academic group.

"Both groups were dropped from the list after the Wall Street Journal alerted
the task force to the discrepancies."

~~~
blowski
Is there a group representing the 93% who accepted the restructuring?

------
eudox
The worst thing about living in Uruguay is being right next to Them. Now this
happens, and we're going to get the fallout.

~~~
cjbprime
And here we thought you were going to say that the worst thing about living in
Uruguay was the rampant nationalism between Uruguayans and Argentinians..

~~~
jambo
I don't see how this adds to the conversation. Also, Argentina and Uruguay
have similar racial composition & as far as I can tell see themselves as the
same people of the Rio Plata.

~~~
djKianoosh
Not to bring too many facts into the discussion, but Uruguay and Argentina
dont have similar racial composition:

[http://www.indexmundi.com/uruguay/demographics_profile.html](http://www.indexmundi.com/uruguay/demographics_profile.html)
[http://www.indexmundi.com/argentina/demographics_profile.htm...](http://www.indexmundi.com/argentina/demographics_profile.html)

Uruguay have 12% non-white, Argentina only 3%

That's not what I would call "similar".

~~~
jambo
Sorry, I should have been clearer: they are predominantly white. When I was
last in each country, I didn't get any real sense of deep hatred of each
other. Though there was some seemingly good natured ribbing about who was
better at e.g. asado.

~~~
rabble
It's so friendly that Uruguayans and Argentines don't identify the other as
foreign. Uruguayans didn't want to be their own country when their started
their independence war, it was an attempt to not be part of Spain or Brazil
and to be joined with what would become Argentina. It was the British who
decided Uruguay would be an independent country. Since then in the last 200
years, they've developed somewhat distinct institutions and cultures. It's
similar to the relationship between the US and Canada.

------
pessimizer
I don't understand why S&Ps rating matters, except for in the cases of US
state or federal investments where some of the ratings agencies have been
written into statute. Everybody is as familiar with the Argentinian situation
and how it has developed as S&P is, and they have the ability to make their
own judgements about whether they want to buy Argentinean bonds.

The danger to Argentina is that the US government has declared that they're
holding hostage the bond payments that Argentina has agreed to and wishes to
make.

~~~
bayesianhorse
The background behind the rating agencies is that there are thousands or even
millions of investment portfolios out there, with many of them fulfilling very
important risk management functions. Pension funds, health insurance, all
other forms of insurance, Banks, even many big companies who aren't
technically in the finance industry.

Most of them need some form of "low yield safe investment". But it is hard to
define what is safe. That's where rating agencies come in. An insurance can
promise to abide by such an agency, and that removes a lot of oportunity for
bad judgement on the part of individual fund managers.

You may argue whether these agencies are doing a good job at this, but most
proposals to get to a better system involve some way of increasing the power
of governments or individual fund managers.

~~~
crdoconnor
>You may argue whether these agencies are doing a good job at this, but most
proposals to get to a better system involve some way of increasing the power
of governments or individual fund managers.

Ratings agencies are unaccountable private entities. Every time they are
challenged they invoke the 1st amendment - i.e. their right to lie. Yet the
law enshrines their privilege through regulation of investments (which are
forced to rely upon their opinions).

There's absolutely no way the government would be any worse. They are at least
accountable to their citizens via voting. Ratings agencies are accountable to
nobody.

They've also used their weight to bully, too. S&P downgraded the US even
though it made absolutely no sense because there were moves made to prosecute
them for mis-rating CDOs before the credit crisis.

------
Grue3
I wonder what highly esteemed economics expert Paul Krugman thinks about this.

[http://krugman.blogs.nytimes.com/2012/05/03/down-
argentina-w...](http://krugman.blogs.nytimes.com/2012/05/03/down-argentina-
way/)

~~~
bmelton
I don't usually upvote sarcasm, and I'm not even sure if that _is_ sarcasm,
but regardless, I don't understand this statement.

> But why exactly is Brazil an impressive “BRIC” while Argentina is always
> disparaged? Actually, we know why — but it doesn’t speak well for the state
> of economics reporting.

What is it that we know? Why is, in Krugman's mind, Argentina always being
disparaged?

~~~
evol262
Because they already defaulted in 2001 and got into a spat with the IMF and
various investors from western nations who tried to capitalize on their
misfortune.

In Krugman's mind, Argentina is disparaged because they don't really want to
be part of the western "system" of investment in the national resources of
South American nations by developed powers.

------
Nursie
So in the coming days we'll be hearing a lot more about 'Las Malvinas' and how
Britain is an evil colonial power and stole the islands?

That usually seems to be what happens when Argentina has internal problems
that need to be distracted from.

~~~
arethuza
Rather off topic - I watched the World Cup Final in a large crowd at a German
owned resort in Turkey, with a lot of Germans, English, Turks and a handful of
Scots (us).

Everyone supported Germany apart from the English who supported Argentina -
which rather surprised me :-)

~~~
mkohlmyr
Probably has more to do with how Brits feel about Germany than Argentina

------
opendais
Argentina should never have handled the bonds under NY law and without control
of the bondholder's list. That mistake is costing them dearly.

The only reason they can't pay everyone but the holdouts [e.g. selective
default] is because of the fact they handled them under NY law after the 2001
default. :/

~~~
PeterisP
If they hadn't ceded the legal control to NY law, then they either wouldn't
have gotten the money they wanted, or at the very least had a much higher
interest for it.

That's the whole point - if you're a trustworthy borrower, then you can get
money on decent terms; but if you're like Argentina then every lender needs
all the protection they can get, to try to prevent cases like this one.

~~~
opendais
The point is, they are getting hit multiple times with the "untrustworthy
borrower bat" for a single incident in 2001 and are now being forced to screw
_all of their borrowers_ and not just the ones who refused to play ball in
2001. Because NY law.

That is like saying "Oh, you can pay none of your debts until you pay the ones
you defaulted on already in 2001."

Nope.jpg.

That is f'ed up.

They defaulted in 2001. You don't get to come back and say "Oh, but you have
to pay us anyway or we will not let you pay the debts since then either."

EDIT: I'm amused by the downvotes given that is how bankruptcy law works most
places. You default one time. The zombie borrowers don't get to come back
later and demand money later, enforced by the courts.

~~~
PeterisP
The reason that they can demand money is that those bonds have a requirement
that Argentina will pay all bondholders equally - even if they pay x% of it,
then they have to pay _every_ bondholder x%, instead of paying some
bondholders more and some less or nothing.

Now Argentina is paying money to some of those old bondholders according to
the restructured debt that Argentina itself agreed to. However, all other
bondholders - including some that Argentina dislikes and doesn't want to pay -
have a valid claim on that money, according to that initial rule. That's it.

Argentina can pay noone (as per a default). Argentina can pay all the
bondholders equally. But it's not allowed to choose which bonds to pay and
which not to pay.

~~~
opendais
> However, all other bondholders - including some that Argentina dislikes and
> doesn't want to pay - have a valid claim on that money, according to that
> initial rule. That's it.

That isn't it. Those "bondholders Argetina dislikes" are asking for more money
than the rest and are demanding the full value for bonds that all the other
bondholders agreed to take a haircut on in 2001.

You don't get to go back and demand full value on debt that was restructured
for everyone else. That is like if I declared bankruptcy and one of my credit
card companies held out for full payment on the debt when all the others had
already signed off on X% of the debt.

That credit card company wouldn't be able to do it but these bondholders can
because they found the right judge.

~~~
PeterisP
Argentina issued the bonds on explicit terms that it will be okay to hold out
on a haircut - Argentina agreed that even if 93% agree on restructuring, then
it's not binding to others and they can demand full value.

Argentina issued the bonds on explicit terms that it will pay everyone equally
- even if they agree or refuse some future deal. Argentina dislikes them from
not agreeing to it, but that's it - only a dislike that doesn't give any
rights to pay them differently than others; they didn't have to agree to the
haircut, so it's within their rights to demand to be paid whenever the others
get paid.

For your CC example - yes, it would likely be different in personal
bankruptcy, but that's not relevant because personal bankruptcy intentionally
gives much more protection than sovereign bonds, the rules are quite different
there. And sovereign defaults don't wipe you as clean like a personal
bankruptcy does in many western countries - and there are jurisdictions where
you don't get personal bankruptcy, and you keep the debts until you die. And
in some places, even after that - the debt transfers to the heirs.

~~~
opendais
I think the issue is, I disagree with the morality of the bondholder's cause
and the negative impact it creates on other bondholders.

You don't seem to realize that is why I'm complaining. >.>

------
jstalin
A decent article on the mechanics of why these holdouts were able to force
Argentina's hand: [https://mises.org/daily/6825/Understanding-Argentinas-
Coming...](https://mises.org/daily/6825/Understanding-Argentinas-Coming-
Default)

------
tomp
Well, the recent Greek default seems to have been handled quite gracefully...
(but of course, Greece is part of the EU zone, so there was a lot of help
available)

[http://www.economist.com/node/21550271](http://www.economist.com/node/21550271)

~~~
lclarkmichalek
This is the second default in 13 years, with (as you mention) no strong
regional bank to support them, and (most likely) in a country without the
political willpower to push through reforms to prevent this kind of thing
happening again.

~~~
tomp
From another article linked in the HN comments, it seems that this is really a
finalization of the 2001 default. Argentina is not able to pay the (current)
bond holders only because the courts won't let it do so.

~~~
PeterisP
Argentina _is_ able to pay the current bondholders, it's simply choosing not
to pay them because part of that money will go also to those bondholders
Argentina dislikes.

~~~
encoderer
In the story they said Argentina has transferred $500MM to pay bond holders,
but the bank refuses to transfer it because the court ruled they could not
selectively pay and any cooperating banks would be in contempt. Is there
another layer to the story I'm missing?

~~~
PeterisP
That's the exact thing - they have the money to pay, but they have to give a
proportion of that money to the holdout bondholders (the "not selective"
part), and they refused to do that, despite all the negotiations.

Courts didn't rule that they can't pay, courts ruled that they can't ignore
the other bondholders when paying.

[edit] A car analogy - if a court says you can't drive until you pay your
parking fines, then it doesn't mean that you're maliciously completely
prevented from driving, it simply means that you're compelled to pay the fine
at last.

~~~
encoderer
that makes sense

------
simonebrunozzi
I'm very sorry for Argentinians - I've been there last year, visiting
relatives (I'm from Italy, and my grand aunt moved to Argentina in the 50s -
she was a bit over 20 - to escape an arranged marriage in Italy, and came back
only in the 80s).

Argentina is a beautiful country, with problems that are very similar to the
ones that we have in Italy - but different scenarios, and different economies.

I see this as an opportunity to consider adopting Bitcoin as a national
currency, and stop being hostage of 1) banks, and 2) corrupt government
officials. I don't know if it would work... But I hope so.

~~~
lmm
Bitcoin would make these problems worse. The whole reason they got into this
mess in the first place was by pegging their currency to the dollar, which
meant they couldn't devalue the peso when they should have done for a long
time; when the eventual reckoning came it was brutal. With bitcoin it would be
much much worse, because you can't ever do that decoupling, and you wouldn't
even get the US government doing writedowns like QE (which at least mean that
in any global financial disaster, you've got a government doing approximately
the appropriate things).

~~~
u124556
Then you just change the price in bitcoins: this was 0.005 bitcoins yesterday?
well, today it will be 0.007.

------
Spooky23
Why does Argentina struggle so with these sorts of problems?

It seems like a country with enormous potential. Lots of resources, limited
security threat, amazing climate.

~~~
the_af
Disclaimer: I'm from Argentina.

One batch of politicians and lobbyists sells the country for short-term gain.
Later politicians inherit the problem, and maybe compound it with their own
batch of mistakes. The "problem" in this particular case is a tiny group of
foreign speculative capital creditors holding the whole country hostage. It
has little to do with the country's potential.

Note these so-called "vulture funds" are doing what they do: acquire debt at
low prices while a country's economy is down, then attempt to recoup it at
disproportionate interest rates when the country's economy recovers. That they
are attempting this _now_ , if anything, is a sign Argentina's economy isn't
in such a bad shape. The vulture funds aren't run by fools; they wouldn't
attempt to extract money where there is none.

~~~
estebank
That they are attempting this now might also be a sign that they expect
Argentina's economy to take a nose dive.

------
bedane
To the more knowledgeable people around: can this trigger a credit default
swaps crisis? Are all the Argentina CDS bought in the last decade really known
to the public?

~~~
sz4kerto
Not really -- it's an event that has been expected for a while. CDS dominoes
usually start falling when a significant AND unexpected event happens ('black
swan'). Argentina in default is moderately significant but not unexpected.

In other words, sudden changes in valuations cause a problem. Their government
bond valuations have slowly approached zero therefore there's no sudden jump.
The value of the CDSs does not change suddenly when Argentina is formally
considered default if everybody has expected that outcome.

------
tragomaskhalos
Let's hope this doesn't precipitate that favoured bread and circuses
smokescreen of Argentine politics, viz idiotic sabre-rattling over the
Falklands.

~~~
the_af
This comment is naive. Our "sabre-rattling" over the Malvinas Islands was done
during our vicious, murderous military dictatorship in the 70s/early 80s. We
now have a democracy. Any dispute about the islands is done via diplomatic
means (regardless of whether you believe the claim has merit, diplomacy is the
only legitimate way to resolve it).

No sabre-rattling is possible. Don't confuse democratic Argentina with past
dictatorship-ruled Argentina.

~~~
SaberUK
>Our "sabre-rattling" over the Malvinas Islands was done during our vicious,
murderous military dictatorship in the 70s/early 80s.

[http://www.theguardian.com/world/2014/jan/12/argentina-
falkl...](http://www.theguardian.com/world/2014/jan/12/argentina-falklands-
oil-international-courts)

[http://www.theguardian.com/uk/2013/feb/05/falklands-under-
ou...](http://www.theguardian.com/uk/2013/feb/05/falklands-under-our-control-
argentina)

~~~
the_af
That's absurd. "Sabre-rattling" means attempting to intimidate by displays of
military power (or implied military power). See:
[http://dictionary.reference.com/browse/sabre-
rattling?s=t&pa...](http://dictionary.reference.com/browse/sabre-
rattling?s=t&path=/)

Both links you cited specifically rule out military intervention. Allow me to
quote from your first link:

Quotes from your first link:

\----

 _" Argentina will seek legal punishment, including prison sentences, for
anyone who drills for oil in the Falklands and the surrounding waters it
claims as its territories, the country's newly created Malvinas secretary has
told the Guardian. [...] In his first interview with the international media
since taking the post on Monday, Daniel Filmus also warned that companies
involved in exploration of the disputed areas will be disqualified from
potentially more lucrative work in Vaca Muerta (the giant shale oil deposit in
Argentina's Patagonia region) and offshore areas.

"We will go to the international courts. It must be known that Argentina will
defend its claim," Filmus told the Guardian at his office in the ministry of
foreign affairs. "Whoever doesn't obtain authorisation will not only face
administrative consequences but will also face prison sentences.""_

\----

You may or may not like Argentina's policies and position on the matter of the
Malvinas, but all this is:

a- Not military posturing. b- Within legal bounds. See mentions of legal
action, prison sentences, international courts. I don't see any threats of
military aggression, do you?

So we can rule out sabre-rattling from your first link. Let's go on with your
second link.

First sentence after the heading of second link:

\----

 _" Argentinian foreign minister rules out military solution but says 'not one
single country' supports UK right to govern islands"_

\----

So a military solution is ruled out then? I rest my case.

------
manishsharan
Wow ! Just one investor can bring a country to its knees !

~~~
johnnyg
Wouldn't it be more fair to say endemic corruption and decades of misguided
plans that swung too hard to socialist, then capitalist and then again
socialist policies created this?

The idea that the root cause of this is that a group of investors come along,
buy debt on the open market and then expect that debt to be paid seems overly
simplistic.

~~~
nabla9
Defaulting is error on both sides, the borrower failed in risk analysis just
like the debtor.

The problem is that sovereign nations don't have clear bankrupt procedure and
these hedge funds are holding country as hostage for their past mistakes
despite the fact that majority of borrowers accepted debt restructuring that
was arranged and accepted haircuts.

If the debt and its interest grows past what country gdp can ever grow, they
can never pay back and they either became debt slaves forever or keep
defaulting. This is attempt at debt slavery in national level. (if person
can't pay his debt ever, should he and his family lineage be responsible for
that debt forever?)

I think it's reasonable to expect that in these cases banks should accept
haircuts and settle like wast majority of investors did. Upholding business
deal is ethically less important than country of millions being able to
continue their life. The logical cost of country not being able to pay for
their dept should be higher interest rates in future, not shutting country
down.

~~~
johnnyg
Nice reply! I love HN sometimes.

What impact does this have on contracts in general?

When I give my word, I keep it. When I sign a contract, I honor it. There's a
social contract that assures me that the counter party will too. There's a
court system setup to ensure they do. There is force behind that if it is
taken even further.

If I should instead shape every contract with a 20% hedge that assumes the
counter party will not keep their word, doesn't that introduce a significant
amount of inefficiency in the entire system.

Isn't it long term better and in fact just that those who give their word,
spend all of their money and then run out take the consequences of it?

For systemic risk to be properly moderated, the individuals or even individual
counties must suffer the consequences of their actions. You can opt to not
allow this, but you ultimately suffer as a whole when you do.

I see no better way through. Do you?

~~~
lmm
So there's currently an interesting case going on with Caesar's bonds because
someone accidentally put "and" in a contract where they meant "or".[1] If you
have to spend lots of time having a group of expert lawyers and grammaticians
going through your contracts before you sign them and checking for every
possible edge case, that's a significant inefficiency and cost in the system
as well.

The 2001 restructuring was reasonable; most of the bondholders agreed with it,
and got a fair price for their bonds. The holdouts knew this when they bought
the same bonds.

Imagine a court system that applies common sense and equitable principles and
tries to interpret contracts in a way that's as fair as possible to everyone
involved, rather than going by the strict letter of every contract document.
This removes the ability to rip someone off when you spot a hole in their
contract, which makes some things less efficient, but I can see it working
better overall.

[1] So it's something like: there's a provision in the contract that says that
certain guarantees are invalidated if this subsidiary is reabsorbed into its
parent corporation and it's sold to a different company, and some other
conditions. Which is obviously nonsense because there's no way those things
would both happen. But it's also what the contract says.

~~~
bmelton
> a way that's as fair as possible to everyone involved, rather than going by
> the strict letter of every contract document.

Presumably, this is in place to keep colluding with judges who will interpret
your claim "fairly", for a fee, to a minimum, as well as mitigate the hedge
against those who defend contract discrepancies with "Well, that's what we
meant", when in fact, that was neither what was meant or ever said.

The Halbig decision bears on this matter. There's a law, which is effectively
a contract, and the IRS attempted to interpret it how they needed to to make
the ACA work. What this means now is, right or wrong, that we have a group of
Senators and Representatives who voted on a law to be enacted as it was
written, and when that was no longer viable, they simply 'interpreted' the
text of the law to mean something new so that it could work.

Ignoring who's right or who is wrong, some additional lawyering up front would
have prevented this, but that was not done because it would not have been
politically expedient. Contracts are a way of keeping people fair. If the
contract is written in a way that isn't fair, then it would be unenforceable
regardless of how well it was written, so that 'fairness' is built in to
contract law already.

------
yread
TLDR;

When restructuring defaulted bonds, Argentina agree to borrow in US dollars.
They further agreed:

\- to pay all bond holders equally.

\- to be governed by New York state law.

\- to NOT include a collective action clause in the bond agreement which would
have forced minority recalcitrant bondholders to enter a restructuring
agreement, if a super majority of the bondholders agreed.

A small minority (2.5-3%) refused to accept the 70-75% haircut the Argentina
government was forcing on the bondholders (fyi: previously the largest haircut
in sovereign debt was 30%)

(from one of the dealbook article's comments)

~~~
fonosip
Small corrections: \- Holdouts are 7.6% \- Haircut was around 75% nominal, but
in practice was more around 40% since there were some GDP growth incentives
and better interest rates

------
walshemj
Time to reinforce the Falkland's garrison

~~~
the_af
Sigh. Argentina is currently a democracy and has been one since the early 80s
after our last military dictatorship. We are not a warlike country. Any issue
with the Malvinas Islands is being handled via diplomacy. Please stop
spreading mindless FUD.

------
neeks
We really should have evolved by now to using a monetary system that doesn't
revolve around debt.

~~~
bayesianhorse
Which is impossible, because any economic activity that takes some time to
come to fruition is already a sort of debt. If you can't use a currency to
increase the "money" supply, other forms of credit and investment emerge, and
you get the same problems.

~~~
neeks
Right, because there isn't numerous examples throughout history where debt-
free fiat currency flourished. We have been conditioned by neoclassical
economics and have refused to confront the pyramid scheme.

~~~
bayesianhorse
Can you name one such debt-free currency? Preferably one that works in a
modern economy? Don't forget: A lot of our risk-management and wealth today
depends on derivatives and a well running financial market.

To say that a completely different but unproven system works better is a very
tough point to defend.

~~~
neeks
Well let me preface with this: I'm not an economist and of course harbor my
own bias(just like everybody else), but I'm educated enough to recognize when
systems and people are being gamed.

Why can't our government(or any government for that matter) print their own
money and issue it to its people, which is then freed from the private central
bank's interest? Instead, we allow the banking industry to self-regulate and
it in turn does what's in its self-interest.

I've heard historians and anti-neoclassic-economists refer back to the success
of Tally Sticks(1100 - 1854), Colonial Script(1764 –– 1776), and Roman
currency before they switched to a gold standard. But, I'm not an authority on
this and sincerely would appreciate any literature that contradicts it.

The only modern example would be cyprtocurrency, and the verdict is still out
on that. Hell, even if more states and nations moved to North Dakota's banking
approach we'd be better off.

I don't have all the answers, but I know humans can do better and it starts
with the average-person continually investing time to educate themselves about
monetary policies and the history of currencies.

The current monetary system has feed global wars, imperialism and possibly the
worst financial inequality in mankind's history. Unless you're a banker or in
the financial industry, I don't understand why you wouldn't want to try
something new?

~~~
bayesianhorse
Obviously you are not an economist or historian (I'm neither). "Why can't our
government print their own money?" pretty much gives away that you haven't put
in any effort to learn how banking, money or a central bank works.

All the examples you mention don't hold up. Not even in their own time, much
less in a modern time where we need private finance.

"Cryptocurrency" is a new kind of knee-jerk reaction to "everything perceived
to be wrong with money". There's a reason why conspiracy nuts flock to
cryptocurrencies in droves. Turns out that ordinary people get screwed over
with bitcoins far more easily than with the "evil" fiat currencies. Also there
is no reason why you can't have a sort of reserve-banking, or even monetary
expansion in a bitcoin-based economy. They just don't do it yet, because
Bitcoins at the present moment have negligible impact on the real economy
(which might change).

------
skj
If only they had won the world cup, this whole mess might have been avoided.

------
drcross
I don't mean to sound like an evangelist but i've been waiting for a currency
to fail to see how/if crypto-currencies have the ability to get the country up
and running again. In theory the tools are there if they can wrestle value out
of their slumping traditional currency.

~~~
lclarkmichalek
The peso has been all but failed for some years now, due to the falsification
of inflation figures by the central bank, and the divergence between the
real/market exchange rate and the "offical" exchange rate. The result has been
fairly simple: people use USD.

