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Argentina's debt fight: What it is, why it matters
Topic Started: 2 Jul 2014, 09:41 PM (5,237 Views)
o2sd
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K-town
31 Jul 2014, 08:59 PM
Oh ffs, are you serious?
I must capitulate to your searing, insightful, fact based rebuttal. The day is yours sir.
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peter fraser
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o2sd
31 Jul 2014, 08:50 PM
Yes, but their currency is convertible. Print more pesos, buy more dollars. Peso goes down, inflation goes up, debts get paid. Not hard.
They can't print USD and that's all that matters. Converting newly printed Peso's is difficult.

Argentina made a huge mistake, and now they should default to the pre-arranged haircut. Those creditors who won't accept the terms of the payment get nothing.
Any expressed market opinion is my own and is not to be taken as financial advice
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o2sd
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peter fraser
31 Jul 2014, 09:03 PM
They can't print USD and that's all that matters. Converting newly printed Peso's is difficult.

The peso is a floating currency. Print, buy, pay. Simple as anything. The more you sell, the cheaper it gets.
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Argentina made a huge mistake, and now they should default to the pre-arranged haircut.

That depends on whether or not they want anyone to lend them money again. They could pay out the bonds right now, it would take their entire currency reserves plus a devaluation to around 18-24 to the USD. The Argentinian government is a deadbeat that doesn't want to pay the political price of high inflation, so they are waving their arms and crying about the vultures who lent them the money which they went and spent on some nice things for themselves.
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Those creditors who won't accept the terms of the payment get nothing.

Yes, no moral hazard there.
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K-town
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o2sd
31 Jul 2014, 09:01 PM
I must capitulate to your searing, insightful, fact based rebuttal. The day is yours sir.
If you spent less time trying to be a faux intellectual you wouldn't come across as such a dumb dislikeable person.

A few posts ago you didn't even realise the debt was in USD. And so you moved onto printing undesirable pesos, making them more undesirable and exchanging them for the worlds most desirable currency. You knew it was stupid, but still posted it.

A veritas level time waster.
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o2sd
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K-town
31 Jul 2014, 09:59 PM
If you spent less time trying to be a faux intellectual you wouldn't come across as such a dumb dislikeable person.
Yawn.
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A few posts ago you didn't even realise the debt was in USD.

What makes you say that?
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And so you moved onto printing undesirable pesos, making them more undesirable and exchanging them for the worlds most desirable currency.

Yes, that is how a floating currency works. You print more to buy other currencies, increasing the demand for other currencies and decreasing the demand for yours. Hence the exchange rate goes down. I said as much in my 2nd and 3rd post on this topic, but it would appear your reading comprehension is lacking.
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You knew it was stupid, but still posted it.

You think FX markets are stupid? Hmmmm :hmm:
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A veritas level time waster.

Feel free to put me on ignore.
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b_b
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o2sd
31 Jul 2014, 09:18 PM
The peso is a floating currency. Print, buy, pay. Simple as anything. The more you sell, the cheaper it gets.


That depends on whether or not they want anyone to lend them money again. They could pay out the bonds right now, it would take their entire currency reserves plus a devaluation to around 18-24 to the USD. The Argentinian government is a deadbeat that doesn't want to pay the political price of high inflation, so they are waving their arms and crying about the vultures who lent them the money which they went and spent on some nice things for themselves.


Yes, no moral hazard there.
It does not matter if the peso is currently floating. A Central Bank selling its own currency in size is unlikely to find a sufficient buyer. So at that point, one could argue it is no longer floating.

No different to the issue faced by the UK in 1976.
Edited by b_b, 1 Aug 2014, 12:22 AM.
(S – I) + (T - G) + (M - X) = 0
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Sober
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peter fraser
31 Jul 2014, 09:03 PM
They can't print USD and that's all that matters. Converting newly printed Peso's is difficult.

Argentina made a huge mistake, and now they should default to the pre-arranged haircut. Those creditors who won't accept the terms of the payment get nothing.
Nonsense. The Argentine government prints the only currency that matters within Argentina, and that's the peso. The Argentine economy continues to create considable hard-currency export earnings from oil and agriculture, and these have successfully been appropriated and recycled by the government.

The Argentine government may well have destroyed the accumulated wealth of foreign investors and much of its own middle class in Argentina (particularly pension savings), but that won't actually matter as long as it retains populist-based power.
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GloomBoomDoom
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http://americasmarkets.usatoday.com/2014/07/31/argentinas-stock-index-sinks-7-on-debt-default/
MSE
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o2sd
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b_b
1 Aug 2014, 12:22 AM
It does not matter if the peso is currently floating. A Central Bank selling its own currency in size is unlikely to find a sufficient buyer. So at that point, one could argue it is no longer floating.

No different to the issue faced by the UK in 1976.
As Sober noted above, Argentina has considerable sources of USD income, and reasonable reserves (around $39B from memory), so a depreciation in the Peso, even a considerable one, will simply be a discount for foreign buyers of Argentina's exports.

Argentina can pay their bondholders, they just don't want to, because of the inflation implications, which is the greater political problem when you are a populist government.

As for a CB selling it's own currency in size, as long as you have valuable exports, the currency can be sold down a long way before you run out of buyers. There is a moral hazard in this strategy also unless you are a military dictatorship, then you suppress dissent regarding inflation and keep selling until your currency becomes worthless.

Edited by o2sd, 1 Aug 2014, 10:16 AM.
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peter fraser
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o2sd
1 Aug 2014, 10:14 AM
As Sober noted above, Argentina has considerable sources of USD income, and reasonable reserves (around $39B from memory), so a depreciation in the Peso, even a considerable one, will simply be a discount for foreign buyers of Argentina's exports.

Argentina can pay their bondholders, they just don't want to, because of the inflation implications, which is the greater political problem when you are a populist government.

As for a CB selling it's own currency in size, as long as you have valuable exports, the currency can be sold down a long way before you run out of buyers. There is a moral hazard in this strategy also unless you are a military dictatorship, then you suppress dissent regarding inflation and keep selling until your currency becomes worthless.
Argentina reached an agreement with it's creditors quite some time ago. Argentina want to pay those creditors but has been held up by the court actions of one creditor who bought their bonds for pennies on the dollar and then took court action.

Argentina should pay the creditors who accepted the settlement terms, and not pay the creditor who doesn't accept the terms previously agreed to.

Not that Argentina listens to us, so what happens is theatre at this point.

Any expressed market opinion is my own and is not to be taken as financial advice
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