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.
Argentina managed to reach an agreement with some of its creditors. Those bonds no longer exist.
The bonds not swapped still have the backing of the Argentine government.
Incidently the MMT solution for Argentina is clear. Some combination of default or selling state assets, raising taxes, raising interest rates and printing less money and working harder. I think that could almost be called Thatcherism??
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.
If what you are saying is correct (I do not know the depth and liquidity of the USD / Peso market), then Arg should tell the hedgies to fck off.
To the extent Arg has exports into foreign markets, and can issue their own currency, then I do not understand the need to negotiate....
They do, I checked their bank records a couple ago and they were expanding their currency in circulation 33% per year. This leaves the other states, like China, Russia, India and all the other funnies for dead.
The mainstream western floating currencies print about 7% more cash pa.
The Keynesian miracle isn't working for Argentina and their exports are very, very ordinary.
If what you are saying is correct (I do not know the depth and liquidity of the USD / Peso market), then Arg should tell the hedgies to fck off.
To the extent Arg has exports into foreign markets, and can issue their own currency, then I do not understand the need to negotiate....
Argentine can pay the bondholders. They can also raise taxes, raise interest rates, sell state assets, cut spending and get the population to work harder.
Are you really so naive as to not understand why they do not do this? Of course not.
All they have to do is tell the hedgies and unions to go away, or tell the hedgies and rich folk to go away. All they need to do is tell a few people to go away. Its all so easy in a fantasy to govern a south american county or any country for that matter.
Argentine can pay the bondholders. They can also raise taxes, raise interest rates, sell state assets, cut spending and get the population to work harder.
Yes - I know. But why bother? They should not reward the hedgies for holding a country to ransom. If the country has a decent export sector (a claim made earlier - but not by me), then there is no need to borrow USD to acquire real resources from the global economy.
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Are you really so naive as to not understand why they do not do this? Of course not.
No - I do not understand why a Country like Argentina (or any other for that matter) want to see their citizens become slaves for rich hedge fund managers in another country.
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All they have to do is tell the hedgies and unions to go away, or tell the hedgies and rich folk to go away. All they need to do is tell a few people to go away. Its all so easy in a fantasy to govern a south american county or any country for that matter.
When the crash came, however, Iceland's deposit guarantee proved worthless, forcing the UK and the Netherlands to use their own taxpayer funds to compensate ordinary savers and sparking a poisonous diplomatic row.
It was a spat that, against the odds, Iceland won. While many other politicians in Iceland had urged a policy of appeasing the enraged British and Dutch governments, Gunnlaugsson had insisted they should go hang.
Yes - I know. But why bother? They should not reward the hedgies for holding a country to ransom. If the country has a decent export sector (a claim made earlier - but not by me), then there is no need to borrow USD to acquire real resources from the global economy.
Iraq 2003
Libya 2011
Breaking out of the USD hegemony is easier said than done.
Argentina imports more than it exports so it is stuck with the USD, nobody in their right mind will take payment in peso.
And in the case of Iceland it wasn't their government debt at issue. Britain is responsible for foreign banks on its turf, they merely wanted Iceland to pay for what was their responsibility.
Yes - I know. But why bother? They should not reward the hedgies for holding a country to ransom. If the country has a decent export sector (a claim made earlier - but not by me), then there is no need to borrow USD to acquire real resources from the global economy.
No - I do not understand why a Country like Argentina (or any other for that matter) want to see their citizens become slaves for rich hedge fund managers in another country.
Maybe it would be news to you that Argentinia has very high inflation? Probably not. Printing cannot help them unless also they come up with some combination of raise taxes, reduce spending work harder sell assets and more or less do the full thatcher revolution. Ie printing cannot help them at all.
Argentina do not want to become slaves to hedge funds of course. The US 'government' is requiring they pay off the remaining hold offs before they pay the discounted ones because somehow all of the money to pay the bondholders is held in new york. That is the news story.
Reality check:
Iceland held onto its private foreign assets that had been owned by the same banks that the government took over owing the depositors, and did not renege on its government debt and was easily able to get adequate borrowing from friends and the IMF. In the fullness of time the remaining private assets owned by the banks will likely perform and payoff the Foreign governments who bailed out the depositors.
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