Argentina’s Massive Anti-Government Demonstrations [armstrongeconomics]

Argentina seized all pensions. The people are getting to the point that all this socialism is really fascism. Those who keep pointing to hyperinflation better start looking in the opposite direction. Economics is like weather – you can die from too much heat or too much cold – both extremes will kill you. Hyperinflation is the nice way where politicians really try to meet their obligations because they care. Then there is the nasty way. The cling to authority, seize everything, lie, abandon every promise, and default pretending it is your own fault never their’s. This is a battle between the bondholders and the taxpayers every place you look. This is the Sovereign Debt Crisis in bloom around the globe.

http://www.buenosairesherald.com/article/129044/massive-antigovernment-protests-take-place-around-the-country

There is a way out. We will be making available soon the video from the Sovereign Debt Crisis and will put on Amazon.

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Financial repression 101 [SoberLook]

Sign says: “Christina don’t **** with democracy”.

Source: The Nation

That’s exactly what Christina Fernández de Kirchne’s government has been doing for some time.

The Nation: – Among several reasons for these accusations could be the country’s current inflation rate (estimated by economists to be 26 percent, while the government cites it as 11.1 percent); the state’s assumption of control of private pension funds valued at 30 billion; the government’s restrictions on currency exchange, making it difficult for citizens to travel outside of Argentina; restricted freedom of speech; and, most significantly, an accusation of widespread corruption.

Argentina’s actions don’t just threaten the nation’s democratic system. The latest policies amount to a harsh form of financial repression that will bring the nation’s private sector to its knees. As confidence in Argentina’s stability deteriorates, foreign reserves are becoming dangerously low. The latest move to close any loopholes that allowed outflows of dollars from the country is now impacting domestic market liquidity.

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Argentina’s downward spiral [SoberLook]

The government’s mishandling of Argentina’s economy has hit new highs recently with the implementation of price controls on food. It is a notoriously ineffective policy that tends to create shortages and spawns black markets.

International Affairs Review: – President Cristina Fernández de Kirchner’s temporary price freeze on food products marks the most recent instance of her gross mishandling of Argentina’s economy. The price freeze applies to all major food retailers, which account for over 70% of the market. Historically, these types of economic policies have never produced positive results. Most often, food importers stop importing because they would lose money by selling their food at the prices ordered by the government. Customers of large retailers who stand in line hoping to buy at the frozen price will then find the shelves barren. This scarcity of goods will spawn a black market, where food will be sold at actual market prices. While some law enforcement officials may tolerate these black markets, other will try to dismantle them, only to discover more tenacious entrepreneurs setting up shop the next corner over.

Unfortunately, the temporary price freeze is only part of an alarming trend towards financial mismanagement, which includes the expropriation of major foreign investments. Last year’s nationalization of Repsol YPF has infuriated Spain, one of Argentina’s largest foreign investors. Kirchner’s presidency has also been marred by accusations of falsifying CPI statistics (which provoked a strong rebuke from the IMF), a weakening of central bank independence, use of the nation’s currency reserves for political payoffs, and the threat of default on its debt – again. To most outsiders it would appear that Argentina is repeating many of the mistakes that resulted in its economic crisis of the early 2000s.

In a classic case of “wag the dog”, Argentina’s government is trying to focus the population on external issues. Argentine officials are now taking an aggressive stance with respect to self-determination in the Falkland Islands. Knowing that the upcoming referendum will likely result in a status quo, Argentina’s government declared the vote to be “illegal”. Tensions with the UK are likely to escalate further.

 

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Argentina Default Swaps Traders Lose 81% as Risk Recedes [Bloomberg]

Traders who bought three-month protection against an Argentine default lost 81 percent of their money in the two days after a U.S. court delayed a ruling that could have blocked payments to bondholders.

The cost to insure $10 million of Argentine debt against non-payment through March has plunged to $651,389 from $3.5 million on Nov. 28, according to SW Asset Management LLC. The selloff came after a U.S. federal appeals court stayed District Judge Thomas Griesa’s decision that would have forced the country to pay so-called holdout creditors from its $95 billion default in 2001 before holders of its restructured bonds.

Speculation that Argentina would opt to default for a second time in 11 years rather than settle with the holdouts caused the nation’s bonds to tumble by the most in emerging markets last month. While President Cristina Fernandez de Kirchner says her country will pay its performing debt, she has vowed never to give in to the demands of investors including billionaire Paul Singer she has dubbed “vultures.” Argentina is still more likely to renege on payments than any country in the world, according to the credit-default swaps trading.

Swaps Traders Lose 81% as Default Risk Recedes: Argentina Credit

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Argentina fears default after American court ruling

Argentina president, Cristina Fernández de Kirchner

Argentina president Cristina Fernández de Kirchner has said her government will not negotiate. Photograph: Cezaro De Luca/EPA/Corbis

Argentinian politicians and global debt campaigners have responded with fury to a US court judgment that risks plunging the country back into default.

Elliott Capital Management and Aurelius Capital Management, regarded as “vulture funds” by Buenos Aires, won a ruling in a New York court on Wednesday that could force Argentina to hand over $1.3bn (£816m) in repayments and interest to the tiny minority of bondholders who refused to sign up to a hard-fought writedown of its debts after the country defaulted in 2001.

Judge Thomas Griesa upheld his own ruling of last month backing Elliott Associates, and said: “Argentina owes this and owes it now.”

In a strongly worded statement, Griesa said that Argentina should make repayments to the so-called holdouts at the same pace that it is repaying the vast majority of bondholders who did agree to a debt-swap. He also warned that US-based bank BNY Mellon, which handles Argentina’s debt payments to US-based bondholders, would be acting “in active concert” with the republic, if it failed to comply with the ruling.

If some of the country’s repayments were diverted to the vulture funds, however, it could reduce the amount available for Argentina’s other lenders, pushing it into a technical default on more than $60bn in outstanding debts. Buenos Aires has repeatedly made clear that it has no intention of paying anything to the plaintiffs in the case.

 

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Elliott Management Vs Argentina Round 3: The Showdown [Zerohedge]

Most recently, in “Elliott Management Vs Argentina Round 2: Now It’s Personal” we laid out the story of how in the ongoing legal fight between Argentina’s prominent distressed debt creditor, and exchange offer holdout, Elliott Management (and to a smaller degree Aurelius), and distressed debtor Argentina, the moving pieces continue in flux, even as various US legal institutions have demanded that Argentina proceed with paying the holdouts despite the Latin American country’s vocal prior refusals to do so, and most importantly, the lack of a sovereign payment enforcement mechanism. Last night, the fight escalate one more, and perhaps final time, before the Rubicon is crossed and Argentina either pays Elliott, “or else” the country proves all those who furiously bought up Argentina CDS in the past two weeks correct, and the country redefaults on $24 billion of debt. Because as Reuters reports, late last night, US District Judge Griesa overseeing the Argentina case, ordered the Latin American country to make immediate payment with a deadline for escrow account funding of December 15.

In an ruling delivered just as the United States headed off for its Thursday Thanksgiving holiday, U.S. District Judge Thomas Griesa rejected Argentina’s request to maintain his previous order halting payments to holdout investors who did not participate in two bond exchanges of defaulted sovereign debt.

 

The ruling is the latest development in a litigation saga that has lasted more than ten years and now appears to be favoring holdout bond investors such as Elliot Management Corp’s NML Capital Ltd and Aurelius Capital Management.

 

If Griesa’s ruling is upheld and Argentina chooses to defy him, U.S. courts could ultimately inhibit debt payments to creditors who accepted the terms of the restructuring, out of consideration for investors who rejected Argentina’s terms at the time.

 

This would trigger a technical default on approximately $24 billion worth of debt issued in the 2005 and 2010 exchanges.

Griesa essentially circumvented the traditional appeals process and said no more delays.

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Argentina: One step closer to default

The Argentinian government formally responded on November 16th to a recent US court ruling which stated that the it could not discriminate against “holdout” creditors (those bondholders who did not participate in the 2005 and 2010 restructurings of debt defaulted in 2001). The ruling leaves the government with the difficult choice of paying the holdouts—which it has until now sworn it would never do—or falling into default with existing creditors in order to prevent holdouts from accessing seized funds.

There is still little clarity on whether the government intends to comply with the October 26th court ruling. In its November 16th brief, the government stated its willingness to comply with US courts but argued that the holdouts were given fair treatment (having been given the opportunity to enter into the debt restructuring like other creditors) and requested that any payment to them remain on hold until the case passes through the court system. Holders of restructured debt have issued official filings in the US court system supporting this position. Meanwhile, in the local press government representatives continue to reject any payment to holdouts, arguing that this would undermine the rights of those creditors (representing 93% of total defaulted debt) that hold swapped bonds.

 

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