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Analysis: Argentina policies adrift as inflation spiral looms


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WestVirginiaRebel
argentina-policies-adrift-inflation-spiral-looms-175644449--business.html;_ylt=AwrBJR8S5.tSqxgAGKzQtDMDYahoo News:

BUENOS AIRES (Reuters) - In the midst of Argentina's biggest currency devaluation in a decade, with the peso's plunge rattling financial markets worldwide, President Cristina Fernandez's first public address in weeks was silent on the matter.

 

She didn't say a word about the currency, but instead took to national television last week to announce the latest government measure - a new form of high school scholarship.

 

While the president has avoided mention of currency policy, the increasingly unpredictable messages from her ministers have amplified the risks weighing on the peso.

 

An announcement last week suggesting long-awaited relief from currency controls for ordinary Argentines in practice meant a trickle of U.S. dollars for an affluent minority.

 

Officials also promised to cut the tax rate on spending dollars overseas, but revoked the measure just two days later.

 

Critics say the government's erratic decision-making is the biggest risk looming over the volatile peso, as the policies that triggered the currency crunch have only become more contradictory as the crisis unfolds.

________

 

Don't cry for our economic mess, Argentina...


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@WestVirginaRebel

Ran across this the other day

Argentina: The Beginning of the End?
1/24/14

The day of reckoning seems to be dawning on the latest iteration of Peronist failure in Argentina. The continuing refusal by the government of President Cristina Fernandez de Kirchner to bow to market realities has put the country’s Central Bank in an impossible position, forcing it to pull the plug on support for the peso. The Central Bank has sold billions of dollars to shore up Argentina’s currency, but with an unending flood of inane currency controls and restrictions surging from Buenos Aires, the BCRA finally hung the peso out to dry. The FT reports:

The peso fell as much as 15 per cent in thin trading on Thursday after the central bank suddenly and silently removed its support. It recovered to close down about 10 per cent after the bank reappeared towards the close, selling about $100m to buy pesos, analysts said. […]

“That’s what happens in markets,” said Siobhan Morden, Latin America strategist at Jefferies in New York. “Pressure builds, and when the central bank backs away, everyone starts to panic.” […]

“It’s become clear that all those fingers in the dike are not enough,” Mr Porzecanski said. “The government is faced with either a further confidence-shattering loss of reserves or a further confidence-shattering devaluation of the peso. All the good options are gone.”


(Snip)

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  • 5 months later...
Draggingtree

Understanding Argentina’s Coming Default

 

Mises Daily: Wednesday, July 30, 2014 by Nicolás Cachanosky

At the time of this writing, Argentina is a few days away from formally defaulting on its debts.How could this happen three times in just twenty-eight years?

 

Following the 2001 default, Argentina offered a debt swap (a restructuring of debt) to its creditors in 2005. Many bondholders accepted the Argentine offer, but some of them did not. Those who did not accept the debt swap are called the “holdouts.” When Argentina started to pay the new bonds to those who entered the debt swap (the “holdins”), the holdouts took Argentina to court under New York law, the jurisdiction under which the Argentine debt has been issued. After the US Supreme Court refused to hear the Argentine case a few weeks ago, Judge Griesa’s ruling became final.

 

The ruling requires Argentina to pay 100 percent of its debt to the holdouts at the same time Argentina pays the restructured bonds to the “holdins.” Scissors-32x32.pnghttp://mises.org/daily/6825/Understanding-Argentinas-Coming-Default

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Draggingtree

Default, Argentina!

By Christopher Westley

Wednesday, July 30th, 2014

Regarding Nicolás Cachanosky’s insightful article this morning on Argentina’s coming default, I would just add that it can’t come soon enough. Although one can only imagine what kinds of behind-the-scenes pressure Argentine President Cristina Kirchner and central bank head Juan Carlos Fábrega are under right now to pay these bonds, Argentina should continue with its default. It’s the only moral choice. If it doesn’t default, it will (i) maintain its creditworthiness in the future, which only puts off for another day the inevitable end to the government’s tax-borrow-spend policies that only favor the political class and well-positioned cronies, and (ii) it imposes Greece-like austerity on the remaining productive sectors and other innocent parties when real austerity would imply vastly reducing the size and scope of the Argentine state. If it defaulted and the government was finally deemed a credit risk by the World Bank (and its cronies), then the government’s ability to intervene in the economy would be severely hampered and incentives for real savings and sustainable economic growth would finally reappear.Scissors-32x32.png

http://bastiat.mises.org/?p=10806

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Draggingtree

July 31, 2014

A little 'Argentino' default?

By Silvio Canto, Jr.

We've been hearing about an Argentina default for some months. It looks like the default may be here before the weekend, according to Reuters:

 

"The country's economy minister, Axel Kicillof, speaking at a news conference at the Argentine consulate in New York, repeatedly referred to the holdout hedge funds as "vultures" after two days of talks failed to produce an agreement.

 

"Unfortunately, no agreement was reached and the Republic ofArgentina will imminently be in default," Daniel Pollack, the court-appointed mediator in the case, said in a statement on Wednesday evening."Scissors-32x32.png

http://americanthinker.com/blog/2014/07/a_little_argentino_default.html

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Draggingtree

65 Words Just Caused Argentina's $29-Billion Default

 

A tale of debt and difficult English

 

KATHY GILSINAN

 

JUL 31 2014, 11:59 AM ET

At the stroke of midnight last night, Argentina officially defaulted on $29 billion worth of debt. It was the eighth time in its history, and the second time in 13 years, that Argentina told its foreign creditors it would not pay its bills.

 

But this time was different, and rather bizarre. When Argentina last defaulted, in 2001, it had roughly $80 billion worth of debt it couldn’t pay back. It was, at the time, the biggest sovereign-debt default ever. This time, Argentina—Latin America's third- or fourth-largest economy, depending on who you're asking—had the money on hand to pay a $539-million bill due by close of business on Wednesday. It didn’t make the payment, and as a result has now technically defaulted on the entire $29 billion it owes international creditors. All this, in turn, is the result of how an 83-year-old judge interpreted the following 65 words: Scissors-32x32.pnghttp://www.theatlantic.com/international/archive/2014/07/65-words-just-caused-argentinas-29-billion-default/375368/

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Draggingtree
What Argentina’s Default Means for the Rest of Us

By CATHERINE ADDINGTONAugust 4, 2014, 6:00 AM

Argentina has defaulted eight times in its 200-year history, the latest coming on Thursday after a bizarre legal saga that left Argentine sovereign debt in the hands of a Manhattan federal district judge.

 

Judge Thomas Griesa ruled that Argentina could not make its next payment on restructured debt from its 2001 default—money that is already sitting in the New York bank in charge of mediating the payments—until including another set of bondholders in that exchange. That second set of bondholders, representing only seven percent of Argentina’s creditors, consists of hedge funds represented by Elliott Management’s NML Capital. The funds bought Argentine bonds as the country’s economy spiraled downwards, and they rejected the restructuring, holding out for the bonds’ full original value. Scissors-32x32.png

 

http://www.theamericanconservative.com/what-argentinas-default-means-for-the-rest-of-us/

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