Skip to comments.This Is How A Hedge Funder Brings An Entire Country To Its Knees
Posted on 06/27/2014 1:47:18 PM PDT by blam
June 27, 2014
Right now Argentina is in danger of a calamity, the likes of which the world hasn't seen since 2001, and it's all because of one hedge fund manager's tried and true strategy to make money off of distressed debt.
That's right, bringing a country to its knees is a "strategy."
According to a U.S. court's ruling, if Argentina does not pay a group of hedge fund managers over $1.3 billion worth of bonds by July 30, the Republic could go into default. If it goes into default investors lose faith its capacity to pay, interest rates on its bonds surge, and the country is forced to print money to pay creditors its economy could tailspin.
Then again, if Argentina does pay this group of hedge fund managers over $1.3 billion worth of bonds by July 30, it opens itself up to lawsuits from other investors who also own those bonds lawsuits that could cost the country up to $15 billion. That's over half the money it has in its central bank.
So what's a country to do? And how did it get to this desperate point?
The bonds in contention in this case are Argentina's sovereign bonds issued in 2001, just as the country was collapsing.
That collapse, to hedge fund manager Paul Singer, looked like an opportunity to use a common strategy: distressed debt investing.
Here's how it works.
(Excerpt) Read more at businessinsider.com ...
Actually, the root of the problem is Argentina's socialism that made it a country with distressed debt. The USA should learn something from this, and it isn't how evil hedge funds are.
Argentina is bankrupt because Cristina Elisabet Fernández de Kirchner has destroyed its economy through socialist policies. She is the enemy of all productive enterprise, a threat to honest business, and a corrupter of morals through promotion of the notion that one's need entitles one to the fruit of another's labour.
We shall reap similar fruit in the US economy within the next 5 years or so for identical cause.
Argentina has been a serial defaulter on its debts. It issues the bonds, takes the money and stiffs the bondholders. It then picks them off one by one with cents on the dollar settlements.
These investor said no mas. If you want our money you have to agree that if any bonds are paid they all have to be paid so you can't play games trying to pick us off.
The US courts, including a recent decision of the US Supreme Court, said a contract is a contract and you have to pay up, which must have come as a shock to the corrupt socialists who run Argentina.
Oh yeah, sure, the problem isn’t a failed, dysfunctional, idiotic socialist nation that has already had ample experience marching itself into economic collapse — no no no, the problem is those eeevil capitalists.
Ayup, that’s the problem, capitalism. Couldn’t possibly be anything else.
Argentina has assets.
Rogoff and Reinhart wrote an excellent book about sovereign bankruptcies and bank crises, “This Time is Different.” After each bankruptcy, the government in question claims to be reformed, tightens up the ship, and then borrows and spends, convincing investors that “this time is different.” It’s Argentina, for god’s sake. Serial socialist deadbeats.
Remember, at the beginning of the 20th century Argentina was considered every bit as advanced as Europe or the US. Then it’s government went awry.
Now what is the lesson here .... don’t spend money you don’t have. Argentina spent money it didn’t have and now must pay it back.
Then its government went awry.
No, it went communist (socialist until they bring out the guns).
That’s how it went awry... at first.
Then the army went nuts, too.
Now Kirchner is socialist, again.
It’s like pong, with both extremes bad. It’s very hard to recover from either socialism or a military dictatorship.
"Argentina's population is overwhelmingly European in origin (principally from Spain and Italy); there is little mixture of indigenous peoples. An estimated 97% of the people are of European extraction, and 3% are mestizo, Amerindian, or of other nonwhite groups. The pure Amerindian population has been increasing slightly through immigration from Bolivia and Paraguay."
There’s a joke about Europe with the punchline “It’s organized by the Italians”. Maybe that’s part of the problem.
I don't think Obama ever read that in a newspaper. Certainly not before the GM bankruptcy.
Good point. Obummer was every bit as corrupt as Argentina in forcing a default of the GM bonds to benefit his union cronies.