Headline: Argentina is in default, says Standard & Poor’s
Sub-headline: Restructuring plan amounts to the ninth time that the country has reneged on its debt
Argentina has defaulted on its debt, according to Standard & Poor’s, the rating agency, after it announced plans to delay payments on its $101bn of borrowings.
Standard & Poor’s like the other ‘rating agencies’ are bankrupt!
Headline : The Indisputable Role of Credit Ratings Agencies in the 2008 Collapse, and Why Nothing Has Changed
The role of the credit ratings agencies during the financial crisis remains highly criticized and mostly unaccountable. The agencies have been blamed for exaggerated ratings of risky mortgage-backed securities, giving investors false confidence that they were safe for investing. While criticizing the ratings by credit ratings agencies in an op-ed for The New York Times, columnist Paul Krugman wrote, “The skewed assessments, in turn, helped the financial system take on far more risk than it could safely handle.” In 2011, the Financial Crisis Inquiry Commission found that these ratings agencies “were key enablers of the financial meltdown.”
Germany defaulted four times in the 20th Century as reported in this newspaper:
For a couple of minutes Friedman then offered a brief review of western financial history, highlighting the unprecedented nature of Europe’s single currency experiment, and offering a description of sovereign and local government defaults in the 20th century. Then, with an edge to his voice, Friedman pointed out that one of the great beneficiaries of debt forgiveness throughout the last century was Germany: on multiple occasions (1924, 1929, 1932 and 1953), the western allies had restructured German debt.
When do the Posh Boys at The Financial Times admit that Neo-Liberalism is not just an utter failure, but a catastrophe? There is more about Macri political defeat, and ‘The Three’ lowering Argentina’s credit rating- the corrupt ‘rating’ the incompetent?
Argentina’s bonds and currency have slumped since Mr Macri — who had been a popular figure with international investors — suffered an unexpectedly heavy defeat in a primary election which all but ended his hopes of re-election in October.
The result of the primary election had already seen two of the big three rating agencies lower Argentina’s credit rating.
Next in line is the Financial Times’ Editorial Board’s intervention:
Headline: Argentina’s debt debacle poses a difficult choice
Sub-headline: Addiction to US dollar borrowing is haunting the country once again
Argentina is hurtling towards another disorderly debt default. It would be the ninth in the country’s history. The timing is highly unusual, coming two months before a presidential election and less than a year into an IMF bailout that had already been increased. But it is also a recognition of reality. IMF assumptions on Argentina’s ability to roll over its short-term debt proved wildly optimistic in the face of political uncertainty. A recent central-bank auction that covered only a fraction of the debt falling due highlighted how much Argentina is struggling to refinance its vast and largely US dollar-denominated debt pile.
The resounding defeat of President Mauricio Macri in a nationwide primary election on August 11 triggered protracted financial market turbulence. The currency has weakened by about 25 per cent since the vote, taking the country’s ratio of public debt to gross domestic product — 86 per cent at the end of 2018 — to something closer to 100 per cent. The finance ministry announced late on Wednesday that Argentina will seek a “voluntary reprofiling” of its debt, though describing the problem as “liquidity stresses” rather than a solvency issue. The distinction does not matter. Maturity extensions are classified as defaults by rating agencies. And institutional investors have been given no choice in the delay in repayment of $7bn in short-term debt imposed by the government. Argentina will now try to negotiate a restructuring on the rest of its debt, split between $44bn in repayments to the IMF and $50bn in international bonds. Any swift agreement will be difficult to achieve.
The reader notes that Macri is given a bit of a scolding by @FT: his ‘Austerity Lite’ wasn’t strong enough medicine. In sum, Market Discipline must cause suffering to insure ‘salvation‘. This, the Party Line of the Free Market Mythology in route!
The country’s economic problems are deep rooted. But Mr Macri bears some responsibility for not tackling them more robustly. Years of outsized fiscal and current account deficits are only now being reined in — the latter thanks more to a collapse in imports than to any sustained improvement in exports. Had Mr Macri accelerated fiscal consolidation at the start of his term four years ago and relied more heavily on domestic financing, Argentina’s vulnerabilities would be much lower. This “original sin” problem has been the country’s downfall time and again.
The editors then consider Macri’s responsibility in this debacle, eliding from their narrative the why of the near free-fall of the peso, but most importantly, the continuing proof that Neo-Liberalism is a spent force.
With the exception of Macron’s ‘Reforms’, that are not just haunted by both the gilets jaunes and gilets noirs, but a generalized political discontent, defined by the 36.5% of ‘spoiled ballots’ in the final vote: that can, given the right circumstance, lead to open rebellion!