Wednesday, July 30, 2014

D Day for thee, Argentina

It's the 30th of July, and that means Argentina has to belly up to the bar in New York and pay their overdue tab;
Despite the defiant tone of the government, many people seem resigned. Argentina has defaulted before and it will do it again.
I met Carina Etchegaray, the mother of two children aged 14 and 16.
When Argentina last defaulted at the end of 2001, she lost huge amounts of savings.
She had wanted to buy a house for her young family. But at the end of 2001, the government introduced what was known as the "corralito". It literally means a small enclosure in Spanish, but refers to when the government partially froze bank accounts and people were stopped from taking money out.
"When we finally had the money, because of devaluation, we could only buy a car for the same quantity of money we had for a house," she says.
But she is also practical.
"We live with this shadow of crisis. You have to continue with your life because you have children and have to work.
"You have to adapt - in this country, it's the way of life."
What we've bolded in the above ought to warm the cockles of Scott Sumner's Market Monetarist heart, but what's a nice girl like Cristina Kirchner doing in a place like New York federal court?

Well, to make a long story short, the 'way of life' (weaker than weak rule of law) in Argentina meant that if you want to sell sovereign bonds to the world (i.e., borrow their money) you have to subject yourself to an authority where they haven't (yet) hanged all the lawyers.

In which case 'the vultures' will come home to roost, eventually. Como hoy. If they didn't, international finance as it is known, will be changed drastically, to the detriment of just about everyone.

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