…who cares? Serious question this one, and the following swear word is necessary for emphasis:
Who. Fucking. Cares?
1) Not the rest of the world. They’ll just shrug their collective shoulders, let their brain-dead hacks write them a “Don’t Cry For Me…” headline, then get back to whatever sports program or TV series they prefer.
2) Not Argentina. This one’s quite important by the way, it’s basic point behind the writing this post in fact. For one thing Argentina’s been through defaults before, its population knows how to handle the jive. For another, it’s not as if the economy’s doing that badly. For yet another and wildly unlike 2001/2002, the country has access to U.S. Dollars via its own reserves, via deal (e.g. China last week) and via selling things to other places (start with soybeans, work down the list). It’s not a perfect economic position (inflation) and there are other structural weaknesses, but it’s not the edge-of-collapse postion the BS-merchants and CFK-oppo press try to make it out to be. Argentina’s doing ok and it’ll do just fine even if an indefinite closure to international debt capital via the world markets is in its near future. Not only that, but this battle has been framed in such an us-vs-them way that the CFK govt has the general support of its population against ‘the vultures’.
3) But the vulture funds care. That’s because they’re not getting their cash next week, which is precisely why they’re currently kicking up all this fuss now because really, those guys understand the dirty little secret that is point 2) above and know their leverage position is tenuous at best and more likely non-existent. We repeat; Argentina does not need to do a deal here and it can decide to ignore Griesa’s ruling with little or no damage done, barring the headlines you’ll get for a while. And semi-on-topic I’ll bet you several dollars to the proverbial donut that Mr. Singer now regrets all that BS he tried to pull by embargoing the ANA Libertad in Ghana last year, because that’s exactly the type of thing you don’t do to a sovereign nation without getting it returned to you with interest (pardon the pun).
4) The other people who care are the non-holdout bondholders, because they’re not getting their interest payments even though Argentina sent the payment out to the relevant clearing banks. Kinda wonder if judge Griesa’s going to be defending a case soon, instead of merely judging one.
The bottom line here is that Argentina doesn’t need to pay and it can fall into default, because 1) the consequences for the country are much better than the chain reaction that it might (repeat might, lot of discussion over RUFO right now) set off if it pays and 2) the consequences for the country really aren’t that bad even compared to a neutral position. In fact (slightly off-topic) it’s a bit like the “award” Gold Reserve (GRZ) might get awarded in a few weeks time in its ICSID case versus Venezuela; who’s gonna write your cheque, Doug?
Back on-subject now and this is at least part of the point I alluded to a couple of days ago in this post, the bit about the difference between the law and justice. Yes for sure the law says that Argentina defaults and it’s in the wrong, but only according to the eyes of the law, which in this case is personified by a dusty idiot of a biased judge in New York who should have been put out to grass a decade ago and is showing signs of Alzheimer’s. Therefore Argentina can and indeed will ignore this book-driven law and bide its time until the real terms of agreement are struck and that will only happen via true justice, a far more powerful thing than a mere law.