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Gooooooood Mornin' Bueeeeenos Aaaairessss! Today is a good day to default or do you want to be solvent forever!? As we have stated many times, Argentina indeed represents the economic future of all countries on earth. A few days back a new cycle of default started and you have a front row seat to the upcoming debacle. This is going to be good. Think of it as a cross between a soap opera and a neverending story and as such creatively enough, we call it the neverending sopera. Allows us to introduce the main cast of characters of this unique edu-tainment development for this fall.


The "vulture" funds

These funds buy bonds from defaulted countries at a deep, deep discount (10 cents per USD or less) and then sue for full payment.


The Argentine government

These people struggle to bring social justice to the masses who are most in need, incessantly fighting against the evil, evil forces of greed.


The judge

The old uber-conservative judge of senile appearance that seems unable to understand that if you steal from Peter to pay Paul, this is no justice at all.


The bankers

Big bankers dealing and wheeling in the background and behind closed doors to get a deal going and so prevent loses.


The bond insurers

These financial institutions that insured Argentine bonds against default. There is one born every minute.


Long, long time ago (well not that much) there was a country called Argentina. Politicians wanted to stay in power at all costs and so they sold their souls to the unholy trinity: Tax, Borrow and Print. For a while it seemed to work. Power was retained in the hands that "deserved" it and all was well and good in the land. Until that dreadful day when the Treasurer burst-in shouting that lenders where picketing at the palace doors and threatening to tear them down.

"Not to worry" said the high priests of the Sacred Economic Faith; "we have the solution". We can create wealth out of thin air. We can do so through the magic of printing. And so they did. And so it seemed to work… for a little while at least. Eventually however, lenders started to reject newly minted color paper, people could not be taxed any more and printing was destroying the economy.

Argentina came to a sudden stop.

The ugly "D" word was used.

"Not to worry" said the politicians; we will offer you a deal. Give us the old worthless bonds and we will print some new ones at a deep, deep discount. This time however, we promise we will pay.

And so most lenders did, alas not the evil, evil vulture funds. They bought all those old bonds that nobody wanted and went crying to the judge: Iiiiiitssss Noooooo Faaaaaiiiirrrr!!!

And eventually the judge agreed. There was however a tiny flaw in the plan; there was no way to extort, pressure a sovereign to pay. "Not to worry" said the judge, we will steal stop other sovereign money circulating through these lands and you will be paid in full.

When the government tried to pay other lenders, their money was stopped by the judge… and the "D" word reappeared again. Then the fixers went to work on the vultures but achieved nothing. The suckers had to pay.


Most people and most websites out there are blaming the vulture funds for demanding full payment, blaming the judge for siding with the funds, blaming the banks for demanding payments, blaming the Argentine government for borrowing and not paying, blaming, blaming, blaming. Yet, somehow, nobody is blaming the real culprits for the real reasons. Let's go step by step.

Are vulture funds to be blamed?

No. They are operating within the idiotic rules and regulations that governments themselves set-up and agreed to.

Is the judge to be blamed?

No. The judge is also operating within the same rules.

Are the banks to be blamed?

No. They only lent money to an insolvent country.

Are politicians to be blamed?

Yes, because they did borrow too much, but there is more to this story.

Then who is to be blamed?

Central Bankers.

It is Central Bankers (and their sponsors) who developed and intoxicated people with funny money. It is Central Bankers who provided the means to politicians to create this debacle. Without the capacity to print endlessly, governments would have a very sensible borrowing ceiling. Banks would simply not lend if it was clear that countries could not pay… But then again, Banks would lend if they could be "insured". And who insured those loans? Other "financial institutions". And why would these institutions do so? Because politicians would come to the rescue should their insurance payment be triggered. It's the old "too big to fall" and "just say no to moral hazard" story.

And there you have it. In the end politicians are to blame. Full circle.


Of course, this is just the first pilot episode of this returning neverending Argentine sopera. Over the following days, weeks and months we can expect to see an ever increasing cast of characters dealing and wheeling their way through this swampy land called default. It will be a roller coaster. Deals will fall through and emotions run high. Impending doom will hang like Damocle's sword over Argentina and many tales will be spin. It will be a blast! Alas, eventually, all good things must come to an end. A reapproachemt will be achieved. Deals will be sealed. A new default cycle will begin.


Alas, while all the people will be transfixed by the mystery and suspense of the story, very few (if any) will be looking in the right direction and asking the correct question: if Argentina is in default, why is it restructuring is debt instead of just defaulting?

Ahhhh grasshopper, excellent question!

The answer however, is trivial: money. You see, to a degree Argentina is the golden goose. Banks loan money that does not exist (since it was created out of thin air) and in return they receive real money. If in the process they lose 50% of more, who cares! The money lent never existed in the first place!

However, if Argentina is allow to outright default, the game is up! No more golden goose. And so the great game of exploiting suckers continues afoot for as long as there are politicians in power to sustain it and support it.

Game over.


A new Argentine default cycle has begun. You have the opportunity to watch it as it unfolds in real time. Get to know it because eventually it will come to a country near you. Whether you like it or not. And unfortunately, you have no choice in this matter.

Note: please see the Glossary if you are unfamiliar with certain words.

PS.: just for fun, it is possible to pinpoint the exact day the Argentine default was inevitable. Take a look at the graph below. On Jan 31, 2014 the yearly inflation surpassed the 25% mark and kept rising. That day Argentine faith was sealed (for the duration of this evolution).

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