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zugzwang

Argentina Running Out Of Options

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Three things I do know when TSHF:

1. Everything is priced in USD.

2. All correlations tend to one.

3. Default/confiscation may prove more acceptable than hyperinflation.

Sober Look

Thursday, September 25, 2014

With Argentina's private sector in disarray, Cristina Fernandez de Kirchner's government has been forced to increasingly bail out failing businesses, particularly importers that are critical to Argentina's stability. The nation's fiscal problems are escalating rapidly as it undertakes what amounts to a form of nationalization.

A great deal of hard currency now goes to support domestic importers (that are forced to sell at a loss to keep prices under control) and the country is becoming desperate for dollars needed to import the products the population needs. In the past, some of the greatest sources of foreign currency for Argentina have been grain exports, particularly soy.

Except there's a problem...

Cash%2Bsoybeens%2Bprice.PNG

With fiscal deficit growing rapidly and access to international markets shut off due to the recent default, Argentina's central bank has been doing the only thing a central bank can do in this situation - monetize the deficit by printing more pesos. This has resulted in inflation levels of over 36% this summer and probably even higher currently. Not quite Zimbabwe levels yet, but moving in that direction.

http://soberlook.com/2014/09/argentina-running-out-of-options.html

Edited by zugzwang

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Perhaps they could just default fully/totally, and then live within their means? I know its a strange thing these days, but how about they just only spend what they actually have as opposed to racking up mountains of debt?

Edited by Errol

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If Argentina goes for a second time are they likely to bring anything big down.

Indeed my friend. The Asian 1998 crisis started with some bad real estate deals in Thailand, then spread throughout the pacific.

From small acorns...

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Perhaps they could just default fully/totally, and then live within their means? I know its a strange thing these days, but how about they just only spend what they actually have as opposed to racking up mountains of debt?

Indeed, governments should NEVER run a deficit. There is no reason to borrow today and repay tomorrow. Spending should be nice and stable.

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Perhaps they could just default fully/totally, and then live within their means? I know its a strange thing these days, but how about they just only spend what they actually have as opposed to racking up mountains of debt?

Eh? Wha are you going on about you mad fool!

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Why should they as no other country lives within their means. Milipede didn't even mention our deficit in his speech as it is of no consequence. Without all of this debt the world's economies would be in trouble.

milliband and co do not understand having to EARN a living..end of.

they have grown up in state subsidised universities,studying marxist courses, then gone to a state subsidised job as a political researcher/intern for mainstream party, then gone on to be a state subsidised MP.

they can spout out as many clever ideas as they like,but the crunch comes when someone says "ok, give me your business plan.

that's what the banks do before they loan to a small business.

..and even then the failure rate is probably 50-60%

what joe public needs to do now is say to these people what the banks would do.

"show me the business plan before I hand out my hard earned cash....what's in it for me?"..oh, and by the way, if I do lend to you, I expect you to keep your promises.

long-winded promises are not enough..he wouldn't last 5 minutes in real business,I doubt he'd make it past the first quarter of an hour on dragons den either.

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Indeed, governments should NEVER run a deficit. There is no reason to borrow today and repay tomorrow. Spending should be nice and stable.

Corrected for you.

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Perhaps they could just default fully/totally, and then live within their means? I know its a strange thing these days, but how about they just only spend what they actually have as opposed to racking up mountains of debt?

Who would buy Putin's oil and gas?

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Why should they as no other country lives within their means. Milipede didn't even mention our deficit in his speech as it is of no consequence. Without all of this debt the world's economies would be in trouble. different, but not in debt and the debt owners would be far less wealthy/powerful.

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Five years on from the last debt crisis and the world is facing yet another 'Minsky moment'.

http://www.cnbc.com/id/102035634

The world's three economic superpowers - the U.S., China and Europe - are heading for a major collapse in asset values because their economic models favor consumption instead of productivity, one economist has warned.

"We're still not wise enough to realize that our current model is a 'Ponzi' scheme rushing toward its inevitable 'Minsky moment'," Steen Jakobsen, a chief economist at Danish investment bank Saxo Bank, said in a research note on Friday.

The term "Minsky moment" refers to a phrase coined for the Asian debt crisis of the late 1990s by Pimco's Paul McCulley.

Unsustainable debt will be the cause of the crash, according to Jakobsen, and will occur when the cash returns on assets become insufficient to service the debt taken on to acquire those assets in the first place. He gives no timeframe for his thesis but says that the problem of huge debts has been swept under the carpet by central bankers and policymakers and will come back as low inflation or even deflation. "We're still working with the same dog-eared script we were introduced to all of five years ago," he said. "Maintain sufficiently low interest rates to service the debt burden, pretend to have credible plan, but never address the structural problem and simply buy more time. But while we were able to get away with this theme for an awfully long time, the dynamic is now changing."

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http://www.bbc.co.uk/news/world-latin-america-30014214

Tax officials have raided more than 70 financial organisations across Argentina, in what they say is an operation targeting money-laundering.

Agents targeted banks, currency exchange shops and other institutions in Buenos Aires and various provinces.

Officials accused them of tax avoidance and of facilitating capital flight out of the country.

Earlier this month, Argentina temporarily suspended the operations of Procter and Gamble, alleging tax fraud.

Argentina has been controlling access to foreign currency to try to maintain its falling central bank reserves.

A desperate cash grab?

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