Argentina

[imoldernu]

No doubt you've read about the situation in Argentina. While most here are not deep into international bonds, there are 196 countries that the US recognizes. Almost all are involved in debt, backed by bonds. We don't often hear of this as most portfolios are not based in high risk bonds, but the world market is involved, and indirectly, part of the national debt/income too.
An interesting subject, currently in flux, but soon to be forgotten. You might be interested in this June 2017 article that dealt with Argentina, and previous defaults.
https://www.ft.com/content/5ac33abc-551b-11e7-9fed-c19e2700005f
Maybe a reason to notice comparative debts involving other countries in the financial news, as well as U.S. Corporations.
edit ... oops.. the article may be behind a firewall (Financial Times). There will be many articles about the same subject. The articles reviewed previous bankruptcies.

 

[Senator]

Argentina was one of the richest countries in the world ~1900. They declined as many countries do, when they ran out of money to support all the social programs that were started.

 

[joeea]

Argentina was one of the richest countries in the world ~1900. They declined as many countries do, when they ran out of money to support all the social programs that were started.

Or, they declined as many countries do, when their political structures crumbled and the Great Depression hit.

 

[Running_Man]

 

[CyclingInvestor]

Or, they declined as many countries do, when their political structures crumbled and the Great Depression hit.

If it were just one or two times, perhaps, but Argentina has defaulted or narrowly avoided default 7 (or 8, depending on the source) times in the last 200 years, starting in 1827. There have been additional provincial defaults.

 

[imoldernu]

U.S. Long Bond.

The rate on 30-year Treasury bonds approached an all-time low and a closely monitored section of the U.S. yield curve hurtled closer to inversion as investors sought shelter amid a fraught geopolitical backdrop.

The yield on the long bond tumbled as much as 14 basis points to 2.12%, closing in on its record-low of 2.0882% from July 2016. The rate on 10-year notes dropped as much as 12 basis points to 1.63% and the securities at one point yielded just 5 basis points more than two-year notes. That’s the flattest that part of the curve has been since 2007.

https://www.bloomberg.com/news/articles/2019-08-12/u-s-30-year-yield-drops-to-fresh-2019-low-nearing-record-level

 

[Running_Man]

SO as this chart shows it is possible for an entire market to have a day where 50% of the value evaporates. Argentina's stock market capitalization on Friday was about 160 billion.

 

[imoldernu]

SO as this chart shows it is possible for an entire market to have a day where 50% of the value evaporates. Argentina's stock market capitalization on Friday was about 160 billion.

Yeah... and we can spend even faster...

https://www.cnsnews.com/news/article/terence-p-jeffrey/3727014000000-federal-spending-sets-record-through-july-treasury-runs

(CNSNews.com) - The federal government spent a record $3,727,014,000,000 in the first ten months of fiscal 2019 (October through July), according to the Monthly Treasury Statement released today.

While spending that record $3,727,014,000,000, the government ran a deficit of $866,812,000,000.

$866,812,000,000 that's $866+ Billion

 

[Theo]

$866,812,000,000 that's $866+ Billion

That government deficit is equal to private sector and foreign surpluses. It is not a problem.

Argentina's problem is they keep pegging their currency to the dollar and borrowing in dollars. If the US borrowed in Euros, it could wind up with the same issues potentially.

 

[Running_Man]

That government deficit is equal to private sector and foreign surpluses. It is not a problem.

Argentina's problem is they keep pegging their currency to the dollar and borrowing in dollars. If the US borrowed in Euros, it could wind up with the same issues potentially.

One has to borrow in the currency of the person willing to lend. And if you want to purchase goods that are sold in dollars, you may need to buy in dollars as the central bank of a company that just issues currency, as in Venezuela, quickly can buy nothing.

The same is true with China, if they want to import they pay primarily in dollars not yuan because the dollar is the reserve currency, at least for the time being. Euros are ok if you are dealing with a European company but beyond that have little function at this point. Which is why most governments have large supplies of gold, to convert to currency needed in a time of extreme stress.

 

[unclemick]

One has to borrow in the currency of the person willing to lend. And if you want to purchase goods that are sold in dollars, you may need to buy in dollars as the central bank of a company that just issues currency, as in Venezuela, quickly can buy nothing.

The same is true with China, if they want to import they pay primarily in dollars not yuan because the dollar is the reserve currency, at least for the time being. Euros are ok if you are dealing with a European company but beyond that have little function at this point. Which is why most governments have large supplies of gold, to convert to currency needed in a time of extreme stress.

One Angus Maddison used to publish world economies (estimates) by GDP from 1 AD to 2008. Some of his other work noted where Markets went 'poof'. Egypt is one I seem to recall. Can't remember which forum/person used to mention him a lot.

? Does 'crowd funding' and bitcoin have any role in all this ?

heh heh heh -

 

[Cut-Throat]

Argentina was one of the richest countries in the world ~1900. They declined as many countries do, when they ran out of money to support all the social programs that were started.

Nope! Quite the opposite..... Pretty sure of where you get your misinformation from.....


https://en.wikipedia.org/wiki/Economic_history_of_Argentina

 

[Senator]

Nope! Quite the opposite..... Pretty sure of where you get your misinformation from.....


https://en.wikipedia.org/wiki/Economic_history_of_Argentina

I get it from the link you posted. Is wikipedia not a good source?

During the first three decades of the 20th century, Argentina outgrew Canada and Australia in population, total income, and per capita income. By 1913, Argentina was the world's 10th wealthiest state per capita.

In 1913, the country's income per head was on a par with that of France and Germany, and far ahead of Italy's or Spain's. At the end of 1913, Argentina had a gold stock of £59 million, or 3.7% of the world's monetary gold, while representing 1.2% of the world's economic output.

Automobile ownership in the country in 1929 was the highest in the Southern hemisphere.

In the early 1970s, per capita income in Argentina was twice as high as in Mexico and more than three times as high as in Chile and Brazil.

... domestic firms could not compete with foreign imports because of the overvalued currency and long-term structural problems.

Growing government spending, large wage raises, and inefficient production created a chronic inflation that rose through the 1980s, when it briefly exceeded an annual rate of 1000%.

 

[Cut-Throat]

I get it from the link you posted.

Please tell me where you got YOUR statement of


"when they ran out of money to support all the social programs that were started."


Have you even been to Argentina?

 

[Senator]

Please tell me where you got YOUR statement of

"when they ran out of money to support all the social programs that were started."

Have you even been to Argentina?

They had too much government spending. Most Government spending is for Social Programs, no matter what country you are in.

 

[Cut-Throat]

They had too much government spending. Most Government spending is for Social Programs, no matter what country you are in.

Not True.... Have you ever looked at the U.S. Defense Spending and Interest on the Debt? And then there is a severe under payment of Taxes at the higher income levels.

Also, if you believe that Social Security in the U.S is contributing to the National Debt, it actually has a $2.7 Trillion Dollar Surplus and has never contributed to the Debt.

 

[Gringoretirado]

Actually it is right in the same article:


Beginning in 1947, Perón took a leftward shift after breaking up with the "Catholic nationalism" movement, which led to gradual state control of the economy, reflected in the increase in state-owned property, interventionism (including control of rents and prices) and higher levels of public inversion, mainly financed by the inflationary tax. The expansive macroeconomic policy, which aimed at the redistribution of wealth and the increase of spending to finance populist policies, led to inflation.[97]

 

[Senator]

Not True.... Have you ever looked at the U.S. Defense Spending and Interest on the Debt?

What was Argentina's defense budget? That is the topic.

What do you think caused Argentina's decline? Not enough spending?

Edit: The USA's defense budget is 16.2% of total expenditures, mandatory and non mandatory. Interest is about 6%.

 

[Cut-Throat]

What was Argentina's defense budget? That is the topic.

What do you think caused Argentina's decline? Not enough spending?

Edit: The USA's defense budget is 16.2% of total expenditures, mandatory and non mandatory. Interest is about 6%.

"The single most important factor in this decline has been political instability since 1930, when a military junta took power, ending seven decades of civilian constitutional government."


Government Corruption ....


https://en.m.wikipedia.org/wiki/Dirty_War

 

[Senator]

"The single most important factor in this decline has been political instability since 1930, when a military junta took power, ending seven decades of civilian constitutional government."


Government Corruption ....


https://en.m.wikipedia.org/wiki/Dirty_War

Doesn't Argentina elect their own government by a vote?

 

[brett]

Hoping that in a few months our local supermarket will be blowing out cases of very well priced Argentine Malbec!

 

[copyright1997reloaded]

Wikipedia, the indisputable source.

I wonder what happens in economies that "eat the rich"?

Argentina has a "Universal Child Allowance" (universal income anyone?). Argentina has a 35% max tax rate (on income above approximately $9500 USD). Argentina social security tax is about 17%, scheduled to increase to about 19.5% in 2022. Argentina has a medical tax of 6%.

Argentina has a wealth tax on worldwide asset holdings of individuals. This tax applies to individuals with assets over (approximately) $5000 USD, and the rate is 0.5% of the amount over AR$305,000 (approximately $5000 USD) increasing to 1.25% of amounts over AR$500,000. Assets held in Argentina institutions are exempt.

Argentina also has a value-added tax, and a financial transaction tax.

I'm certainly not an expert on Argentina, but do espouse the viewpoint that one of the major advantages the USA has had has been a relatively stable political system, where the losers lose gracefully and prepare for the next peaceful election. Another major factor has been the general sanctity of contract law and to have (in general) agreements that can be counted on being upheld in a court of law.

 

[Senator]

Wikipedia, the indisputable source.

I wonder what happens in economies that "eat the rich"?

Wasn't there a Goose story at one time about this? Or a Little Red Hen story? Or a Grasshopper story?

 

[MarieIG]

Wasn't there a Goose story at one time about this? Or a Little Red Hen story? Or a Grasshopper story?

Speaking with relatives who lived "behind the iron curtain" (as well as some hard-working immigrants from those countries) it was beyond awful with bread lines, poor living conditions, poor medical care, loss of freedom, and everyone - with the exception of some corrupt government officials living in poverty.

The (non-family) immigrants who spoke with me were educated but came over with nothing, took menial jobs, saved money, bought property, sent their children to college, etc. One became a major land lord in NYC, owning commercial properties, and now has four children who are medical professionals. Another is a hard working, successful GC. They do not support the "eating of the rich," rather - they support the ability to work hard, become successful and enjoy the fruits of their efforts.

(Yes, I have also seen people who have immigrated, immediately went on social programs, and never paid a penny in taxes. These are not those people.)

 

[Senator]

The (non-family) immigrants who spoke with me were educated but came over with nothing, took menial jobs, saved money, bought property, sent their children to college, etc. One became a major land lord in NYC, owning commercial properties, and now has four children who are medical professionals. Another is a hard working, successful GC. They do not support the "eating of the rich," rather - they support the ability to work hard, become successful and enjoy the fruits of their efforts.

That is the beauty of the idea of America. If you can dream it, you can live it. America is an idea, not a country. We do have a physical presence, but it is the idea that draws people to the physical country. There is nothing physical we have here that other countries do not also have.

In Argentina, people were promised more than the Government could deliver, and the people fell for it. Their government is elected by the people, just like they are in Mexico and Venezuela. The majority of the voters were envious of other people, and did not want to put in the work required to achieve the lifestyle they wanted.

The Government spent money they did not have, and could/cannot pay it back.

It's OK to not put in the extra work, but it becomes a problem if you want to live the lifestyle of the extra work.