Vultures Circling Argentina, Disconnect At The Fed

In General Interest by Jonathan Tasini0 Comments

It might look these events are completely unrelated but there is a tie between the extortion underway of Argentina courtesy of a hedge fund, on the one hand, versus the cluelessness at the Federal Reserve Board about what is actually happening to real people.

The vulture is Paul Singer, the hedge fund billionaire who runs Elliott Management. The very short story is that he won’t take a discount on bonds he holds from Argentina’s defaulted bonds–contrary to just about all the rest of the claimants who negotiated a deal with Argentina that would still hand them a nice tidy 300 percent profit.

Argentina is trying to get some legislation passed in the U.S. to help out but certainly this sums it up:

Argentina has refused to pay the holdouts, calling them vultures whose actions are akin to extortion, comments which were repeated by Mr. Kicillof on Wednesday. Both sides failed to reach a court-mediated settlement last month, and on July 30, Argentina slipped into a default after a $539 million interest payment to other bondholders was blocked.

On Wednesday, Mr. Kicillof said the government would extend the option to swap the original bonds with those to be issued under Argentine law to its holdout investors who did not participate in previous debt restructurings.

“Mr. Singer can come here and show up at the counter and receive payment, obtaining a 300 percent profit,” Mr Kicillof said. But, he added, “that isn’t enough for Mr. Singer because he’s a vulture.”

Now, over at the Fed, there is a different kind of vulture but one that also prays at the altar of the bond market. This little cabal of vultures thinks, well, things are doing so much better in the U.S. that the Fed should start raising interest rates:

An increasingly vocal group of dissenters, however, saw evidence that the Fed had nearly exhausted its ability to repair damage caused by the recession. They argued that the Fed must retreat quickly to maintain control of inflation.

…Some officials see all of this as evidence that the Fed is rapidly approaching the limits of its abilities. One voting member of the committee, Charles Plosser, president of the Federal Reserve Bank of Philadelphia, dissented at the July meeting, arguing that it was time for the Fed to signal that it was getting closer to raising interest rates.

According to the minutes, some other officials who do not vote this year also were “increasingly uncomfortable with the committee’s forward guidance” that rates are likely to remain low for some time.

But, you can only view the economy as improving so much from the vantage point of the privileged, not from the seat of the regular person, millions of whom can’t pay the bills or find decent paying work.

The point is that, underneath both events, is the same problem: the financial mandarins still call the shots and are always looking for a way to fuck the regular person, whether s/he lives in Argentina or on Main Street U.S.A.

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