Argentina is finally going cold turkey and ending the debt shell game Many other countries need to do this as well. They all have a rising middle class that is quite able to support a local currency and properly deploy it. Thus it can all be readily internalized and any foreign currency reserves used to accommodate trade.
What made Argentina so difficult anyway is that these loans were all siphoned off into private hands offshore. In short they were stolen with the certain connivance of the lenders themselves. All that came from it was a market for peddling internal debt purportedly back by offshore capital. now you see it, now you don't.
Plenty of real business happened but it was all large projects that never needed any real help. transitioning into a proper internal capital system will allow these countries to thrive.
Colonization by Bankruptcy: The High-Stakes Chess Match for Argentina
Tuesday, 26 August 2014 10:09
By Ellen Brown, The Web of Debt Blog | News Analysis
http://truth-out.org/news/item/25808-colonization-by-bankruptcy-the-high-stakes-chess-match-for-argentina
If Argentina were in a high-stakes chess match, the country’s actions this week would be the equivalent of flipping over all the pieces on the board.
– David Dayen, Fiscal Times, August 22, 2014
Argentina is playing hardball with the vulture funds, which have been
trying to force it into an involuntary bankruptcy. The vultures are
demanding what amounts to a 600% return on bonds bought for pennies on
the dollar, defeating a 2005 settlement in which 92% of creditors agreed
to accept a 70% haircut on their bonds. A US court has backed the
vulture funds; but last week, Argentina sidestepped its jurisdiction by
transferring the trustee for payment from Bank of New York Mellon to its
own central bank. That play, if approved by the Argentine Congress,
will allow the country to continue making payments under its 2005
settlement, avoiding default on the majority of its bonds.
Argentina is already foreclosed from international capital markets,
so it doesn’t have much to lose by thwarting the US court system.
Similar bold moves by Ecuador and Iceland have left those countries in
substantially better shape than Greece, which went along with the
agendas of the international financiers.
The upside for Argentina was captured by President Fernandez in a
nationwide speech on August 19th. Struggling to hold back tears, according to Bloomberg, she said:
When it comes to the sovereignty of our country and the conviction that we can no longer be extorted and that we can’t become burdened with debt again, we are emerging as Argentines.
. . . If I signed what they’re trying to make me sign, the bomb wouldn’t explode now but rather there would surely be applause, marvelous headlines in the papers. But we would enter into the infernal cycle of debt which we’ve been subject to for so long.
The Endgame: Patagonia in the Crosshairs
The deeper implications of that infernal debt cycle were explored by Argentine political analyst
Adrian Salbuchi in an August 12th article titled “Sovereign Debt for Territory: A New Global Elite Swap Strategy.”
Where territories were once captured by military might, he maintains
that today they are being annexed by debt. The still-evolving plan is to
drive destitute nations into an international bankruptcy court whose
decisions would have the force of law throughout the world. The court
could then do with whole countries what US bankruptcy courts do with
businesses: sell off their assets, including their real estate.
Sovereign territories could be acquired as the spoils of bankruptcy
without a shot being fired.
Global financiers and interlocking megacorporations are increasingly
supplanting governments on the international stage. An international
bankruptcy court would be one more institution making that takeover
legally binding and enforceable. Governments can say no to the
strong-arm tactics of the global bankers’ collection agency, the IMF. An
international bankruptcy court would allow creditors to force a nation
into bankruptcy, where territories could be involuntarily sold off in
the same way that assets of bankrupt corporations are.
For Argentina, says Salbuchi, the likely prize is its very rich
Patagonia region, long a favorite settlement target for ex-pats. When
Argentina suffered a massive default in 2001, the global press,
including Time and The New York Times, went so far as to propose that Patagonia be ceded from the country as a defaulted debt payment mechanism.
The New York Times article followed one published in the Buenos Aires financial newspaper El Cronista Comercial called “Debt for Territory,” which described a proposal by a US consultant to then-president Eduardo Duhalde for swapping public debt for government land. It said:
[T]he idea would be to transform our public debt default into direct equity investment in which creditors can become land owners where they can develop industrial, agricultural and real estate projects. . . . There could be surprising candidates for this idea: during the Alfonsin Administration, the Japanese studied an investment master plan in Argentine land in order to promote emigration. The proposal was also considered in Israel.
Salbuchi notes that ceding Patagonia from Argentina was first
suggested in 1896 by Theodor Herzl, founder of the Zionist movement, as a
second settlement for that movement.
Another article published in 2002 was one by IMF deputy manager Anne
Krueger titled “Should Countries Like Argentina Be Able to Declare
Themselves Bankrupt?” It was posted on the IMF website and proposed
some “new and creative ideas” on what to do about Argentina. Krueger
said, “the lesson is clear: we need better incentives to bring debtors
and creditors together before manageable problems turn into full-blown
crises,” adding that the IMF believes “this could be done by learning
from corporate bankruptcy regimes like Chapter 11 in the US”.
These ideas were developed in greater detail by Ms. Krueger in an IMF
essay titled “A New Approach to Debt Restructuring,” and by Harvard
professor Richard N. Cooper in a 2002 article titled “Chapter 11 for
Countries” published in Foreign Affairs (“mouthpiece of the powerful New York-Based Elite think-tank, Council on Foreign Relations”). Salbuchi writes:
Here, Cooper very matter-of-factly recommends that “only if the debtor nation cannot restore its financial health are its assets liquidated and the proceeds distributed to its creditors – again under the guidance of a (global) court” (!).
In Argentina’s recent tangle with the vulture funds, Ms. Krueger and
the mainstream media have come out in apparent defense of Argentina,
recommending restraint by the US court. But according to Salbuchi, this
does not represent a change in policy. Rather, the concern is that
overly heavy-handed treatment may kill the golden goose:
. . . [I] n today’s delicate post-2008 banking system, a new and less controllable sovereign debt crisis could thwart the global elite’s plans for an “orderly transition towards a new global legal architecture” that will allow orderly liquidation of financially-failed states like Argentina. Especially if such debt were to be collateralized by its national territory (what else is left!?)
Breaking Free from the Sovereign Debt Trap
Salbuchi traces Argentina’s debt crisis back to 1955, when President
Juan Domingo Perón was ousted in a very bloody US/UK/mega-bank-sponsored
military coup:
Perón was hated for his insistence on not indebting Argentina with the mega-bankers: in 1946 he rejected joining the International Monetary Fund (IMF); in 1953 he fully paid off all of Argentina’s sovereign debt. So, once the mega-bankers got rid of him in 1956, they shoved Argentina into the IMF and created the “Paris Club” to engineer decades-worth of sovereign debt for vanquished Argentina, something they’ve been doing until today.
Many countries have been subjected to similar treatment, as John Perkins documents in his blockbuster exposé Confessions of an Economic Hit Man.
When the country cannot pay, the IMF sweeps in with refinancing
agreements with strings attached, including selling off public assets
and slashing public services in order to divert government revenues into
foreign debt service.
Even without pressure from economic hit men, however, governments
routinely indebt themselves for much more than they can ever hope to
repay. Why do they do it? Salbuchi writes:
Here, Western economists, bankers, traders, Ivy League academics and professors, Nobel laureates and the mainstream media have a quick and monolithic reply: because all nations need“investment and investors” if they wish to build highways, power plants, schools, airports, hospitals, raise armies, service infrastructures and a long list of et ceteras . . . .
But more and more people are starting to ask a fundamental common-sense question: why should governments indebt themselves in hard currencies, decades into the future with global mega-bankers, when they could just as well finance these projects and needs far more safely by issuing the proper amounts of their own local sovereign currency instead?
Neoliberal experts shout back that
government-created money devalues the currency, inflates the money
supply, and destroys economies. But does it? Or is it the debt service
on money created privately by banks, along with other forms of “rent” on
capital, that create inflation and destroy economies? As Prof. Michael Hudson points out:
These financial claims on wealth – bonds, mortgages and bank loans – are lent out to become somebody else’s debts in an exponentially expanding process. . . . [E]conomies have been obliged to pay their debts by cutting back new research, development and new physical reinvestment. This is the essence of IMF austerity plans, in which the currency is “stabilized” by further international borrowing on terms that destabilize the economy at large. Such cutbacks in long-term investment also are the product of corporate raids financed by high-interest junk bonds. The debts created by businesses, consumers and national economies cutting back their long-term direct investment leaves these entities even less able to carry their mounting debt burden.
Spiraling debt also results in price inflation, since businesses have
to raise their prices to cover the interest and fees on the debt.
From Sovereign Debt to Monetary Sovereignty
For governments to escape this austerity trap, they need to spend not
less but more money on the tangible capital formation that increases
physical productivity. But where to get the investment money without
getting sucked into the debt vortex? Where can Argentina get funding if
the country is shut out of international capital markets?
The common-sense response, as Salbuchi observes, is for governments
to issue the money they need directly. But “printing money” raises
outcries that can be difficult to overcome politically. An alternative
that can have virtually the same effect is for nations to borrow money
issued by their own publicly-owned banks. Public banks generate credit
just as private banks do; but unlike private lenders, they return
interest and profits to the economy. Their mandate is to serve the
public, and that is where their profits go. Funding through their own
government-issued currencies and publicly-owned banks has been
successfully pursued by many countries historically, including
Australia, New Zealand, Canada, Germany, China, Russia, Korea and Japan.
(For more on this, see The Public Bank Solution.)
Countries do need to be able to buy foreign products that they cannot
acquire or produce domestically, and for that they need a form of
currency or an international credit line that other nations will accept.
But countries are increasingly breaking away from the oil- and
weapons-backed US dollar as global reserve currency. To resolve the
mutually-destructive currency wars will probably take a new Bretton
Woods Accord. But that is another subject for a later article.
This piece was reprinted by Truthout with permission or license. It may
not be reproduced in any form without permission or license from the
source.
Ellen Brown
Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are Web of Debt, Public Bank Solution, and Public Banking Institute.
No comments:
Post a Comment