The world may be focused on the Middle East, but South America in general and Argentina specifically are imploding. Here’s the details…
Last week we discussed how the auction of 100 year bonds should have been serious alarm bells.
This week, the bad news keeps coming in on the nation that is commonly referred to as a “serial defaulter”.
Here’s a rundown in general from Natural News:
Argentina could soon follow in Venezuela’s footsteps as the country moves toward financial collapse. The peso is dropping while prices rise dramatically, and Argentina has now made the very serious move of entering talks with the International Monetary Fund to seek financial rescue.
It’s an interesting step for the country given its history. When Argentina defaulted on $132 billion in foreign debt in 2001, the IMF admitted shortly thereafter that its support had prolonged the country’s crisis. The events of 2001 left one out of every five Argentineans unemployed and spurred 12 years of populist rule.
Many consider the move to be a political gamble by President Mauricio Macri, who is hoping to boost confidence among markets and get the economy back on track ahead of next year’s presidential election. Some feel that Macri is trying to lead the country in the right direction financially, but making up for years of high socialist government spending is proving to be a weighty task.
Just how bad have things become?
For the specifics, we turn to Zero Hedge:
The Argentine Central Bank spent over $1 billion buying pesos on Friday (and another billion to buy short-term bonds back) to support the collapsing currency…
But… the weekend appears to have provided no confidence improvement for investors who are wary of this week’s maturing bills (traders see Tuesday as key day for the BCRA, when it is scheduled to faces maturity of ARS673mm in Lebacs) and the potential delays of any IMF bailout…
However, BNP Paribas says the Peso is too risky to even short, even taking into account the carry return…
“…we prudently decided to close our tactical short 1m NDF USDARS at 23.75,” strategists led by Gabriel Gersztein write in a report,
“If anything, this is not the time to be structurally positioned in ARS assets, in our view”
But JPMorgan is even more concerned, warning that the peso may face “disorder” this week if the nation’s central bank struggles to roll over about $30 billion of short-term notes set to expire.
Since the intervention has not achieved the goal of stabilizing a plunging peso, Argentina’s central bank – Cenbank, will offer an additional $5,000,000,000 USD to help stabilize it..
So as we can see, the crisis is really only getting started.
And this is a 3-for-1 crisis – a currency crisis and a debt crisis and it’s massive sparking inflation due to a plunging currency.
And like always, it starts on the periphery, just like the body will sacrifice its extremities to protect the core, from the periphery, the crisis eventually moves inward.
We have covered the real-time, ongoing collapse of Venezuela to document the what happens to a modern day, post-2008 global financial crisis, in the midst of hyperinflation.
And it is noteworthy that Argentina is no Venezuela.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.