Monday, November 17, 2014

Argentina vs. a touchy vulture

The Masters of the Universe are amazingly touchy about being criticized. Or being called out for being demonstrably wrong.

Paul Singer, who has been the main face of the vulture funds trying to drive Argentina into default, and probably not incidentally, to undermine Argentine President Cristina Fernández' government in the process, is experiencing a lot of getting things wrong and being touchy about it.

The decision that Singer and the vulture funds persuaded Nixon-appointed zombie judge Thomas Griesa to render in favor of the vulture funds against Argentina, which the Supreme Court allowed to stand this year by refusing to review the case, is having repercussions other than the ones the Singer likely expected. Peruvian economist Oscar Ugarteche, author of Arquitectura financiera internacional: una genealogía de 1850 a 2008 (2014?), tells Página/12 (Julia Goldenberg, “Tendría que existir un tribunal internacional de arbitraje para deuda soberana” 17.10.2014):

La nueva arquitectura que se está delineando tiene otra base, no está supeditada a las Instituciones Financieras Internacionales (IFIS) basadas en Washington. El banco de los Brics y el Banco del Sur no necesariamente utilizan el dólar como moneda para préstamos; no utilizan la ley de Estados Unidos ni a Nueva York como jurisdicción para los contratos, abriendo el camino a un futuro de una arquitectura financiera no dominada por un solo país. En mi trabajo de la Arquitectura financiera internacional: una genealogía de 1850 [a] 2008, se puede apreciar que en el tiempo cambian las instituciones cuando las existentes se vuelven obsoletas, sea porque dejan de responder a las necesidades sistémicas de estabilidad o porque las bases que las sostienen se debilitan.

[The new architecture that is being delineated has another basis, it is not dependent on the International Financial Institutions (IFIS) based in Washington. The bank of the BRICS and the Bank of the South {both recently initiated} will not necessarily use the dollar as the currency to make the loans; they won't utilize the law of the United States nor that of New York as a jurisdiction for the contracts, opening the path to a future of a financial architecture not dominated by a singly country. In my work on Arquitectura financiera internacional: una genealogía de 1850 a 2008, one can appreciate that in time the institutions change when the existing ones become obsolete, whether because they cease to respond to the systemic necessities of stability or because the bases that sustain them have become debilitated.]
Ugarteche argues that the Argentine confrontation with the vulture funds has made a problem of the international financial system visible in a new way, "que es un problema que tiene por lo menos 30 años, es que la jurisprudencia estadounidense se transformó en jurisprudencia universal, sin que haya mediado un acuerdo internacional para convertirla en jurisprudencia universal" ("which is a problem that it has had for at least 30 years, [which is] that American jurisprudence has been transformed into the universal jurisprudence [in matters of sovereign debt], without having been mediated by an international agreement to convert into a universal jurisprudence.")

The truly radical decision of the Nixon zombie judge in the vulture funds favor demonstrated dramatically how damaging that situation can be, even redounding against the real interests of the United States, if that interest is taken to be anything more than whatever financial buccaneer is implementing some money-making scheme for their private benefit at the moment. The implications for the restructuring of Greece, Portuguese, Spanish and Italian debt could be enormous.

Ugarteche observes, "Este caso es fascinante porque ha instalado además que este juez no cree en las reestructuraciones de deuda. Tira abajo 200 años de historia financiera" ("This case is fascinating because it had shown that this judge [Thomas Griesa] doesn't believe in the restructuring of debt. That shoots down 200 years of financial history.") Ugarteche is being conservative in the 200 years estimate; I've seen at least one estimate claiming it violated eight centuries of precedent in sovereign debt.

Ugarteche also calls attention to Singer's role as one of the top donors to Republican Party campaigns in the United States. Most likely aware of the irony of South American countries needing to scold the US for corruption, Ugarteche says, "Cambiar leyes a favor tuyo poniéndoles dinero a los congresistas en nuestros países se llama tráfico de influencias" ("Changing laws in your favor by giving money to Members of Congress in our countries [Argentina and Peru] is called trafficking in influence"). In the US, we call it normal politics, probably never more so than in the Citizen's United era. Peru has also tangled with Singer's Elliott Management Corporation vulture funds.

He endorses what he identifies as Argentine Economics Minister Alex Kicillof's belief that the current international system represents first and foremost the interests of big banks.

Kiciloff carried the fight against Singer and the vulture funds to the G-20 Summit that has been meeting in Australia. And got some nominal support in an official G-20 declaration. (Capitanich praises G20 debt restructurings clause Buenos Aires Herald 11/17/2014)

Paul Krugman discusses Paul Singer's touchiness about being wrong about the threat of impending inflation inThe Uses of Ridicule 11/06/2014)

Singer was depicted by Bloomberg Businessweek this year devouring Argentina (Max Abelson and Katia Porzecanski, Paul Singer Will Make Argentina Pay 08/07/2014); the URL indicates that a one time the title of the story was projected to be, "Argentina's vulture Paul Singer is Wall Street freedom fighter."

Krugman writes:

But Singer will get very angry if you make fun of him; in fact, he denounces reporting that points out how wrong he and others have been as the “Krugmanization” of the media, a term I’ll adopt with pride. It’s yet another illustration of one of the remarkable revelations of recent years, the incredibly sensitive feelings of the superrich, who are so hurt at any suggestion that great wealth does not also go with great wisdom and great virtue that they threaten to take the economy with them and go home. [my emphasis]
Krugman links to Matt O'Brien's This billionaire thinks the Fed is missing the hyperinflation in the Hamptons Washington Post 11/06/2014. And Krugman returns to Singer in Rage of the Traders 11/13/2014:

Sometimes the absurdity of what passes for economic wisdom surpasses even my highly adapted expectations. I really, truly expected that even Wall Street would consider Paul Singer’s hyperinflation in the Hamptons rant embarrassing, and try to pretend that it never happened. But no; apparently it’s being passed around eagerly by traders and big shots who think it’s the greatest thing since sliced foie gras. ...

Oh, and really rich people often have no idea when they look ridiculous. After all, who in their entourage is going to tell them?
As Roy Edroso says in another context, "Some ideas, if we're so generous as to call them that, are just too stupid for anything but cold buckets of derision." (Who'll Stop the Derp? Alicublog 11/12/2014)

There seems to have been a great deal of wishful thinking in Singer's approach to the Argentine case. He and those supporting his suit, not least Nixon zombie judge Thomas Griega, seem to have seriously underestimated who they were dealing with in Cristina Fernández and Axel Kicillof.

No comments: