Friday, 4 July 2014

one percenters or singing for your supper

Although there have been recent developments in the court room that seem to favour hyper-capitalism, I suspect that litigation between the government of Argentina and a hedge-fund manager is far from over. When the South American nation's economy was down-and-out and on the verge of collapse, a band of merry angel investors bought up bonds at a few pennies on the dollar. Now that the Argentine economy is back on its feet and the bonds have matured, from being not worth the paper they were printed on to being worth billions of dollars (on paper) and the hedge-fund team is demanding payment in full. Never mind that making this payment would destroy the Argentine market all over again and the their initial predatory investment did not in anyway help the country to extract itself from the financial mess, which is ostensibly why countries expose themselves to such vultures in the first place. US judges have again ruled that the hedge-fund manager has the right to his claim—though it would be nothing more than a Pyrrhic victory. Though smug and satisfied with this impossible ruling, I think that they would like nothing more than to see the proceedings drag on and only threaten to foreclose on Argentina, since that's what banks do best.  As sad as this tale is, it is not unique.
With historically low interest rates, banks are disinclined still to lend to mere mortals when or conduct the non-swash-buckling daily work of the institutions, being that the banks themselves can afford to borrow money from central banks the world over at say one percent interest and use that loan to purchase government bonds and securities, which pays dividends back to the bank of two to three percent, effectively making the government pay banks for this bit of the banksters' entertainment. Why would the bother with anything else than this safe and secure scheme? Government and the markets conspire to keep this economic theatre going, making cosmetic adjustments here and there when the system looks in danger of collapse.