One can only wonder how horrific debt crises caused by artificially created unsustainable debt burdens could ever be resolved by taking on/imposing ever higher, heavier, long-term debt.
When Argentina sank into its worst financial, economic and social crisis in late 2001/2002 forcing it to default on its unsustainable Sovereign Public Debt, Anne Krueger – at the time the International Monetary Fund’s (IMF) first deputy manager – was very straight-forward about the whole matter. She proposed introducing the concept of bankruptcy of entire countries as a means to, above all, afford international creditors fullest protection.
Chapter 11 Bankruptcy for Nation-States!
A Leading Case…
That revolutionary proposal ended up not being used on Argentina at the time, mainly because successive local caretaker governments ended up doing the global mega-bankers’ dirty work for them. Today, with a new crisis looming for Argentina, it appears that the ‘Chapter 11 for Nations’ concept is back on the agenda. Will Argentina become a leading case in macro-managing such a process?
Those were stormy times for Argentina and its creditors. But when President Néstor Kirchner took office in mid-2003, the global mega-bankers were able to quickly agree with him on a scheme whereby Argentina would come out of its debt default in an “orderly manner” (for the bankers, that is…). Since then, the money began flowing again to mega-banker coffers big time!
In June 2005 a hodgepodge of more than 127 public debt bonds was replaced with just three new bonds that rolled over Sovereign Debt as far as 42 years into the future; the key bond series being adjustable by Cost of Living, which in Argentina means inflation. This explains why the Kirchner government have tampered with official inflation statistics all but destroying the credibility of the local statistics office, INDEC.
At the time, however, around 20% of bondholders did not agree to play along. They clumped together as a strongly leveraged group of so-called “hold-outs” – mostly vulture hedge-funds like the Elliott Management Group – suing Argentina repeatedly so that their original bonds’ capital and interest yields are paid to them. Thanks to a series of Second District South Manhattan Court of Appeals sentences by Judge Thomas Griesa favouring Plaintiffs, these vulture funds now demand their pound of flesh.
AFP Photo / Alejandro Pagni
In recent years, Néstor Kirchner’s ill-fated June 2005 Debt Mega-Swap began backfiring on Argentina creating all sorts of trouble for the country, that included the attachment of public assets abroad. Notably, the high profile arrest for over two months of the Argentine Navy’s School Vessel – ironically named “Libertad”; Liberty – in a port in Ghana with its full crew on board, heeding one of the New York Court’s attachment orders.
A new showdown seems to be fast approaching as Argentina has been ordered to pay up or else. This is making key global players fidget uncomfortably in their chairs. Although the global banking elite would love to put Argentina up against the wall, they must however be cautious regarding the precedent this would create that could bring mischief to on-going debt restructures in other parts of the world, especially in the European Union.
That explains why President Obama who had said he would support Argentina, then decided not to do so. The IMF’s Christine Lagarde also said she would support Argentina, but then changed her mind… twice. The French government who were not expected to make any friendly gestures, now speaks in support of the troubled South American country…
So, what’s up? Basically, that Anne Krueger’s concept of setting up the international legal framework that would allow bankruptcy procedures to be imposed on whole nations is again in the forefront.
That would “legally” permit turning Argentina upside down so that it not only gives up every last Dollar but, more importantly, its immense natural resources, a most attractive prospect for the Global Power Elite, as long it does not wreak havoc or derails their long-term plan of the controlled deconstruction of sovereign nation-states – Arab and (coming) Latin American “Springs” included – as part of the coming World Government they are engineering.
What’s the idea?
In an article published in the CFR’s official journal “Foreign Affairs” over a decade ago (July/August 2002), former US government and Federal Reserve Bank officer Richard N. Cooper backed the country bankruptcy factor supporting Ms Krueger’s “bold suggestion” whereby “under certain conditions a government’s international debt repayments should be temporarily suspended while negotiations take place on restructuring that debt.” With her statement, the IMF officially endorsed the radical suggestion of introducing an international legal framework addressing country bankruptcy as a way of “improving the international financial architecture”.
In practice, as the IMF’s No. 2 officer, Krueger’s proposal was to introduce a sort of Chapter 11 mechanism permitting orderly management of the transition of countries defaulting on their sovereign debts, back into paying by steering their Nation-States into controlled national bankruptcy.
The implicit objective is to ensure that Sovereign Bond creditors – hedge funds, vulture funds, giant megabanks like Goldman Sachs, Bank of America, CitiCorp, JPMorganChase, HSBC, and the IMF itself – can exert huge leverage taking priority in cashing in on the monies sucked out of a Nation’s taxpayers’ (workers’), central banks, mineral, oil & gas wealth, and other resources and reserves.
AFP Photo / Justin Sullivan
This would transmute into a new edition of the IMF’s proverbial “recipes” to “help nations” totally and irretrievably in debt to once again “access international financial markets” so that they can re-program, roll-over, refinance, kick forwards defaulted, impossible-to-pay short-term debt, by mutating them into long-term, hugely profitable, high interest yield juicy performing debts.
That would look really nice on mega-banker financial sheets, and would ensure that gigantic amounts continue to flow out of troubled Nation-State public coffers and into mega banker private pockets!
As if horrific debt crises caused by artificially created unsustainable debt burdens could ever be resolved by taking on/imposing ever higher, heavier, long-term debt. One can almost hear the sucking sound in the dark recesses of the global financial system…
Modern mass slavery couldn’t have been better thought out…!
Argentina’s Pound of Flesh
Argentina pulled out of its 2001 default thanks to President Kirchner’s heeding of all global mega-banker demands, a fact eloquently symbolized when in January 2006 Mr Kirchner paid to the IMF the FULL amount allegedly owed to them by Argentina: almost U$S 10 billion in hard cash with no write-downs, in exchange for absolutely nothing! Sovereign debt indeed acts as a chronic infection that conditions everything in Argentina.
Alas! As with all chronic infections you can bring down the fever for a short while but as soon as you run out of addictive meds, or catch a new cold, you´re again running a full-fledged infectious fever.
Eight years later, this is Argentina’s sorry state: annual inflation topping 30%; growth slowing down dramatically; total government clampdown on the purchase of foreign currencies for imports, travel, tourism and other needs; government tampering with economic statistics; slumping popular support for Ms Kirchner’s… Add to that rampant corruption and public mismanagement…
A woman leaves a supermarket with a promotional poster outside in Buenos Aires (AFP Photo / Juan Mabromata)
But this was no accident, for Argentina’s chronic debt crises has made the country bite the dust under a Catch-22 trap for many decades. When in July 2000, a little over a year before the country’s collapse, a sector inside Argentina’s Catholic Church helped organize a “Jubilee Year” in Congress centering on the country’s ballooning public debt crisis. This prompted Cardinal Héctor Aguer, Archbishop of La Plata (Argentina), to say that continuing on its present path could only lead to Argentina’s demise as a sovereign nation, adding that “one can almost imagine the words that will be inscribed on Argentina’s tombstone: “She lived paying; she died owing”. This echoed Ralph Waldo Emerson’s words, “They say the world is close to bankruptcy; that the world owes more than what the world can pay…”
Solve et coagula
Now the Global Power Masters appear to be keen on refloating the whole “Chapter 11 for countries” idea. But they must do this with great caution lest they end up shooting themselves in the foot, because if Argentina is to be made an example of by a New York Court ordering Argentina to pay vulture funds who did not accept the 2005 Debt Mega-Swap, that example could spill over not only into countries like Greece, Portugal and Cyprus, which mega-bankers could macro-manage, but also Spain and Italy – even France – which is a totally different and more complex ball game that could even sound the untimely death-knell of the Euro earlier than what the global Elite want.
Remember: the Elites pushing all nations towards World Government need to engineer the CONTROLLED demise of Sovereign Nation-States; and the CONTROLLED demise of municipal governments like Detroit, Los Angeles, Washington DC and 120 other US cities earmarked for bankruptcy, where they propose applying constructive Chapter 9 public bankruptcy conditions rather than Chapter 11 designed to “orderly” tear apart and gobble up private companies.
The question is whether declaring nations, provinces, states and municipalities bankrupt and ripe for liquidation is the next Wave of Change that will erode traditional public structures, thus paving the way for that coming World Government. A long-term process echoing the adage of the alchemists of old: “Solve et Coagula” – Dissolve and Re-build – which, by the way, ties in with the British Fabian Society’s idea of doing things gradually and unnoticed rather than suddenly and painfully.
For one of history’s lessons from the failed Marxist revolutionary experiment of the 20th Century is that stable far-reaching change cannot be imposed overnight; better to drive change gradually, seducing people into accepting it. Just like the proverbial frog which if thrown into boiling water will jump off and survive, but if placed in lukewarm water slowly heated up, will cook to death without realizing it.
Finally, the obvious question is: why does just about every country’s public sector – Argentina, UK, Italy, Mexico, US, France, Brazil, Spain, Italy, Netherlands, Thailand, Nigeria… – owe so, so very much money to the same supranational private sector banks: Goldman Sachs, CitiCorp, Lazards, Bank of America, HSBC, JPMorgan Chase?
Gregg Easterbrook eloquently described the roots of the problem in an article published in Reuters on 7th July 2011: “Governments in Greece, Portugal, the United States and elsewhere are borrowing, and often wasting, money at a reckless pace. Why do banks and financial markets cooperate? Because there’s something in it for them. They keep a little slice of the public money being borrowed or wasted. This is the ‘Sliver Strategy’, and it underlies the ways many of the Western world’s wealthy institutions relate to government: Only a sliver. But the more that is borrowed, the larger the sliver becomes….”
This begs the question “why did big banks underwrite the liars’ loans that caused the housing bubble? Because they took origination fees and other payments, then passed the toxic debt along to taxpayers. The greater the loan volume the larger the sliver — and most of the slivers ended up in the pockets of the banks’ top management.”
So, ready or not, here comes the New Wave: Bankruptcy of “failed states…!”
See you in Court…
Adrian Salbuchi for RT