Ok, you economists, this is a quick exercise in free association: When I say “South America” what do you think? If you said “default,” go to the head of the class. Really, it’s the whole bloody continent (think “Mexico,” amigo), but let’s just look at Argentina, an economic basket case if there ever was one. The only question I have is why, given its recent history of fiscal incontinence (not to mention political barbarousness), anyone would lend them a nickel.
The latest episode, which has been much in the news lately, involves more than $1 billion that Argentina owes to Elliott Management, a New York-based hedge fund. Things came to a head yesterday (well, I am writing from New Zealand, and somehow lost Thursday: it happened on Wednesday in New York) when Argentina failed to make a $500 million bond payment and slid, officially, into default. As the New York Times reported, Argentina had the money on to make the bond payment, but a right-thinking New York federal court judge had ruled that the spendthrift country had to pay its other creditors first. Clever work!
Of course, the New York Times is all pursed-lips about this. It describes the head of Elliott Management, Paul Singer, as “a billionaire,” i.e. a bad guy, and goes on to note with distaste that the hedge fund’s pursuit of Argentina “is motivated by a desire to make money.” You don’t say? Is that a bad thing?