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News :: International
Supreme Court Refuses Argentina Debt Case
by Jenna Maus
Email: development (nospam) jubileeusa.org
17 Jun 2014
Supreme Court Refuses Argentina Debt Case and Validates Hedge Fund Predatory Behavior
The US Supreme Court denied Argentina's appeal for a hearing today, leaving intact a lower court ruling that validates predatory behavior targeted towards countries in financial distress. The high court also denied a related appeal on behalf of the more than 92% of bond holders who had accepted Argentina's restructuring deal. In a final blow, the court also decided that hedge funds can access information on where Argentina holds financial assets around the world. The International Monetary Fund (IMF), legitimate Wall Street investors and the US government had sided with Argentina because of the case's impact on debt restructuring, poor country access to credit and global financial stability.
"I am absolutely shocked by the decision," said Eric LeCompte, Executive Director of the religious anti-poverty organization, Jubilee USA Network. "For heavily indebted countries supporting poor people, this is a devastating blow. These hedge funds are equipped with an instrument that forces struggling economies into submission."
The case dates back to 2001 when Argentina defaulted on its debts and a group of predatory hedge funds purchased some debt for pennies on the dollar. The hedge fund NML Capital leads a group of hold-out creditors in suing the country for more than $1 billion. The case will set a precedent that will impact the functioning of the global financial system. The court did not exercise the expected option of asking the United States government to issue an opinion in the matter. In a related Supreme Court case and in lower courts the US government consistently argued that hold-out creditors should take the same deal that was agreed to by nearly 93 percent of bondholders. The US Treasury and the White House continue to express support for Argentina because of the case's impacts on US bipartisan debt relief policy, global debt restructuring and impacts on poor people.
"For 15 years, Republicans and Democrats have agreed that the world's poorest countries need to have their debt burdens reduced," noted LeCompte. "Today, that bipartisan policy is threatened by the court's decision."
Numerous global institutions and organizations have weighed in on behalf of Argentina. In March, citing the impact of the case on debt relief policy and the global poor, Jubilee USA filed to the Supreme Court on behalf of 79 religious and development institutions urging the high court to take the case. France, Brazil and Mexico also filed amicus curiae briefs on behalf of Argentina before the Supreme Court. The World Bank, Wall Street investors and the IMF have all expressed concern regarding the possibility of a win by the predatory hedge funds. The IMF recently reaffirmed support for Argentina, declaring itself "deeply concerned" about the potential impact the case could have on the ability of countries to restructure their debts, which in turn allows the global financial system to operate.
"There's a rare consensus that the court's decision today is harmful," added LeCompte. "The religious community is saddened that these extreme actors will now broaden their efforts to collect assets that belong to the poor. Given the ruling, we need to see what legislative remedies we can implement to stop these hedge funds."
Read a history and timeline of the case: http://www.jubileeusa.org/truth-about-debt/vulturefunds/argentina.html
Read Jubilee's USA's filing urging the Supreme Court to take the case: http://jubileeusa.org/fileadmin/13-990__-991_Amici_Brief_filed_3-24-14.p
Jubilee USA Network is an alliance of more than 75 US organizations, 400 faith communities and 50 Jubilee global partners. Jubilee's mission is to build an economy that serves, protects and promotes participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world's poorest people. www.jubileeusa.org
This work is in the public domain.
Re: Supreme Court Refuses Argentina Debt Case
by Workers Vanguard
(No verified email address)
16 Jun 2014
Thirty Years After Falklands/Malvinas War
Britain and Argentina: Between Some Rocks and Losing Face
The following article is reprinted from Workers Hammer No. 220 (Autumn 2012), newspaper of the Spartacist League/Britain, section of the International Communist League.
This spring marked the thirtieth anniversary of the bizarre, dirty little war between British imperialism and the Argentine junta over some desolate rocks in the South Atlantic. Both Margaret Thatcher’s vicious Tory government and General Leopoldo Galtieri’s bloody military dictatorship used the conflict over the Falklands—known in Argentina as the Malvinas—as a diversion to arouse patriotism, quell social struggle and boost their fortunes. It was in the interest of the working class in each country for “their” bourgeois rulers to be humiliated in defeat: Thatcher’s victory spelled bad news for the British working class, while the Argentine defeat resulted in the fall of Galtieri’s regime. This year, with austerity and repression on the agenda of both governments, you could be forgiven for thinking that they had orchestrated some kind of parody of the conflict as an anniversary commemoration.
Prime Minister David Cameron has made clear his government’s intention to hang on to this archipelago in the South Atlantic, nearly 8,000 miles from Britain’s coast. Britain dispatched its prized destroyer, HMS Dauntless, and a submarine; to add some pomp the RAF sent Prince William to the Falklands. For its part, the Argentine government aptly condemned Britain’s behaviour as “colonial” and declared British oil exploration in the area to be “illegal” and “clandestine.” The trading bloc Mercosur, which includes Argentina, Brazil and Uruguay, closed those countries’ ports to ships flying the Falklands flag and Argentina turned away several British cruise ships.
After accusing the Argentine government of behaving in a colonial manner, Cameron cynically lectured president Cristina Fernández on the islanders’ national rights: “We should believe in self determination and act as democrats here.” Cameron flaunts his commitment to self-determination against Argentina but it is not much in evidence when it comes to Scotland, which his government insists should remain part of the “United Kingdom.” And who in their right mind could imagine the British prime minister invoking democratic rights for the people of Diego Garcia? The British imperialist overlords expelled the island’s inhabitants in the 1960s to make way for a U.S. military base. In 2004, Tony Blair’s Labour government used the royal prerogative to overturn a high court judgement which would have allowed the islanders to return. As Richard Gifford, a lawyer representing the 4,500 islanders and their descendants, remarked: “Not since the days of King John has anyone tried to expel British citizens from the realm by executive order.” Now there’s a lesson in how the British imperialists “believe in self determination and act as democrats”! U.S./British imperialists out of Diego Garcia! For a right of return and compensation!
The Tory-led government, which is deeply unpopular among the working class at home for imposing punishing austerity measures, is shamelessly trying to whip up a version of the “Falklands factor” to boost its ratings. Before the 1982 conflict, British governments had been trying to unload the Falklands for years, including handing over various administrative powers to Argentina. “But once the Argentines had invaded, an enfeebled Britain saw a chance to reassert the obscene traditions of the Empire, and Thatcher was not about to let it pass,” as we wrote in Spartacist Britain (No. 42, May 1982). The sinking of the Argentine General Belgrano battleship, upon Thatcher’s orders, was a genuine war crime. Hundreds of conscripts were slaughtered while the ship was outside Britain’s own declared war zone. British naval officers made no effort to rescue the survivors huddled together in lifeboats trying to avoid freezing to death.
The Argentine bourgeoisie’s claims to the Falklands are based on the heritage of the Spanish crown. The British invaded in 1833, some two decades after Argentine independence. The islands, 300 miles from the Argentine coast, have since been inhabited by English-speaking settlers. According to the Guardian (13 September) a recent census shows that of 2,563 residents, fewer than a third consider themselves British while 59 per cent regard themselves as Falkland Islanders. In a rational world, there is no reason for Britain, Argentina or any other country to have sovereignty over the Falkland/Malvinas islands. The inhabitants should be left alone to fish, graze sheep, host tourists and the occasional scientific expedition. To defend its bogus claim to sovereignty over the Falklands, Britain maintains a military base at Mount Pleasant Airfield, in addition to various stations in the South Atlantic. All British military bases out of the South Atlantic!
The Main Enemy Is at Home!
During the Falklands war we put forward the perspective of revolutionary defeatism on both sides, expressed in slogans such as: “Sink Thatcher! Sink the Junta!” We wrote: “we think that as long as these two viciously anti-working-class regimes go at one another, it’s a good thing if they grind up their respective military machines. Marxists are revolutionary defeatist on both sides in the present conflict. The potential for a massive class upsurge in Argentina is obvious and Thatcher, too, is hated by Britain’s workers” (Spartacist Britain No. 42, May 1982). At the time, Britain and Argentina were two of the staunchest allies in Washington’s Cold War II anti-Soviet crusade which, as defenders of the Soviet Union, we Trotskyists opposed. As our comrades in the U.S. wrote at the time, “revolutionary socialists can only look forward to the spectacle of these two hated right-wing regimes sinking each other’s fleets on the high seas” (Workers Vanguard No. 304, 30 April 1982).
For General Galtieri, “recovery” of the Falklands/Malvinas began as a textbook case of a despotic regime trying to take the heat off at home by launching a foreign invasion. The world’s highest inflation rate, industry operating at 50 per cent capacity, and skyrocketing unemployment stoked popular anger, already boiling over from the military’s “dirty war” of terror in which more than 10,000 leftists and other opponents had been killed and 30,000 disappeared. On 30 March 1982, 15,000 workers were met with brutal repression when they attempted to protest in front of the presidential palace. Three days later Argentine commandos seized the Falklands. Galtieri was banking on Washington’s support as a well-earned reward for backing the U.S.’s war against the Sandinistas in Nicaragua and leftist insurgents in El Salvador. After all, Galtieri had declared that the third world war had already begun in the Americas, a war between the “free world,” led by the United States, and Soviet Communism. But after failing to prevent Britain and Argentina from falling out, an exasperated U.S. imperialism backed Britain, deciding that its robust anti-Soviet ally in Europe was strategically more important.
As the war got underway, the Thatcher government reached an unprecedented peak in the opinion polls on a wave of jingoism, with the gutter press screaming for “our boys” to get the “Argies” as Royal Navy recruitment posters were pinned on factory noticeboards. The Labour Party leaders and trade-union bureaucracy embraced this patriotic fervour, supporting the formation of the British Task Force. The victory of Her Majesty’s forces was a defeat for British workers. The message couldn’t have been clearer, first to striking railway workers, when returning troops unfurled a banner saying: “Call off the rail strike, or we’ll call an air strike!”
The “Falklands factor” enabled Thatcher to triumph in a general election in 1983. In her second term she pushed ahead with plans to smash the power of the trade unions. The militant National Union of Mineworkers (NUM), whose struggles had brought down the previous Tory government, was a particular target. The coal miners fought heroically throughout the 1984-85 strike, against an army of cops and the full might of the state. But thanks to the treachery of the trade-union bureaucracy and Labour Party politicians, the miners remained isolated against Thatcher. Above all what was necessary to ensure a victory for the miners was for workers in other industries to strike alongside the NUM. But the trade-union and Labour “lefts” mouthed words of solidarity, while the right-wing leaders openly and viciously condemned the striking miners, just as they contributed to the chauvinist patriotism around the Falklands war.
Labourite Left: From Union Jack “Socialists”…
The Labour “left,” led at the time by Tony Benn, opposed the war on patriotic grounds. Benn warned that the Falklands were not worth risking the British fleet over and that such a costly war could “end in tragedy for this country.” The Spartacist League/Britain responded: “It would be a tragedy for the British bosses! The only war worth fighting by the British workers is the class war against their own bourgeoisie. THE MAIN ENEMY IS AT HOME!” (Spartacist Britain No. 42, May 1982). Some ostensible “Marxists” at the time managed to stand to the right of Tony Benn. An article in the Socialist Party’s magazine on the 25th anniversary of the war claimed: “We opposed both British imperialism and the Argentinean military dictatorship” (Socialism Today, April 2007). But in 1982 their forebears in the Militant tendency, which subsequently split into what is today the Socialist Party and Socialist Appeal, attacked the Bennite call to withdraw the fleet as a “pacifist blind alley.” And they went foam-flecked against organisations who were for the defeat of British imperialism, denouncing the “monstrous absurdity of the sectarians’ position,” of “calling for the defeat of the Task Force.” The ultimate solution for these utter reformists, who are wedded to the idea that socialism can be implemented beginning with an “Enabling Act” in parliament, was “to force a general election to open the way for the return of a Labour government to implement socialist policies at home and abroad.” For the Militant: “Using socialist methods, a Labour government could rapidly defeat the [Argentine] dictatorship” (Militant International Review, June 1982).
…To Cheering the Junta
Workers Power also has a sordid history of coming down on the side of the imperialists, from championing the counterrevolutionary Polish Solidarność in the 1980s to hailing the imperialist-backed Libyan rebels last spring. However during the Falklands war Workers Power rallied to the “anti-imperialist” cause…of the Argentine junta. In a 1982 leaflet, Workers Power placed demands on the reactionary military dictatorship, supposedly in order to “expose it”:
“The junta have tried to dress themselves up as real fighters of imperialism. This is a hollow lie. But many believe it to be genuine. The task of Argentinian socialists is to force the junta to take real anti-imperialist measures. They should be forced to nationalise the many multinationals in Argentina; the workers must seize control of those factories and must be armed to mount a real defence against a possible attack.”
—“Victory to the Argentine”
Leftists in Argentina who held a similar position include the pseudo-Trotskyist Nahuel Moreno’s Partido Socialista de los Trabajadores (PST). For the nationalist cause of the Malvinas, the PST declared that they “form part of the military camp of the dictatorship in the fight against the British imperialists.” As the Spartacist League/U.S. wrote at the time: “It is particularly grotesque for the PST to support this ploy by butchers who have murdered more than a hundred of their comrades.” Our article insisted:
“This ultra-reactionary junta will not undertake any anti-imperialist action, however partial. What do they want the islands for? As we have pointed out, they could well turn them into concentration camps for ‘dissidents,’ the luckiest of the desaparecidos—an Argentine Dawson Island. And whom have they named as military governor of the Malvinas? Mario Benjamín Menéndez, who was a principal architect of the junta’s war of extermination against the Argentine left, as well as a notoriously brutal concentration camp commandant.”
— Workers Vanguard No. 307, 11 June 1982
A victory for the Argentine junta in this war would have been contrary to the interests of the Argentine working masses, heightening the chauvinist sentiments Galtieri had excited and manipulated in order to defuse a burgeoning class struggle. Our perspective of revolutionary defeatism was vindicated by the events in Argentina following the outcome of the war. Within hours of the fall of Port Stanley to the British imperialists, the chant “¡Se va a acabar, la dictadura militar!” (“The military dictatorship is coming to an end!”) was heard through the streets of Buenos Aires. The humiliating defeat of the Argentine bourgeoisie in the war led directly to the overthrow of the military dictatorship, creating an opening for the construction of a genuinely revolutionary party. But the removal of the junta, in the absence of such a party, has been followed by a series of capitalist crises. Populist nationalism is the major barrier to forging a genuinely revolutionary party in Argentina.
The Spartacist League/Britain fights to build a party committed to burying for good the heritage of British imperialism, its military and the Union Jack. We are proud to have stated at the time:
“The Argentine proletariat must not be taken in by the nationalist diversion over the Falklands, but must continue the struggle to smash Galtieri’s bloody junta. It is the duty of British workers to fight against the Thatcher government’s military adventure to regain a colony, and to fight for their own class power, eradicating the last vestiges of Britain’s sordid and brutal imperialist history. The main enemy is at home!”
— Spartacist Britain No. 42, May 1982
Argentina Debt Case
by Jorge Vilches
(No verified email address)
15 Jul 2014
Click on image for a larger version
Judge Griesa's Impact Upon CDS, Derivatives, and Sovereign Bond Markets
Argentina’s Default, Vulture Funds and the US Courts
by JORGES VILCHES
In order to avoid a new default in less than three weeks, Argentina and all of the holdouts must reach an agreement that is acceptable to every restructured bondholder of Argentine debt and Judge Thomas Griesa.
Otherwise, some of the possible outcomes include:
(1) An international cascade of competing “legal” claims involving many other sovereign defaults besides Argentina’s
(2) A pseudo-Lehman Brothers CDS and derivatives scenario, possibly with new 2008-type bail-outs
(3) Deepening of the current de-dollarization of international finances, with markets, governments and the Federal Reserve befuddled and dysfunctional as in the 2008 limbo.
The glaring absence of internationally acknowledged legislation on sovereign bankruptcy to abide by forced common sense to prevail without the need for judicial intervention. Thus, the largest nation state default in history was successfully left behind, and by 2015, Argentina was expected to return to international credit markets after 13 years of ostracism.
Nobel Prize laureate Paul Krugman, in a front-page high-impact 2012 New York Times piece, praised Argentina’s “remarkable success story.” Many other world-renowned authorities agreed that the decades-long conundrum of debt traps had finally been solved, with implications of genuine growth.
Enter the US Judiciary and Vulture Funds
The US judiciary decided to treat a sovereign debt default as if it were a run-of-the-mill New York business bankruptcy. The minuscule (1.6 percent) albeit horribly powerful holdout vulture funds had taken advantage of the occasion to implement their cunning and fully vetted business model based on the purchase of defaulted Argentine debt that was handed over at dirt cheap prices.
This utterly suspicious class of “plaintiffs” had simultaneously engaged in swift and handsomely expensive lobbying.
Finally, they gained heavy-weight legal support, manifest namely in very “curious” US judiciary rulings in disdain of the very nature of a sovereign debt default.
Now, circumstances are pushing financial momentum for a brand new Argentine default with as of yet unfathomable “un-intended” consequences, including multi-multi-billion arithmetically unpayable new claims worldwide as the decisions of the US judiciary decisions would be taken as precedent.
The problem is that such sanctions were imposed on a nation state without internationally-acknowledged sovereign bankruptcy rules to back them up. As per sovereign immunity (something to which nation states cannot waiver) and also by definition, sovereign debt is unenforceable. The patient has died, and no miracle drug can revive the corpse. Debtors may have rights, but not remedies. US law, judges, and a “special master” do not apply to nation states. Judge Griesa’s “pari passu” interpretation has been hotly and widely contested worldwide, even in the US.
As a matter of fact, Judge Griesa’s own moaning for months along these lines is on record. The US Judiciary has overstepped the mark of common sense and violated several important clauses of the delicate, unwritten code that rules amicable foreign relations. The US judiciary should not establish US foreign policy, nor is it a world court. As per Justice Ruth Bader Ginsburg’s dissent, the Supreme Court should not “exorbitantly approve” vulture funds’ direct access to US listings of Argentina’s seizable assets worldwide.
Eyes wide shut
Obviously, in view of the default that is being actively pursued, financial terrorists worldwide may now surely “join the party” by filing additional multi-billion claims through CDS’ Credit Default Swaps.
As the IMF is painfully aware, all of the above is bound to fuel a worldwide cascade of competing “lega” claims from vulture funds, plus restructured sovereign bond creditors and CDS holders, all of which would severely affect counterparties and possibly trigger systemic events that were absolutely unimaginable only a week ago.
It?s worth mentioning that CDS counterparty risk is concentrated in only ten ultra-highly leveraged “too-big-to-fail” banks, which may have to be bailed out yet again depending upon how events unfold.
Thus, the international financial system could needlessly find itself running around in circles, clueless and deeply submerged in a J.K. Galbraith type of “Age of Uncertainty.”
The question is whether the Fed is ready for any of this.
Jorge Vilches writes about trade and finances.