Argentina bondholders accuse government of undermining recovery

Rebuke comes as bond prices are mired in distressed territory just months after restructuring deal

Colby Smith in New York and Benedict Mander in Buenos Aires

       Bondholders were critical of policies implemented by the government of Alberto Fernández, Argentina’s president © Argentinian Presidency/AFP via G


Some of Argentina’s biggest bondholders issued a sharp rebuke of how the government is handling the country’s deteriorating economic situation, just a few months after reaching a compromise to restructure $65bn worth of debt. 

Two creditor groups at the heart of the recent negotiations to resolve Argentina’s unsustainable debt burden accused the government of putting forward policies that “undermine” its own economic recovery, in a statement released on Thursday.

They also called into question whether “their sacrifices to provide a debt structure Argentina is capable of servicing were essentially meaningless”.

“Argentina’s economic authorities have not only failed to restore confidence, but policy actions taken in the immediate aftermath of the debt restructuring have dramatically worsened the country’s economic crisis,” wrote members of the group, representing holders of previously restructured exchange bonds as well as the Argentina creditor committee.

They added: “Instead of heralding a reopening of access to markets to support Argentina’s manifest investment needs, the aftermath of the debt restructuring is a virtual wasteland for Argentine credit.”

Argentine bond prices have sunk back into distressed territory since the restructuring process was finalised in early September. The deal involved Argentina pushing back the timing of large debt payments and slashing the aggregate amount set to be paid out to creditors.

The country’s bond set to mature in 2030 has slipped to 38 cents on the dollar, having debuted above 50. Another approximately $20bn in bonds maturing in 2035 have since plunged to 34 cents on the dollar.

Meanwhile, the peso has slumped after already-strict capital controls were tightened last month. So far government measures aimed at protecting net liquid foreign exchange reserves, which have fallen below $1bn, have failed to convince investors, as the central bank continues to resort to massive money printing to finance spending.

The gap between the official and black market exchange rates has reached historic highs, with many fearing that the country’s seventh devaluation since Argentina’s peso abandoned its peg to the dollar in 2002 is imminent. On the black market a dollar can now fetch as much as 190 pesos. 

The statement from creditors came on the heels of the IMF’s most recent visit to Buenos Aires earlier this month. The fund lent Argentina $44bn as part of a record $57bn bailout package extended in 2018, and policymakers are now looking to renegotiate the repayment plans.

“This vicious cycle needs to be broken,” the investors said. “Creditors have already played their part, providing a historic opportunity to Argentina for a fresh start. It is now up to Argentina and the IMF to play theirs.” 

The Next Civil War?

Although US President Donald Trump has long hid his tax records and history of business failings, he has never made any secret of his willingness to destroy the US constitutional order if doing so will give him a political advantage. Not since the eve of the Civil War has America been so on edge.

Elizabeth Drew


WASHINGTON, DC – America’s capital is more on edge now than at perhaps any other time since the eve of the Civil War in 1860. The city was tense during Watergate, of course. 

But as much as Richard Nixon tested the constitutional system, as a lawyer who had served in government for decades, he recognized that there are limits that even a president dares not transgress. 

And now, with President Donald Trump, the First Lady, and a top aide all testing positive for COVID-19, there is more uncertainty in Washington, DC that at any time in living memory.

The non-medical crisis now facing the United States is that Trump doesn’t recognize limits. There is scant indication that he even understands, let alone respects, America’s constitutional order, the survival of which depends on whether those to whom power has been entrusted exercise restraint.

Trump, recklessly breaking precedents and norms, has consistently attempted to disable any checks on his behavior. He insists that Article II of the Constitution “gives me the right to do whatever I want to do.” And he is buttressed in his view by Attorney General William Barr, who is the kind of fealty-first law-enforcement chief that Trump has craved.

A critical part of Trump’s effort to undermine confidence in the election outcome, if it goes against him, is his attempt to discredit millions of ballots preemptively. The assumption is that, because of the COVID-19 pandemic that Trump has allowed to get out of hand, more Americans than ever before will vote by mail, and that most of those who do will be Democrats.

Earlier, misreading public opinion as he so often does, Trump sought to slow mail deliveries in order to disqualify millions of mail-in ballots. After a public backlash, these activities were supposedly suspended, yet mail delivery remains slower than before.

Then, in September, Trump started saying that the election aftermath will be peaceful as long as “we … get rid of the ballots” – whatever that means. He and his campaign team are now casting about for more ways to shape or otherwise invalidate the election’s outcome if necessary.

Allies of Trump’s challenger Joe Biden are discussing how to forestall Republican meddling with the outcome, and force the president from the White House if he loses the election but refuses to leave. The need to take this astonishing possibility seriously is a sign of how far things have deteriorated.

And so, the legal guns are being readied. With luck, real weapons won’t be used. But Trump has been encouraging violence since he first ran for office, and he doesn’t convincingly eschew it now. His calling at the first presidential debate on the Proud Boys, a violent right-wing white-supremacy group, to “stand back and stand by” has embroiled the White House in efforts to sanitize this ominous statement.

Meanwhile, the New York Times’ recent  exposé has made clear why Trump has frantically sought to keep his tax returns secret: he paid $750 in federal income taxes in both 2016 and 2017, and nothing for many years before that. The revelations about Trump’s dicey tax record and business dealings offers one explanation for his desperation to win another term in office. 

The Times’ reporting has scraped away Trump’s populist façade and revealed that the underlying rationale for his presidency – that he was a savvy billionaire who would apply his amazing business acumen to running the country – was entirely bogus.

The Times report also showed that, as was widely suspected, Trump had received financial help from authoritarian countries such as Turkey and Saudi Arabia. And Trump reportedly has voiced his own assumption that he has benefited from Russian oligarchs at the behest of Vladimir Putin. 

Numerous observers warn that Trump’s indebtedness to foreign countries makes him a national-security threat. As it is, Trump owes over $400 million in debts that will come due in the next few years; there’s no knowing where he’ll find the money.

Trump’s performance in the first presidential debate was the latest demonstration of the threat he poses to democracy. His thuggish behavior – serial interruptions, nasty wisecracks, and blatant distortions – were an extension of his persistent effort to destroy any means of holding him accountable. 

The debates are another democratic practice that Trump seeks to destroy. But despite all the lamentations over what a miserable event the debate was, the tens of millions of Americans who loathe him should celebrate his performance, displaying as it did the unvarnished Trump.

The so-called debate didn’t ease Trump’s political predicament. He can scarcely afford to lose support at this point. His unwillingness to denounce white supremacists unambiguously, his apparent incitement of violence, and his threats – “This is not going to end well” – were as alarming as they were norm-shattering. Even some of Trump’s Senate Republican lackeys openly expressed unease.

Though Biden provided some substance and obviously didn’t stoop to Trump’s level, he wasn’t at his best. He occasionally appeared thrown off by Trump’s behavior, and failed to convey the stature and sense of command that people desire in a president. By calling Trump a “clown” and telling him to “shut up,” Biden may have been trying to show that he, too, can play a tough guy. But is this how Americans want a president to talk?

Some semblance of a coherent argument could be glimpsed in Trump’s attempt to ram through the Republican-controlled Senate the nomination of the right-wing judge Amy Coney Barrett to fill the Supreme Court seat vacated by the death of the liberal hero Ruth Bader Ginsburg. 

By trying to have her confirmed and seated in a few weeks, Trump is again going against democratic assumptions, and also public opinion. Trump openly states that he wants Barrett on the bench to improve his chances if a case involving the election outcome reaches the Court. Republican senators seem unwilling to insist that Barrett recuse herself to avoid such a flagrant conflict of interest.

Trump’s disinclination – and perhaps inability – to reach beyond his right-wing base, which is insufficient to elect him, also calls into question his political acumen, and is one of many reasons to doubt his basic intelligence (an issue on which he is quite sensitive). But one thing about the president is now clearer than ever: in order to perpetuate his hold on power, Trump is testing the constitution in unprecedented ways.


Elizabeth Drew is a Washington-based journalist and the author, most recently, of Washington Journal: Reporting Watergate and Richard Nixon's Downfall.

Spain Becomes Europe’s Weak Link

The Spanish economy is suffering from a particularly bad resurgence in Covid-19 cases as well as its outsized exposure to tourism

By Jon Sindreu


Once a rising star of the European economy, Spain is on a path to becoming its problem child—and the latest example of why global investors should tread carefully around Southern European stocks.

This week, the latest readings of the purchasing managers index published by IHS Markit confirmed two trends. The first is that global manufacturing activity is recovering at a much faster pace than services. The second is that, among big developed countries, Spain seems to be in particular trouble.

The pandemic has made these polls of companies more difficult to interpret than usual. Still, they show Spain performing worse than its European peers, including Italy, which was the economic laggard coming into the crisis and was worse hit by the first wave of Covid-19 cases.


Spain has been unable to contain the spread of the virus. 

In the spring, officials took too long to act, only to later establish the strictest of lockdowns. 

Unlike Italy, the country then tried to return to normal too fast—its leader of health emergencies went abroad on vacation just weeks after advising against travel between provinces. 

Infection rates rebounded sharply in the summer, such that Spain accounted for one-third of Europe’s daily Covid-19 cases. Now, Madrid is one of the region’s hardest-hit cities, and new measures that directly impact the services sector have been enacted.

The structure of Spain’s economy, which enjoyed a growth spurt between 2015 and 2019, explains why it is at risk now. 


Tourism directly accounts for 12% of Spanish gross domestic product—more than any other member of the Organization for Economic Cooperation and Development—and employs 14% of the population.


Official figures suggest that half of the one million jobs lost during the depths of the outbreak have already been recovered. But there are an additional 735,000 being propped up by subsidized furlough programs. 

Many are tourism-related roles that will probably disappear as soon as support ceases. 

The real unemployment rate is likely well above 20%, rather than the official 15%.

In the medium term, what is even more important for all economies is how much money consumers have once the pandemic is over. Reduced earnings could depress demand for years and even cause a double-dip recession. 

In the U.S., an expansion of unemployment subsidies and stimulus checks led personal income to increase more than 10% in the second quarter even as people lost their jobs. In Southern Europe and Spain in particular, by contrast, income losses have been very steep, Oxford Economics analyst Ángel Talavera has pointed out.



The reason is that these governments have been less willing or able to widen their budget deficits by opening their purses, despite support from the European Central Bank. While Oxford Economics forecasts a rebound in Spanish personal income in the third quarter, the economic gap with richer nations is likely to widen from here. 

European reconstruction funds will probably arrive too late—over the past week, governance questions have put the timing further at risk—and won’t fix Spain’s overreliance on relatively unproductive industries like tourism.

A big question for investors over the past few months has been whether to tilt their portfolios from the U.S. to Europe. The pain in Spain is a warning of the dangers involved.

The end of the dollar’s exorbitant privilege

A crash is likely given the collapse in US domestic saving and a gaping current account deficit

Stephen Roach 

© REUTERS


The riddle once posed in the 1960s by former French finance minister (eventually president) Valéry Giscard d’Estaing is about to be solved. Giscard bemoaned a US that took advantage of its privileged position as the world’s dominant reserve currency and drew freely on the rest of the world to support its over-extended standard of living. 

That privilege is about to be withdrawn. A crash in the dollar is likely and it could fall by as much as 35 per cent by the end of 2021.

The reason: a lethal interplay between a collapse in domestic saving and a gaping current account deficit. In the second quarter of 2020, net domestic saving — depreciation-adjusted saving of households, businesses and the government sector — plunged back into negative territory for the first time since the global financial crisis. 

At -1.2 per cent in the second quarter, net domestic saving as a share of national income was fully 4.1 percentage points below the first quarter, the steepest quarterly plunge in records that go back to 1947. 

 Unsurprisingly, the current account deficit followed suit. Lacking in saving and wanting to grow, the US levered its exorbitant privilege to borrow surplus saving from abroad. 

That pushed the current account deficit to -3.5 per cent of gross domestic product in the second quarter — 1.4 percentage points below that in the first period and also the sharpest quarterly erosion on record.



While a Covid-related explosion in the federal government deficit is the immediate source of the problem, this was an accident waiting to happen. 

Going into the pandemic, the net domestic saving rate averaged just 2.9 per cent of gross national income from 2011 to 2019, less than half the 7 per cent average from 1960 to 2005. 

This thin cushion left the US vulnerable to any shock, let alone Covid.

As budget deficits pile up in the years ahead, further downward pressure on domestic saving and the current account will intensify. 

The latest estimates of the Congressional Budget Office put the federal deficit at 16 per cent of gross domestic product in 2020 before receding to “just” 8.6 per cent in 2021. 

Assuming the US Congress eventually agrees to another round of fiscal relief, a much larger deficit for 2021 is likely.



This will take the US net saving rate far deeper into negative territory than during the global crisis That has ominous implications for America’s future. 

After setting aside depreciation required of an ageing capital stock of buildings and infrastructure, the US is, in effect, liquidating the net saving required for the expansion of productive capacity. 

Without borrowing surplus saving from abroad, growth becomes impossible. 

The current account deficit will only deepen as a result.

That’s when the dollar loses its special privilege. With America’s position as the world’s dominant reserve currency slowly eroding since 2000, foreign lenders are likely to demand concessions on the terms for such massive external financing. This normally takes two forms — an interest rate and/or a currency adjustment. 

The Federal Reserve has recently shifted to a strategy that takes into account an average of inflation rather than a specific target, and promised to keep policy rates near zero for several more years. 

That means the interest rate channel has effectively been closed. As a result, more of the current account adjustment will now be forced through a weaker dollar.



The US dollar’s lofty value makes it especially vulnerable. Despite recent falls, a broad index of the dollar’s real effective exchange rate remains some 27 per cent above its July 2011 low. 

That leaves the greenback as the world’s most overvalued major currency, just as the US gets sucked into an unprecedented savings-current account vortex.

Currencies are relative prices. The dollar has always benefited from the seductive charm of TINA — that there is no alternative. Think again. 

The July 21 agreement on a Next Generation EU Fund of €750bn ($858bn) finally establishes a pan-European fiscal policy. That should boost the undervalued euro. The renminbi, gold and cryptocurrencies are also alternatives to the once invincible dollar.

The dollar index fell 33 per cent in real terms both in the 1970s and the mid-1980s, and another 28 per cent from 2002 to 2011. 

During those three periods, the net domestic saving rate averaged 4.9 per cent (versus -1.2 per cent today) and the current account deficit was -2.5 per cent of gross domestic product (versus -3.5 per cent today). 

With the US having squandered its exorbitant privilege, the dollar is now far more vulnerable to a sharp correction. A crash is looming.

Why Biden Is Better Than Trump for the Economy

The presumption that Republicans are better than Democrats at economic stewardship is a longstanding myth that must be debunked. For all Americans who care about their and their children’s future, the right choice this November could not be clearer.

Nouriel Roubini


NEW YORK – Joe Biden has consistently held a wide polling lead over US President Donald Trump ahead of November’s election. But, despite Trump’s botched response to the COVID-19 pandemic – a failure that has left the economy far weaker than it otherwise would have been – he has maintained a marginal edge on the question of which candidate would be better for the US economy. 

Thanks to Trump, a country with just 4% of the world’s population now accounts for more than 20% of total COVID-19 deaths – an utterly shameful outcome, given America’s advanced (albeit expensive) health-care system.

The presumption that Republicans are better than Democrats at economic stewardship is a longstanding myth that must be debunked. In our 1997 book, Political Cycles and the Macroeconomy, the late (and great) Alberto Alesina and I showed that Democratic administrations tend to preside over faster growth, lower unemployment, and stronger stock markets than Republican presidents do.

In fact, US recessions almost always occur under Republican administrations – a pattern that has persisted since our book appeared. The recessions of 1970, 1980-82, 1990, 2001, 2008-09, and, now, 2020 all occurred when a Republican was in the White House (with the exception of the double-dip recession of 1980-82, which started under Jimmy Carter but continued under Ronald Reagan). Likewise, the Great Recession of 2008-09 was triggered by the 2007-08 financial crisis, which also occurred on the GOP’s watch.1

This tendency is not random: loose regulatory policies lead to financial crises and recessions. And, compounding matters, Republicans consistently pursue reckless fiscal policies, spending as much as Democrats do, but refusing to raise taxes to make up for the resulting budget shortfalls.1

Owing to such mismanagement under the George W. Bush presidency, President Barack Obama and Vice President Biden inherited the worst recession since the Great Depression. In early 2009, the US unemployment rate surpassed 10%, growth was in free fall, the budget deficit had already exceeded $1.2 trillion, and the stock market was down almost 60%. Yet, by the end of Obama’s second term in early 2017, all of those indicators had massively improved.1

In fact, even before the COVID-19 recession, US employment and GDP growth, as well as the stock market’s performance, were better under Obama than under Trump. Just as Trump inherited millions from his father, only to squander it on business failures, so he inherited a strong economy from his predecessor, only to wreck it within a single term.

The rally in equity prices this past August coincided with a hardening of Biden’s polling lead, suggesting that markets are not nervous about a Biden presidency, or about the prospects of a Democratic sweep of Congress. The reason is simple: a Biden administration would be unlikely to pursue radical economic policies. 

Biden may be surrounded by progressive advisers, but they are all fully within the political mainstream. Moreover, his vice-presidential pick, US Senator Kamala Harris of California, is a proven moderate, and most of the Democratic senators who would be seated in a new Congress are more centrist than the left wing of their party.

Yes, a Biden administration might raise marginal tax rates on corporations and the top 1% of households, which Trump and congressional Republicans cut merely to give wealthy donors and corporations a $1.5 trillion handout. But a higher tax rate would result in only a modest hit to corporate profits. 

And any costs to the economy would be more than offset by closing the loopholes that allow for tax avoidance and shifting profits and production abroad, and with Biden’s proposed “Made in America” policies to bring more jobs, profits, and production home.1

Moreover, while Trump and his fellow Republicans have not even bothered to formulate a policy platform for this election, Biden has proposed a suite of fiscal policies designed to boost economic growth. If Democrats take control of both houses of Congress and the White House, a Biden administration would pursue a larger fiscal stimulus targeted at households, workers, and small businesses that need it, as well as job-creating infrastructure spending and investments in the green economy. 

They would not invest in tax cuts for billionaires, but rather in education and worker retraining, and in proactive industrial and innovation policies to ensure future competitiveness. Private business would no longer be terrorized by the president in Twitter tantrums.

Democrats also are calling for higher minimum wages to boost labor income and consumption, along with more sensible regulations to reduce carbon dioxide emissions. They would push for policies to restore some bargaining power to workers, and to protect savers from predatory financial institutions. 

And they would have a much more sensible approach to trade, immigration, and foreign policy, repairing US alliances and partnerships and pursuing a policy of “coopetition” rather than lose-lose containment vis-à-vis China. All these measures would be good for jobs, growth, and markets.

Although Trump ran as a populist, he is a wannabe plutocrat – a pluto-populist – and that is how he has governed. His economic policies have been disastrous for US workers and long-term economic competitiveness. Trade and immigration policies that were billed as measures to restore US jobs have had the opposite effect. 

The “deaths of despair” that disproportionately afflict white blue-collar and precariat workers have not fallen under Trump; with more than 70,000 drug overdose deaths in 2019, this American carnage continues. If the US is to fill the high-value jobs of the future, it will need to train its labor force, not embrace self-destructive protectionism and xenophobia.

The choice for US voters who are concerned about America’s economic prospects could not be clearer. Biden, who has long tapped into blue-collar concerns, is the only presidential candidate in recent history without an Ivy League background. 

He has a better chance than anyone of rebuilding the Democratic coalition and winning back the support of disaffected, working-class voters. For all Americans who care about their and their children’s future, the right choice this November could not be clearer.


Nouriel Roubini, Professor of Economics at New York University's Stern School of Business and Chairman of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com, and he is the host of NourielToday.com.