If you were searching for a bit of good news today it was hard to find. Over There, aside from the killing fields of the Ukraine, the news was unsettling and the mood somber. There was no economic growth, none. On top of that came the report from Portuguese officials that, as predicted in this space, the loss at Banco Espirito Sancto was far greater than estimated and arrest warrants are being issued as I write. Quite frankly, with the exception of the United States, I cannot remember any bank calamity anywhere that didn't involve lending to another entity in the financial group. It's the first place one looks, and this is proving to be the case here…as predicted yet again. We have seen this all before, only the names have been changed to protect the guilty. The suspicion is that there is to be more of this seeping out from underneath rocks in other jurisdictions that can no longer be kept hidden or inflated out of harm. I would agree.
Over Here, questions began to be raised as to the quality of the GDP figures as a whole series of economic data was released including a absolutely dismal Chicago purchasing report that questioned the real state of the economic recovery. The stock market fell over 300 points, the 10 year thumped back down to it's range of around 2.55% and like Europe, the mood turned somber. In addition, people are beginning to wake up to the fact that western relations with Russia--even Angies--are in the toilet and what does that foretell may I ask.
And then of course there are the Argie Bargies.
When is a default not a default? It seems that occurs when the judicial system of the United States tells you that you are in breach of contract if you don't pay ALL of your creditors what they are owed and in light of that you don't pay anybody..or so is the Argentine argument. Now just to prove that they are correct, they plan…or so they claim…to sue the United States in the International Court in the Hague in violation of their sovereign right to remain deadbeats and liars which they have been since 1823 or so. Wrapped up in that will be some really progressive arguments which would essentially reverse 500 years of practice relating to bond issues and God knows how many years of Anglo-American law in regard to contracts. There is a meeting tomorrow at the District Court to see where we go from here which could actually turn into good fun as Judge Griesa may ask for an explanation of the Argentine claim that he was in cahoots with the plaintiffs. Probably wont happen, but people have been thrown in jail for contempt for less. I mean, would that be a kick? Some Argie Minister thrown in the clink for about 100 days? Well, one can dream.
I make light of this but what is occurring is that every horse's ass on the left to include no lesser a horse's ass on these matters than Prof. Stieglitz of Columbia University have chimed in as to how this affair, if allowed to continue, will spell doom to international finance as we know it. Rubbish. What it will hopefully do is reestablish the rule of law and contract as should have been understood by all parties and undoubtedly WAS as Argentina, throughout this affair has been represented by Cleary Gottleib Steen & Hamilton and as I have said on a number of occasions, there is none better. I KNOW they were advised as to what could happen if things got ugly and they chose the path they have walked in the face of that advice. They are now choosing to establish their position in the arena of public dialog and finding ample aid in the Stieglitzs of the world who know nothing of this business but a lot of the politics of the left. It's not going to work, but rather than the non-event that many have predicted of this affair, the course they have taken could make it a very big event indeed. Don't get me wrong, there is a settlement out there and I hope it can be reached quickly. But if Argentina chooses to take the course of arrogance and stupidity so familiar to them as a nation I hope for once the proper decision can be imposed and imposed hard. It begins tomorrow.
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