THE TALE THAT NEVER ENDS

To the surprise of no one, talks between the Argies and the Hedgies broke off last week,  although they are still hanging around in B.A.  Of course the President, Mrs. Kretchner, a dumb a woman who has ever held public office anywhere is benefiting from this mightily in the eyes of public opinion and will therefore continue to do anything to alleviate the situation.  Not only that, she once again borrowed reserves from the Central Bank to pay the country's debts owed to official institutions such as the IADB. What remains is some $25 billion which may seem like a lot but for a country the size of Argentina really isn't.  One must also remember that the country benefited enourmously in the past few years in the commodity boom which for soy beans still continues but which can't go on forever.  Inflation continues to rise…not at past levels to be sure…but on a worrisome trend.. Argentines are as adept at getting out of Pesos and into anything else as they are a playing soccer so one can expect the reserve drain to continue.  Not a good prognosis.

As a corollary to this dismal picture, it appears that, as predicted, the mediator appointed by Judge Griesa, Daniel Pollack, has worked out less than well--as also expected.  The Argentines asked that he be removed weeks ago and the good judge refused, also as expected.  Now you might remember, I suggested at the start of the appointment I didn't think the guy was qualified to deal with this mob no matter what is reputation might lead one to believe, and this apparently was so.  Even parties on the plaintiff's' side in this case have remarked that Mr. Pollack was not a clever choice for the job.  And so, the battle rages in the dueling newspaper adds in public proclamations and in a dozen courtrooms all at enormous expense to the benefit of no one.  There is a complete absence of comity and trust.  So, just in case anyone is listening, Judge Griesa, do everybody a favor and replace your present arbiter with Terry Checki, formally of the New York Fed.  All parties know him as the last totally honest man left standing and no party will refuse to deal with him as to do so would automatically label them as the spanner in the works.  Pay him whatever, and get on with this thing.  Even I am beginning to lose interest.


…And then there is Debit Suisse.  Remember when we said there were internal dealings within the Espirito Sancto organization that probably contributed to the collapse because there always are in such cases?  Well, it turns out that our Suisse buddies were right in the middle of this mess having created securities of special purpose companies of Group members in order to finance the same and then selling the paper on to Bank clients as being akin to deposits of all things, only carrying a higher yield!  I had an Uncle from New England at one point and he said to me, "George (for some reason he called me George), at some point a man is going to walk up to you and ask you to buy a two pound mess of crap (he used a different word) in that there one pound bag he was carrying.  Do not do that because a sure as s---'s manure, you will have two pounds of crap on your shoes the minute you pay him…"  The depositors of Espirito Sancto obviously never met my Uncle Buck.  But he sure had met Debit Suisse.