WEBVTT - Why Argentina Needs Bailout After Bailout After Bailout 0:00:02.720 --> 0:00:15.960 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.680 --> 0:00:21.600 Hello and welcome to another episode of the Odd Thoughts podcast. 0:00:21.720 --> 0:00:23.120 I'm Tracy Alloway. 0:00:22.800 --> 0:00:23.960 And I'm Joe Wisenthal. 0:00:24.320 --> 0:00:27.160 Joe, we are in Washington, DC. Do you know who 0:00:27.200 --> 0:00:28.880 else is in our nation's capital? 0:00:29.680 --> 0:00:32.560 Lots lots of people are in our nation's capital. Yes, 0:00:32.640 --> 0:00:34.479 right now. I could go on and on. There's a 0:00:34.520 --> 0:00:36.479 lot of people live there permanently, but also a lot 0:00:36.520 --> 0:00:38.640 of people visiting this week, like we are true. 0:00:38.680 --> 0:00:41.640 Okay, So one person in particular is visiting who is 0:00:41.720 --> 0:00:45.360 of note for this particular podcast, and that is Javier Milay. 0:00:45.560 --> 0:00:48.879 He is the President of Argentina and he's meeting with 0:00:48.920 --> 0:00:53.160 Trump today. They're supposed to finalize like the twenty billion 0:00:53.200 --> 0:00:57.480 dollars swap that Argentina just got from the US Treasury. Basically, 0:00:57.640 --> 0:01:01.880 Argentina is getting there like a teenth bailout. I tried 0:01:01.880 --> 0:01:03.600 to count all of them, but then I stopped because 0:01:03.640 --> 0:01:07.120 I was like, I have a life. But normally a 0:01:07.120 --> 0:01:09.479 lot of those bailouts come from the IMF. This one's 0:01:09.520 --> 0:01:12.199 coming from the Treasury, so it's fairly unusual. It also 0:01:12.280 --> 0:01:15.360 comes with a lot fewer terms than some other deals. 0:01:16.000 --> 0:01:18.640 But this is a good time to talk about Argentina 0:01:18.760 --> 0:01:22.160 and why it seems to constantly be in financial trouble 0:01:22.280 --> 0:01:24.720 and either defaulting or on the verge of a default. 0:01:25.040 --> 0:01:28.960 You know, I'm like traumatized by Argentina topics. Right, Wait, what, Well, 0:01:29.000 --> 0:01:31.399 I've probably said it once or twice before on the podcast, 0:01:31.480 --> 0:01:33.440 but you know, well, the first time I applied for 0:01:33.480 --> 0:01:36.880 a job in New York City was with Brad Setzer. 0:01:38.000 --> 0:01:39.960 He was like, and in the middle of the interviews, like, 0:01:39.959 --> 0:01:42.160 how would your character this is two thousand and six, 0:01:42.200 --> 0:01:45.000 maybe it's like, how would you characterize the struggles of Argentina? 0:01:45.040 --> 0:01:47.000 And I just totally blanked. I like literally didn't get 0:01:47.000 --> 0:01:49.040 a word out and I didn't get the job obviously, 0:01:49.200 --> 0:01:51.800 So I've sort of this is a huge blind spot 0:01:51.840 --> 0:01:53.760 for me, and it's almost like a blind spot I'm 0:01:53.800 --> 0:01:56.320 afraid to revisit. But we have to dive in. I 0:01:56.360 --> 0:01:59.120 have to learn more. Eventually, one more bailout. This one's 0:01:59.120 --> 0:02:00.840 gonna work, right, this one's. 0:02:00.600 --> 0:02:04.200 Going to be the last one more lane bro Yes. So, 0:02:04.520 --> 0:02:06.760 And you know, the other interesting thing about this is 0:02:06.840 --> 0:02:11.280 Malay was he was initially praised for reducing inflation. I 0:02:11.280 --> 0:02:13.760 think it was something like over two hundred percent, and 0:02:13.800 --> 0:02:16.399 it got down to thirty three percent, which by US 0:02:16.480 --> 0:02:19.079 standards is still pretty high. But he did that by 0:02:19.120 --> 0:02:23.320 slashing government spending and selling Argentina's FX reserves to prop 0:02:23.400 --> 0:02:26.640 up the peso. And now fast forward a little bit 0:02:26.639 --> 0:02:30.239 of time and that approach doesn't seem to be working anymore. 0:02:30.360 --> 0:02:32.640 So again, there's lots to talk about. 0:02:32.760 --> 0:02:35.720 There's so much about Argentina that confusies me, including like 0:02:36.280 --> 0:02:38.520 why is it like this? Because there are lots of 0:02:38.560 --> 0:02:41.919 countries that have institutional struggles of various sources. Yeah, a 0:02:41.960 --> 0:02:43.720 lot of countries that are poor. There are a lot 0:02:43.720 --> 0:02:45.960 of countries that whatever. I can't think of any other 0:02:46.040 --> 0:02:49.560 country that just is always always at the travel like this. 0:02:49.800 --> 0:02:51.440 It is not that poor of a country, et cetera. 0:02:51.520 --> 0:02:55.079 I don't really understand why this is this persistent thing 0:02:55.240 --> 0:02:56.320 distinct to this country. 0:02:56.360 --> 0:02:59.000 All right, our first question will be why is Argentina 0:02:59.200 --> 0:03:00.040 like this? 0:03:00.200 --> 0:03:01.040 Argentina like this? 0:03:01.120 --> 0:03:03.280 And then after we record this interview, you can write 0:03:03.320 --> 0:03:05.799 a little essay for Brad Setzer and send it to him. 0:03:05.840 --> 0:03:08.200 Forge job, Yes, okay, hire me. 0:03:08.480 --> 0:03:10.480 All right, Well, I'm very happy to say that we do, 0:03:10.600 --> 0:03:12.680 in fact have the perfect guest. We are going to 0:03:12.720 --> 0:03:15.800 be speaking with Gregory Makeoff. He is the author of Default, 0:03:15.960 --> 0:03:19.520 the landmark court battle over Argentina's one hundred billion dollar 0:03:19.600 --> 0:03:23.399 debt restructuring. I read this book when it first came out. 0:03:23.639 --> 0:03:27.440 It was absolutely fantastic, And even though it's about, you know, 0:03:27.480 --> 0:03:31.480 a very complex court proceeding, it's it's a page turner 0:03:31.560 --> 0:03:34.560 and there are lots of really interesting anecdotes and lots 0:03:34.560 --> 0:03:37.720 of interesting personalities as well. So, greg thank you so 0:03:37.800 --> 0:03:39.160 much for coming on the podcast. 0:03:39.360 --> 0:03:40.280 Thank you for having me. 0:03:40.840 --> 0:03:43.280 So uh, I guess I should start with that first question, 0:03:44.040 --> 0:03:45.640 what's up with Argentina. 0:03:46.080 --> 0:03:51.360 Well, for the history, they start from the very they 0:03:51.400 --> 0:03:55.280 spend too much, Okay, but lots of countries spend too much. Well, 0:03:55.520 --> 0:04:02.800 they've they're particularly politically divided and do have a reform effort. 0:04:03.240 --> 0:04:07.280 Countries have a crisis than they reform. Hopefully they embed 0:04:07.320 --> 0:04:11.480 the reforms and they graduate to a certain level of stability. 0:04:12.000 --> 0:04:14.720 But whereas the Mexicos and the Brazils and the Perus 0:04:14.720 --> 0:04:19.680 and the Columbias and the Panamas did succeed in the 0:04:19.800 --> 0:04:23.479 nineties and their Brady programs and have not defaulted since, 0:04:24.200 --> 0:04:28.640 Argentina and Venezuela have been distinct in not reforming and 0:04:28.760 --> 0:04:33.560 massively over spending. That's the big difference. There's no magic 0:04:33.720 --> 0:04:34.760 or no mystery here. 0:04:34.880 --> 0:04:37.560 Well, can you explain, maybe just I think this might 0:04:37.600 --> 0:04:40.640 be helpful for me. What is it about the political 0:04:40.839 --> 0:04:44.360 environment of Argentina, which is not the poorest country in 0:04:44.400 --> 0:04:46.159 the world by any stretch. What is it about the 0:04:46.160 --> 0:04:50.440 political environment of Argentina such that it's never been able to, 0:04:50.640 --> 0:04:54.320 as you put it, embed reforms in the ways that 0:04:54.640 --> 0:04:57.200 other countries that struggled in the nineties. 0:04:56.760 --> 0:05:01.159 Were able to machine politics coronism. 0:05:01.520 --> 0:05:04.640 So all I know about Argentina comes from basically your book. 0:05:04.800 --> 0:05:06.720 I covered the New York court case a little bit 0:05:06.720 --> 0:05:09.200 when I was at the ft, but also all my 0:05:09.279 --> 0:05:13.120 knowledge comes from andre Lloyd Webber's musical Ivida, which is 0:05:13.200 --> 0:05:16.520 fantastic and I highly recommend. But can you explain what 0:05:16.600 --> 0:05:17.359 paronism is? 0:05:17.600 --> 0:05:21.560 Yeah, Paronism is kind of a shape shifter, but it 0:05:21.640 --> 0:05:26.440 goes back historically to one Parone who was the president 0:05:26.560 --> 0:05:29.320 or dictator for a while in the fifties, and he, 0:05:30.240 --> 0:05:34.880 in the post war world, was aligned with labor forces 0:05:35.160 --> 0:05:39.640 and cut the country out from the outside world. Nationalistic. 0:05:40.600 --> 0:05:44.640 It became a political machine that controlled apparatus of government 0:05:44.960 --> 0:05:50.200 and the unions and everything, so it embedded itself. Carlos Mennem, 0:05:50.240 --> 0:05:54.880 the president in the nineties who were formed, was a Proonist. 0:05:55.279 --> 0:05:58.040 He had the political machine, but he was a reformer, 0:05:58.520 --> 0:06:02.520 an imperfect reformer. Broke down in two thousand and one. 0:06:03.360 --> 0:06:07.960 But then the Kirchners were also Prohists, and they have 0:06:08.080 --> 0:06:12.680 a particularly virulent version of Pronism, which is really what 0:06:12.760 --> 0:06:17.440 we're talking about here is Kirchnerism. So pironas come in 0:06:17.560 --> 0:06:21.080 many different flavors, and when we're talking about the current situation, 0:06:21.680 --> 0:06:26.480 it's really the Kirchner version of pronism versus the Milai 0:06:26.680 --> 0:06:29.680 version of let's finally balance our budget. 0:06:30.000 --> 0:06:33.599 I want to get to Malay obviously, but just go 0:06:33.680 --> 0:06:36.880 into this a little bit more machine politics. Again, not 0:06:37.040 --> 0:06:41.440 something that's alien to other countries in the world. That's 0:06:41.480 --> 0:06:45.720 fairly common talk about the sort of application or every 0:06:45.720 --> 0:06:48.320 country is some kind of machine politics. What makes that 0:06:48.680 --> 0:06:52.080 Kirchnerism et cetera so powerful and difficult to dislige? 0:06:52.120 --> 0:06:56.279 How is it operationalize the way the cash moves Okay, 0:06:56.760 --> 0:07:00.960 in that if you get a bailout check during you 0:07:01.040 --> 0:07:04.440 get it from the federal government in the mail. In 0:07:04.480 --> 0:07:07.720 the two thousand and one crisis, some of the emergency 0:07:07.839 --> 0:07:13.040 money that was allocated, even from international institutions, was given 0:07:13.080 --> 0:07:17.840 to Argentina, who was given to party operatives to hand 0:07:17.840 --> 0:07:22.960 out in the barrios. You literally get checks from party 0:07:23.040 --> 0:07:28.400 operatives or in regions, from the party governor under a 0:07:28.400 --> 0:07:31.240 picture of the governor in paron. So in many cases 0:07:31.320 --> 0:07:35.160 the cash flow looks like a gift from the leader 0:07:35.240 --> 0:07:38.720 and the party. And then when the leader says, oh, 0:07:39.040 --> 0:07:42.480 there's a Peronist rally in Buenos Aires, we'd like you 0:07:42.560 --> 0:07:45.840 to get on a bus, the people who depend on 0:07:45.960 --> 0:07:49.320 them for the check say, I guess I gotta go. Wow. 0:07:49.480 --> 0:07:53.640 I had no idea that happened. Okay, So Millay campaign 0:07:53.680 --> 0:07:57.720 on a platform of massively reducing government spending in order 0:07:57.760 --> 0:08:00.760 to bring down inflation and all types of austerity. It 0:08:00.800 --> 0:08:05.040 wasn't necessarily IMF style reform, but it was supposed to 0:08:05.080 --> 0:08:09.720 be a reduction in spending. And yet here we are 0:08:09.960 --> 0:08:13.800 and Argentina is getting its twenty billion dollar bailout do 0:08:13.920 --> 0:08:17.920 the politics of economic pain. I guess the idea of 0:08:18.440 --> 0:08:21.760 people no longer handing out checks in the barrios and 0:08:21.800 --> 0:08:27.240 stuff like that. Does that make serious spending reductions just 0:08:27.440 --> 0:08:29.760 untenable in Argentina. 0:08:29.960 --> 0:08:33.520 We should back up a bit and get a bit historically, 0:08:34.120 --> 0:08:38.880 because the people voted in twenty twenty three for Mila, 0:08:38.920 --> 0:08:44.120 because they were in such economic chaos. They voted for 0:08:44.200 --> 0:08:48.559 a complete outsider with a very particular message that had 0:08:48.600 --> 0:08:52.880 a lot of truth for them, and his promise was 0:08:53.600 --> 0:08:58.880 pain now, success later. Let's finally have reform and sustain 0:08:58.960 --> 0:09:02.880 it to stop the two hundred years of boom bust 0:09:02.920 --> 0:09:08.320 evaluation in default. Now, the context of this, just from 0:09:08.360 --> 0:09:11.760 two thousand and one is the country, the program of 0:09:11.800 --> 0:09:16.400 the ninety of men falling apart and facing a devaluation 0:09:16.520 --> 0:09:19.120 in default, one hundred billion dollar debt default. As I 0:09:19.240 --> 0:09:23.160 talk about in my book, the people were in the 0:09:23.200 --> 0:09:27.600 street screaming they all must go, and they were banging 0:09:27.679 --> 0:09:32.760 pots and pans clink, clink, and the president left in 0:09:32.760 --> 0:09:38.280 a helicopter from the top of Casa Rizata. And they 0:09:38.800 --> 0:09:42.600 had a reform program. They ran a very tight budget, 0:09:42.840 --> 0:09:46.640 tighter even than mille is running between three and oh five. 0:09:47.960 --> 0:09:51.679 But then they didn't sustain the reform, and after twenty 0:09:51.840 --> 0:09:54.920 ten they've been in the boom, then the bust in 0:09:55.040 --> 0:10:00.280 default from twenty ten to twenty three. So again they 0:10:00.360 --> 0:10:03.840 voted for Milay because they were saying they all must go. 0:10:04.600 --> 0:10:08.640 The rest of the political class who couldn't deliver must go. 0:10:08.840 --> 0:10:14.080 We want stability. Now. The brilliance of Milay is he said, 0:10:15.520 --> 0:10:19.760 we spent too much, we print too much money, we 0:10:20.640 --> 0:10:25.480 have inflation. And that was true, and he symbolized it 0:10:26.160 --> 0:10:29.280 with a chainsaw, right, because it was the problem in 0:10:29.360 --> 0:10:33.400 the solution. I've seen pictures of him at a rally. 0:10:33.880 --> 0:10:36.400 He's not even talking, he just holds it up. 0:10:36.840 --> 0:10:37.720 That's really powerful. 0:10:37.800 --> 0:10:40.480 And he lent that chainsaw to Elon Musk as well. 0:10:40.559 --> 0:10:41.040 Oh he did. 0:10:41.160 --> 0:10:43.320 Yeah, that was that was Malay's change. 0:10:44.200 --> 0:10:45.480 Wait, what happened to that other guy? 0:10:45.600 --> 0:10:45.640 Was? 0:10:45.720 --> 0:10:48.079 Is there some guy that around twenty sixteen or twenty 0:10:48.120 --> 0:10:51.040 seventeen that all the international community loved that thought he 0:10:51.120 --> 0:10:53.400 was going to be the great neoliberal reformer there? 0:10:53.640 --> 0:10:54.319 That was Macri? 0:10:54.559 --> 0:10:56.280 Oh yeah, Macri right, what happened to that guy? 0:10:56.400 --> 0:11:02.560 Well, the people were tired of the chaos of Christina 0:11:02.600 --> 0:11:05.800 Fernandez de Kirchner, who was present for two terms after 0:11:05.880 --> 0:11:10.120 her husband Nestor was present for one term. He died 0:11:10.280 --> 0:11:12.520 after her first term. He was going to run again, 0:11:13.120 --> 0:11:16.560 so she had two and things were bad, including on 0:11:16.600 --> 0:11:20.120 the bond default and all the litigation, and Macri is like, 0:11:20.160 --> 0:11:22.840 I'm going to bring a normal country, and he did 0:11:22.880 --> 0:11:27.840 some great things at first, but his program fell apart, 0:11:28.120 --> 0:11:36.760 which brought back an even worse Peronist administration with Alberto Fernandez, 0:11:36.960 --> 0:11:39.720 who had been the chief of cabinet for Nestor Kirchner, 0:11:40.280 --> 0:11:44.880 with Christina Fernandez de Kirchners the vice president, and COVID hit. 0:11:45.280 --> 0:11:49.200 They did default again and they handed over the reins 0:11:49.240 --> 0:11:53.600 to Milley with like one hundred and fifty percent annualized inflation. 0:11:54.880 --> 0:11:58.800 So there was an urge to reform under Macri, but 0:11:58.960 --> 0:12:04.400 he had such a bad imbalance of too much monetary 0:12:04.400 --> 0:12:08.200 emission in the local market, he couldn't get out from 0:12:08.200 --> 0:12:11.400 it fast enough. He tried to slow walk it and 0:12:11.520 --> 0:12:14.040 be gradualistic, and he couldn't make it through. 0:12:30.000 --> 0:12:34.400 So Malay took a chainsaw to government spending in Argentina. 0:12:34.440 --> 0:12:37.800 It seems inflation did come down. Why do they need 0:12:37.800 --> 0:12:41.079 a bailout now? Their umpteenth bailout? Actually I should ask you, 0:12:41.080 --> 0:12:43.320 you might actually know how many times Argentina has been 0:12:43.320 --> 0:12:43.760 bailed up. 0:12:44.000 --> 0:12:48.120 I have the number and how many defaults. Okay, the bailouts, 0:12:48.160 --> 0:12:51.720 we'd have to check the number. But first of all, 0:12:52.040 --> 0:12:57.360 I would term the treasury support is not a surprise 0:12:57.400 --> 0:12:59.840 and was always in the cards from that I am 0:12:59.840 --> 0:13:03.560 a program in April. The IMF program, for what it 0:13:03.720 --> 0:13:08.000 was doing in the negative reserve position they inherited from 0:13:08.040 --> 0:13:11.319 the prior government, was always too thin. They were always 0:13:11.440 --> 0:13:15.040 vulnerable to a speculative attack. They were always vulnerable around 0:13:15.080 --> 0:13:19.439 the midterm elections and a speculative attack occurred, and as 0:13:19.840 --> 0:13:24.160 Treasury hint they would, they stood behind the IMF. This 0:13:24.240 --> 0:13:26.920 is nothing new. This is not a failure of the program. 0:13:27.320 --> 0:13:32.360 This is completely predictable. The way it unfolded in the 0:13:32.480 --> 0:13:37.320 speed leaves a bad impression. But as an observer for 0:13:37.360 --> 0:13:42.360 a long time, this was no surprise. And Besson's word, 0:13:42.559 --> 0:13:45.840 we really need to have an orderly election here this 0:13:46.040 --> 0:13:49.600 is true. The people have to choose. Are we going 0:13:49.640 --> 0:13:55.320 to sustain reform and stop defaulting, or are we going 0:13:55.400 --> 0:13:57.640 to go back to the other way and go back 0:13:57.679 --> 0:14:02.240 to overspending money, printing to value inflation and default. There's 0:14:02.280 --> 0:14:07.320 a very stark difference between what the kissel Off leadership 0:14:07.400 --> 0:14:10.160 of the party will lead the country to and what 0:14:10.240 --> 0:14:14.200 a continued leadership by Mila and a center right coalition will. 0:14:14.240 --> 0:14:17.040 Can you actually explain a little bit further? Reform is 0:14:17.040 --> 0:14:20.040 a nebulus term. Sounds good, but I do know what 0:14:20.080 --> 0:14:23.920 it means. What substantively have we seen from the current 0:14:23.960 --> 0:14:28.560 administration in terms of either spending cuts or so called reforms, 0:14:28.880 --> 0:14:30.000 what's been done so far? 0:14:30.920 --> 0:14:35.440 This single number to focus on is the primary surplus. Okay, 0:14:35.800 --> 0:14:38.880 it's kind of like the free cash flow for a company, 0:14:39.360 --> 0:14:43.320 but it's your net cash flow before your debt payments, 0:14:43.560 --> 0:14:49.000 your revenue in minus your expenses and your debt does 0:14:49.040 --> 0:14:53.520 not stabilize unless that's positive and positive enough to pay 0:14:53.560 --> 0:14:58.120 off your existing debt at a reasonable pace. Countries like US, 0:14:58.200 --> 0:15:03.200 the US, we're running negative primary surplus, which means we're 0:15:03.560 --> 0:15:06.920 incurring more debt and we're refinancing maturing debt with more 0:15:06.960 --> 0:15:10.680 and more, which has debt going up. Argentina, to stabilize 0:15:10.720 --> 0:15:13.200 the situation has to run a primary surplus of let's 0:15:13.200 --> 0:15:17.960 say three percent. Under Minister of Economy Lavagna, who was 0:15:18.000 --> 0:15:20.800 a great reformer from two thousand and two to two 0:15:20.840 --> 0:15:24.040 thousand and five who Encouragedner fired him for being too tough. 0:15:24.600 --> 0:15:28.760 They were running a five percent primary totally stabilized the economy. 0:15:29.440 --> 0:15:34.240 Miller's program is carefully calibrated to stop monetary emission in 0:15:34.320 --> 0:15:38.080 stabilize the economy. There's nothing arbitrary about it. It is 0:15:38.200 --> 0:15:42.320 the kind of macroeconomic stabilization that you have to do. 0:15:43.440 --> 0:15:47.640 It makes sense, and moreover, it is done sensitively. They 0:15:47.680 --> 0:15:51.520 protected the basket of money available to the poorest households, 0:15:52.040 --> 0:15:54.800 so where are they cutting. They adjust a lot of 0:15:54.840 --> 0:15:59.760 different things. Most importantly, they did things like you don't 0:15:59.760 --> 0:16:02.560 get free buses anymore, you don't get free trains, so 0:16:02.600 --> 0:16:05.800 they moved the costs of those things up to a 0:16:05.880 --> 0:16:11.280 market rate. And utilities, because the Kirchers they also defaulted 0:16:11.360 --> 0:16:13.560 on all the utility contracts in two thousand and one, 0:16:13.680 --> 0:16:17.280 they never normalized utility rates. So one of their fiscal 0:16:17.400 --> 0:16:21.440 problems around after twenty ten is they were subsidizing the 0:16:21.480 --> 0:16:24.800 power bills for everyone, which was costing four percent of 0:16:24.920 --> 0:16:28.560 GDP a year. That's why you have a primary deficit, 0:16:28.960 --> 0:16:31.760 and they said, we can't do that. So they corrected 0:16:31.800 --> 0:16:40.040 those popular household subsidies and they did some adjustments including 0:16:40.080 --> 0:16:45.640 to the indexation of pension, and that's a next level 0:16:45.920 --> 0:16:50.440 topic in terms of what the Kirchiners did to reindex 0:16:50.480 --> 0:16:51.400 the whole society. 0:16:52.480 --> 0:16:56.640 So we've been very focused on what Argentina itself is 0:16:56.720 --> 0:16:59.240 doing and why it seems to be in a perpetual 0:16:59.360 --> 0:17:03.440 financial predicament. But maybe we could talk about the role 0:17:03.600 --> 0:17:07.600 of external actors a little bit more so in your 0:17:07.680 --> 0:17:12.680 book again fabulous story of the big court case over 0:17:12.840 --> 0:17:16.400 Argentina debt. But one of the criticisms of this whole 0:17:16.440 --> 0:17:21.240 process is that every time you successfully work out default 0:17:21.240 --> 0:17:24.480 to debt or every time you reach a settlement, the 0:17:24.520 --> 0:17:27.600 country can just return to market fairly quickly, right, So 0:17:27.800 --> 0:17:32.080 it's never really punished that much or enough to make 0:17:32.119 --> 0:17:35.960 it seriously think about reducing its debt. Is there some 0:17:36.119 --> 0:17:39.359 truth to that? Are there things that external actors, like 0:17:39.440 --> 0:17:42.040 the court system or the IMF should be doing to 0:17:42.400 --> 0:17:44.080 stop this from repeatedly happening. 0:17:44.600 --> 0:17:48.520 I really think the question you ask is the most 0:17:48.560 --> 0:17:52.359 important one, But it's really about the soul of the 0:17:52.520 --> 0:17:58.480 Argentine people. Have they had enough pain to insist their 0:17:58.600 --> 0:18:05.560 government follows robust financial policies. They either elect people who 0:18:05.600 --> 0:18:08.359 will be straight with them about what they can afford 0:18:08.920 --> 0:18:13.000 and set up policies they will follow, like Gordon Brown's 0:18:13.240 --> 0:18:16.479 Golden Rule and things like that, or they will elect 0:18:16.520 --> 0:18:19.800 politicians who say, oh, I'll make it easier on you. 0:18:20.600 --> 0:18:25.720 And so the people shocked me in twenty twenty three 0:18:25.880 --> 0:18:28.919 on finishing my book. I was depressed. I saw no 0:18:29.040 --> 0:18:34.040 way out of perpetual chaos. And then Milley came and 0:18:34.080 --> 0:18:37.199 they voted for him because the people said, please, we 0:18:37.320 --> 0:18:39.879 want to be in an orderly country. Now we're at 0:18:39.960 --> 0:18:44.280 the midterm, put aside the last six weeks of chaos. 0:18:44.840 --> 0:18:47.919 You're asking the people, will you stick to the plan 0:18:48.440 --> 0:18:51.080 to get to the finish line, or you're going to 0:18:51.160 --> 0:18:53.680 say we're tired, we don't want to try so hard. 0:18:53.680 --> 0:18:57.240 And again they may very well go from Millay and 0:18:57.280 --> 0:19:00.640 Macri and say we do want to complete it where 0:19:00.760 --> 0:19:03.440 we didn't like this blow up that happened. We don't 0:19:04.040 --> 0:19:08.160 want to go there, or they're gonna do something else. 0:19:08.200 --> 0:19:11.840 So no outside party can tell a sovereign nation what 0:19:12.040 --> 0:19:16.320 to do. No judge. The judge makes it worse that 0:19:16.400 --> 0:19:19.880 imf It has to come internally. 0:19:20.440 --> 0:19:23.240 Is the problem democracy? I mean, we've talked about for real, 0:19:23.280 --> 0:19:27.159 like we've talked about this in the context of Fritz 0:19:27.240 --> 0:19:31.760 Bartel wrote a book The Triumph of Broken Promises, similar 0:19:32.280 --> 0:19:37.000 story with the post Soviet states and how they ultimately 0:19:37.000 --> 0:19:40.320 broke apart from the Soviet Union because of this sort 0:19:40.359 --> 0:19:43.800 of difficulty that they had and making difficult decisions and 0:19:43.840 --> 0:19:47.760 these attempts to impose austerity or and live within their means, 0:19:47.760 --> 0:19:50.440 et cetera. And they finally like it didn't work anymore. 0:19:50.560 --> 0:19:53.480 And yet and in the early eighties somehow the UK 0:19:53.680 --> 0:19:55.840 found a way to, you know, sort of do an 0:19:55.920 --> 0:19:58.800 internal adjustment. But these things are like really hard in 0:19:58.800 --> 0:20:02.040 a democracy. They're really hard in a system in which 0:20:02.359 --> 0:20:05.400 every two years there's a referendum on how it's going. 0:20:05.440 --> 0:20:07.680 And if it is painful, I understand why people don't 0:20:07.720 --> 0:20:10.439 want to continue with it, even though maybe long term 0:20:10.560 --> 0:20:14.919 it's beneficial. Like I'm not really proposing this, but like 0:20:15.040 --> 0:20:18.000 in your view, does someone like a Mulay need like 0:20:18.000 --> 0:20:20.600 a nice like ten year or twenty year runway where 0:20:20.600 --> 0:20:22.800 he doesn't have to face the voters. You know what 0:20:22.800 --> 0:20:24.960 I'm saying, like, is this the issue is that these 0:20:25.000 --> 0:20:27.560 difficult things keep coming up for a vote over time, 0:20:27.600 --> 0:20:29.240 and in the middle it's like what are we getting here? 0:20:29.320 --> 0:20:32.680 Yeah, And somebody wrote a book a Black Rock manager 0:20:32.760 --> 0:20:34.800 gave me. He says, Greg, this is the best book. 0:20:35.160 --> 0:20:38.919 It's called A Free Country Deep in Debt. About the 0:20:39.040 --> 0:20:41.560 histories of countries getting in debt is that you don't 0:20:41.600 --> 0:20:43.679 need to know any more than that. But there's this 0:20:43.800 --> 0:20:49.800 challenge between democracy and running a balanced budget. But populations learn. 0:20:50.920 --> 0:20:54.240 And I heard I think it was a Moody's analyst 0:20:54.320 --> 0:20:56.520 or a Fitch analyst last year talking about the debt 0:20:56.600 --> 0:20:59.480 trajectories in Europe. He said, France is going up, in 0:20:59.480 --> 0:21:01.480 this country going up, in the UK is going up, 0:21:01.800 --> 0:21:05.439 but you know what, Greece is going down, in Spain 0:21:05.520 --> 0:21:08.199 is going down, and Italys is going down because the 0:21:08.320 --> 0:21:12.320 crisis country. People don't want to go through the disaster again. 0:21:12.840 --> 0:21:16.800 So when you have people like Argentina who dealt with hyperinflation, 0:21:17.480 --> 0:21:19.719 they don't want to be lied to. They know the 0:21:19.800 --> 0:21:25.520 cost of no pain now and suffering later. Now Americans, 0:21:25.560 --> 0:21:29.200 we don't know. We're willing to have the government massively 0:21:29.240 --> 0:21:33.400 overspend because we want low taxes now and more benefits now, 0:21:33.880 --> 0:21:36.760 and we don't know what it. Imbalanced budget mean. You 0:21:36.760 --> 0:21:39.840 can go forever, but when you've been in Argentina and 0:21:39.840 --> 0:21:43.040 you've suffered it. You want a government who says I'm 0:21:43.040 --> 0:21:47.080 not going to overspend because you've lived the cost. Countries, 0:21:47.760 --> 0:21:51.959 the people embed that knowledge and their voting behavior and 0:21:52.480 --> 0:21:55.600 they can sustain it year after year. That's called graduating. 0:21:56.080 --> 0:21:59.280 That's the point of this election this midterm. Did the 0:21:59.440 --> 0:22:02.840 Argentine people get the message and they are now going 0:22:02.880 --> 0:22:05.960 to sustain the path because they understand the costs, or 0:22:06.000 --> 0:22:08.439 are they going to just say I'm tired of it, 0:22:08.560 --> 0:22:11.120 let's go back. We don't know the answer. We will 0:22:11.160 --> 0:22:14.639 know on the twenty sixth of October after they vote 0:22:14.640 --> 0:22:19.439 on the twenty seventh. And it's an incredible historical moment 0:22:19.520 --> 0:22:34.240 that we're facing. 0:22:36.240 --> 0:22:40.480 Okay, so the new bailout that's getting finalized today in 0:22:40.600 --> 0:22:42.000 DC between Trump and. 0:22:42.040 --> 0:22:44.680 We're recording this the fourteenth. Oh yeah, October fourteenth. 0:22:44.680 --> 0:22:48.880 I should have said October fourteenth. So the new bailout 0:22:49.040 --> 0:22:51.439 does have direct US involvement. I know you said it 0:22:51.480 --> 0:22:55.160 was part of the earlier IMF agreement, but still people are, 0:22:55.240 --> 0:22:57.679 you know, talking about the US doing a twenty billion 0:22:57.680 --> 0:23:02.960 dollar bailout of Argentina. Do you think that involvement changes 0:23:03.160 --> 0:23:06.400 maybe creditor debtor dynamics in the future. 0:23:07.160 --> 0:23:11.760 I think in the short term right now, it's a 0:23:11.800 --> 0:23:15.840 big bazukah to stop a run on the bank. There 0:23:15.920 --> 0:23:20.439 is a speculative attack on the Argentine Peso at the 0:23:20.480 --> 0:23:25.400 worst possible time, and the piranhas start amping it up. 0:23:26.240 --> 0:23:29.320 Christina Fernandez da Kirchner. I think it was October first, 0:23:29.440 --> 0:23:31.760 is on x saying oh, he's going to devalue right 0:23:31.840 --> 0:23:36.679 after the election, and okay, poor more speculative attacks on 0:23:36.800 --> 0:23:40.200 that's kind of a behavior towards your own country, and 0:23:40.359 --> 0:23:45.000 so Treasury is responding by putting a huge bazuka. It's 0:23:45.119 --> 0:23:47.880 very expensive to be short, and so this should put 0:23:47.920 --> 0:23:51.159 all those shorts out of business. They have an orderly election. 0:23:52.000 --> 0:23:54.760 And you don't even know the extent that these sort 0:23:54.760 --> 0:23:58.919 of external things nobody understand really affects behavior. They're living 0:23:59.040 --> 0:24:03.320 their life, are worrying about their bills. There know their 0:24:03.400 --> 0:24:07.879 local stories about what's happened, what Millie has done and 0:24:08.000 --> 0:24:10.560 hasn't done, and what people are saying. This is just 0:24:10.600 --> 0:24:15.040 another piece of noise in a complicated picture. External creditors, 0:24:16.000 --> 0:24:19.479 that's a different question. This is perceptionally very important. Bonds 0:24:19.520 --> 0:24:23.280 started rallying because you have people likewis at Bob Citron 0:24:23.320 --> 0:24:25.359 and said he immediately bought a lot of bonds and 0:24:25.400 --> 0:24:29.679 they went up, and he's saying, oh, Treasury is backing Argentina. 0:24:30.320 --> 0:24:32.719 You buy long term bonds because of short term bawl out. 0:24:32.800 --> 0:24:35.240 That's a risky thing to do, but it's pro Argentina. 0:24:35.480 --> 0:24:40.679 It helps stabilize the situation. But the market is so 0:24:41.160 --> 0:24:46.720 afraid of kiss a Off in particular, so not just Parrohnism, 0:24:46.840 --> 0:24:50.720 which I explained it had reformer menim in early Nester 0:24:50.840 --> 0:24:56.200 Kirchner was quite reformist, but it has this kissal off 0:24:56.440 --> 0:25:03.199 Christina Fernandez to Kirchner version of Poni which involved notorious 0:25:03.200 --> 0:25:09.800 defaulting and Kissilov was directly involved with the nationalization of 0:25:10.000 --> 0:25:12.879