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Unwelcome Inflation Heats Up in Mexico, Brazil, and as Always in Argentina

Unwelcome Inflation Heats Up in Mexico, Brazil, and as Always in Argentina

Brazil’s central bank struck back with shock-and-awe rate hike. Mexico’s central bank faces tough spot after big hit to economy. Argentina’s inflation exceeds 42%.

Around the world, there has been massive fiscal and monetary stimulus, an unprecedented growth in government-guaranteed lending, an explosion in the broad money supply, coupled with low inventories, supply chain shocks, rising shipping costs, and surging demand for certain commodities and consumer goods in developed countries, particularly the US. Companies are able to raise prices and pass on higher costs without triggering a buyers strike as the inflationary mindset has kicked in.

Many emerging economies are also having to contend with the additional inflationary impact of weaker domestic currencies. They include Mexico, where consumer prices rose to 4.7% in March — their highest level since December 2018. Prices are now firmly above the Bank of Mexico’s target inflation rate of 3%, with a one percentage point tolerance threshold above and below that level. In March alone, consumer prices grew 0.8%:

The items that saw the biggest month-on-month price increases were domestic LP gas (5.2%), low-octane gasoline (6%), and staple foods such as eggs (8%).

Surging commodities prices are being passed on to retail products. The price of corn reached $5.68 per bushel in March, up 74% from a year ago. Since last June, the price of this essential grain, for both human and livestock consumption, has risen every month. With consequences: The price of corn tortilla, Mexico’s most important staple food, rose by almost 3% in March from February.

Last year Mexico’s economy suffered its biggest contraction (8.5%) since the worst year of the Great Depression, 1932. It also appears to have contracted in the first quarter of 2021. But prices continue to rise, leaving the Bank of Mexico little choice but to abandon its plan to cut interest rates this month.

…click on the above link to read the rest of the article…

PEPE ESCOBAR: The Age of Anger Exploding in Serial Geysers

PEPE ESCOBAR: The Age of Anger Exploding in Serial Geysers

The presidential election in Argentina pitted the people against neoliberalism and the people won. What happens next will have a tremendous impact all over Latin America and serve as a blueprint for assorted Global South struggles.

South America, Again, Leads Fight Against Neoliberalism

Alberto Fernandez supporters celebrating his presidential victory in Argentina. (Screen shot/YouTube)

The presidential election in Argentina was no less than a game-changer and a graphic lesson for the whole Global South. It pitted, in a nutshell, the people versus neoliberalism. The people won – with new President Alberto Fernandez and former President Cristina Fernández de Kirchner (CFK) as his VP. 

Neoliberalism was represented by Mauricio Macri: a marketing product, former millionaire playboy, president of football legends Boca Juniors, fanatic of New Age superstitions, and CEO obsessed with spending cuts, who was unanimously sold by Western mainstream media as the new paradigm of a post-modern, efficient politician.

Well, the paradigm will soon be evacuated, leaving behind a wasteland: $250 billion in foreign debt; less than $50 billion in reserves; inflation at 55 percent; the U.S. dollar at over 60 pesos (a family needs roughly $500 to spend in a month; 35.4 percent of Argentine homes can’t make it); and, incredible as it may seem in a self-sufficient nation, a food emergency.     

“The Head of Macri: How the First President of ‘No Politics’  Thinks, Lives and Leads.”

Macri, in fact the president of so-called Anti-Politics, No- Politics in Argentina, was a full IMF baby, enjoying total “support” (and gifted with a humongous $58 billion loan). New lines of credit, for the moment, are suspended.   Fernandez is going to have a really hard time trying to preserve sovereignty while negotiating with foreign creditors, or “vultures,” as masses of Argentines define them.

 …click on the above link to read the rest of the article…

Argentina Imposes Currency Controls

Argentina Imposes Currency Controls

Late on Friday, when we noted that according to Argentina’s next president, Alberto Fernandez, the country’s upcoming bond default, its 9th since declaring Independence, was the IMF’s fault as much as that of outgoing president Mauricio Macri, we pointed out that Buenos Aires has a more pressing problem: running out of money.

Specifically, we noted that “the central bank has spent close to $1.5 billion to meet rising demand for dollars since mid-August, or about 10% of its net foreign-currency reserves. Worse, according to calculations by First Geneva Capital Partners, Argentina will drain its net foreign currency reserves within the month if it continues spending dollars at the current rate.” “So”, we concluded, “Buenos Aires has a choice: watch as its currency becomes the next Bolivar, or run out of dollars in days.” 

Two days later Buenos Aires, still not quite sure which path to pursue, did the only thing it could do to avoid a full-blown financial collapse: impose capital controls, which “oddly enough” appears to be a now standard development almost every time the IMF comes in to “rescue” an insolvent nation. Incidentally, without those generous (and record) IMF loans, Argentina would have run out of reserves by now.

As Reuters reports, citing a decree published in an official bulletin on Sunday, the Argentine government authorized the central bank to restrict currency purchases. The decree includes major exporters, which will need permission from the central bank to access the FX market to purchase foreign currency and make transfers abroad. The central bank will also set a deadline for exporters to repatriate foreign currency.

Things went from terrible to even worse last week, when Argentina defaulted on creditors to local short-term debt on Wednesday, at which point Argentina also said it will ask holders of $50 billion of longer-term debt to accept a “voluntary reprofiling.” It also plans to renegotiate payments on nearly $50 billion it has borrowed from the International Monetary Fund.

 …click on the above link to read the rest of the article…

Argentina Proposes IMF-Humiliating ‘Debt Re-Profile’ As It Soft-Defaults For 9th Time Since Independence

Argentina Proposes IMF-Humiliating ‘Debt Re-Profile’ As It Soft-Defaults For 9th Time Since Independence

Less than a week after we suggested The IMF is in for humiliation over the collapse of Argentina – just months after its unprecedented $56 billion liquidity crisis bailout – it appears the South American nation is set to default for the ninth time since its independence in 1816.

Amid a 20% crash in the peso and a collapse in government bonds, which pushed the implied risk of default above 80%, IMF delegates arrived in Argentina on Saturday and, as Bloomberg reports, immediately began meetings with policy makers, facing a deja vu choice from two decades ago: risk making the turmoil even worse by withholding a $5.3 billion installment due next month – or cough it up, and risk even more losses with the IMF bailout program on the verge of collapse.

“The IMF has put a lot in – not just money, but prestige,” said Hector Torres, a former executive director at the Fund who represented South American countries. 

“The fact that the arrangement is not performing well right now is an embarrassment,” he said. And the September installment is “going to be a difficult call.”

Then earlier today, things got worse as Argentina bond spreads widened to the most in 14 years after opposition leader Alberto Fernandez ripped the debt-laden country’s accord with the International Monetary Fund. Fernandez said much of the IMF loan had been wasted on financing capital flight out of the country.

In a statement following a meeting with IMF officials, Fernandez said he agreed with the objectives of the IMF deal, but added that the IMF and the current government generated the current crisis and are now responsible for reversing the “social catastrophe.”

 …click on the above link to read the rest of the article…

Blain’s Morning Porridge – Aug 13 – Argentina, Legarde and Europe

Blain’s Morning Porridge – Aug 13 – Argentina, Legarde and Europe


“I’m going down to Yasgur’s farm, gonna join me a rock and roll band.…” 

Global Credibility Under Pressure – We’ve been Tangoed!

This morning’s headlines are screaming how Argentina and President Mauricio Macri have precipitated yet another crisis upon the stressed geopolitical battlefront…  Relax. We are more than used to dealing with Argentina defaults… But, its far more complex than that.  The latest Argentina Dance Macabre is all about Global Credibility.  It’s another Massive Fail! 

What does it say about the credibility of Global Institutions and Policy when Argentina’s whole market collapsed following a primary for an election in December?  Ex-IMF president, and soon to be head of the ECB, Christine Lagarde personally staked her support for President Mauricio Macri’s pro-market government when she steamrollered through the IMF’s biggest ever bailout of $56 billion for Argentina last year. 

It now looks an extremely poor call on Lagarde’s part.  Macri won a mere 32% of the vote, while former president Cristina Fernandez de Kirchner won 47%.  Don’t Cry for Me Argentina indeed…  Domestic Argentine Politics have left the IMF looking stupid.

There are three major issues to consider here: 

First there is the absolute predictability of what’s just happened in Argentina: 

In return for the 2018 Bailout, the IMF demanded its usual pound of flesh policies: Austerity, Austerity and Austerity, spiced with inflation-targeted monetary policy, fiscal tightening, currency controls, and the keys to the Peso printing presses.  Give Lagarde some credit – she did give lip service to the people with a smattering of minor austerity mitigants in terms of gender equality and social provision.  But, essentially the IMF’s answer to yet another predictable Argentinian crisis was more of the same programme.  You know the definition of madness… 

 …click on the above link to read the rest of the article…

The Lesson Of Argentina: You Can’t Stabilize A Bankrupt Economy

The Lesson Of Argentina: You Can’t Stabilize A Bankrupt Economy

So the U.S. puts Republicans (the party of small government) in charge, and gets… trillion dollar deficits as far as the eye can see AND a revival of socialism among Democrats.

Scary as this may seem, the real (and even scarier) lesson is that it’s all inevitable: Beyond a certain level of indebtedness, even pro-business, sound money, small government leaders are powerless to stop the march to insolvency and currency crisis. 

The latest example is Argentina, which a few years ago elected a free-market president, only to see its debt explode and its currency crash. From Friday’s Wall Street Journal:

Argentine President’s Prospects Dim With Those of His Country’s Economy

Argentina’s assets took a beating Thursday amid President Mauricio Macri’s continuing struggle to tame rising prices and revive a shrinking economy, raising prospects that his left-wing predecessor could make a comeback in this year’s presidential election.

The peso lost more than 5% of its value against the dollar in early trading Thursday, before regaining some ground in the afternoon. Argentina is now the world’s second-riskiest borrower after crisis-hit Venezuela as indicated by credit default swaps, which are derivatives that pay holders when a borrower defaults on a debt payment.

Mr. Macri, who was elected in 2015 on promises to undo the interventionist policies of President Cristina Kirchner, announced new price controls last week to try to get Argentina’s inflation under control. Mr. Macri has failed during his administration to contain inflation, which has risen to a 12-month pace of almost 55% in March from 25% at the start of 2018.

Argentina inflation Argentina bankrupt

The move sparked criticism that the president was abandoning market-friendly policies for short-term electoral considerations as Argentines grow increasingly impatient with rising prices. It also underscored the possibility that Mr. Macri could lose October’s election, even if he faces the polarizing Mrs.

 …click on the above link to read the rest of the article…

Will The ‘Next Permian’ Ever Be Developed?

Will The ‘Next Permian’ Ever Be Developed?

Vaca Muerta

The Vaca Muerta Shale Basin in Argentina is the only unconventional play outside of North America where activity has already made the transition from exploration to full-scale development. The potential prize is huge – geographically, the Vaca Muerta Shale is three times the size of the highly prolific Permian Basin in the US, and it could turn out to be the “next Permian” if the right conditions are established. But much remains to be done before that happens.

Rystad Energy’s Shale Intel group, in collaboration with Luxmath Consulting, has released a comprehensive new report covering all aspects of the Vaca Muerta Shale – including development status, production forecasts, drilling and completion projections, and the outlook for the various service segments in the industry. The report integrates Rystad Energy’s well-level research for Argentina, public disclosures from oil & gas companies and service contractors active in the region, and our conversations with on-the-ground field experts.

(Click to enlarge)

“There are several major bottlenecks that are currently affecting Vaca Muerta – proppant, infrastructure, labor, pressure pumping and the macro economic situation in Argentina. In addition, investments need to be made in water transportation infrastructure as drilling and completions increase within the region,” says Ryan Carbrey, Senior Vice President of Shale Research at Rystad Energy.

Vaca Muerta should see the tally of fracked wells reach between 140 and 150 this year. Only three of those wells are vertical, while all other wells are high-density horizontal completions. It is expected that fracking activity will grow at a rate of 20% per year from 2019 through 2021, reaching about 250 wells in 2021. According to Rystad Energy research, this heightened activity will generate a significant boost in Vaca Muerta oil production – from about 60,000 bpd in the third quarter of 2018 to between 160,000 and 200,000 bpd in the fourth quarter of 2021. Most of this growth will come from the liquids-rich Loma Campana portion of the play, operated by YPF.

…click on the above link to read the rest of the article…

The Stock Market Just Crashed In Italy, And Argentina Has Panic-Raised Interest Rates To 65 Percent

The Stock Market Just Crashed In Italy, And Argentina Has Panic-Raised Interest Rates To 65 Percent

In the 9th largest economy in the world, the financial markets are crashing, and in the 21st largest economy in the world the central bank just raised interest rates to 65 percent to support a currency that is completely imploding.  While the mainstream media in the United States continues to be obsessed with all things Kavanaugh, an international financial crisis threatens to spiral out of control.  Stock prices are falling and currencies are collapsing all over the planet, but because the U.S. has been largely unaffected so far the mainstream media is mostly choosing to ignore what is happening.  But the truth is that this is serious.  The financial crisis in Italy threatens to literally tear the EU apart, and South America has become an economic horror show.  The situation in Brazil continues to get worse, the central bank of Argentina has just raised interest rates to 65 percent, and in Venezuela starving people are literally eating cats and dogs in order to survive.  How bad do things have to get before people will start paying attention?

On Friday, Italian stocks had their worst day in more than two years, and it was the big financial stocks that were on the cutting edge of the carnage

Shares in Italian banks .FTIT8300, whose big sovereign bond portfolios makes them sensitive to political risk, bore the brunt of selling pressure, sinking 7.3 percent as government bonds sold off and the focus turned to rating agencies.

Along with the main Italian stock index .FTMIB, the banks had their worst day since the June 2016 Brexit vote triggered a selloff across markets.

Italian bonds got hit extremely hard too.  The following comes from Business Insider

…click on the above link to read the rest of the article…

Argentina Hikes Rates To 65% As Peso Plunges To New Record Low

Argentina Hikes Rates To 65% As Peso Plunges To New Record Low

It appears the market is willing to test BCRA’s mettle as it pukes pesos down to a new record low against the greenback and pushes towards the bottom of its new “no intervention” band.

The new record low is now 41.54/USD…

While not ‘allowed’ to intervene directly until 44/USD, Bloomberg reports that Argentina just hiked its Leliq rate to 65%.

The sharp drop follows Thursday’s 2.8% decline and comes despite the IMF agreeing on Wednesday to increase its bailout package to the Latin American country by an extra $7.1bn.

Paging Christine Lagarde…

Argentina Gets Record $57 Billion As IMF Boosts Bailout, Creates “No Intervention” Zone For The Peso

Just a few months after the IMF announced in June what was a record-setting $50 billion, 36-month bailout agreement with Argentina, the International Monetary Fund said it would expand the credit line to $57 billion in an attempt to halt the economic and financial crisis that has sent the country’s currency plunging over 50% this year, and pummeled the third-largest Latin American economy. In exchange, Argentina will set a “no intervention” zone for the peso from 34 to 44, meaning the exchange rate will be flexible but not floating.

The revised standby agreement is “aimed at bolstering confidence and stabilizing the economy,” IMF chief Christine Lagarde said Wednesday in a joint statement with Argentine Economy Minister Nicolas Dujovne.

The agreement, which is subject to IMF Executive Board approval, “front loads IMF financing, increasing available resources by US$19 billion through the end of 2019, and brings the total amount available under the program to US$57.1 billion through 2021,” according to statement.

Argentina had started renegotiating the terms of the bailout deal last month when it became obvious that the original funds would be insufficient, and when President Mauricio Macri asked to speed up payments in the original agreement. Meanwhile, as part of the deal, Argentina would be required to fulfill certain stipulations under the agreement, which would need congressional approval by way of the 2019 budget. In exchange, the IMF would cover a significant portion of Argentina’s financing through next year, according to Moody’s.

As part of the government’s efforts to cut its debt, which is projected to reach 70% of GDP next year. Macri and finance minister, Nicolas Dujovne unveiled economic reforms earlier this month, including highly unpopular spending cuts and export tax increases demanded by the IMF.

…click on the above link to read the rest of the article…

Trump Admin Accelerates Push to Export Fracking to Argentina

Trump Admin Accelerates Push to Export Fracking to Argentina

Rick Perry and energy ministers at G20 Summit in Argentina

The technology that has allowed for the shale gas revolution in America, we want to make available to Argentina,” Perry said.

At the summit, which was intended to focus on a transition to cleaner energy, Perry instead pledged the U.S. Department of Energy’s support in helping Argentina exploit its vast fossil fuel resources. Namely by connecting the nation with U.S.companies that know how to extract shale oil and gas via hydraulic fracturing (fracking).

But DOE isn’t the only part of the U.S. government facilitating fracking in Argentina. Under the Trump administration, the Departments of Interior and State — working closely with Pennsylvania State University — have been involved in multiple workshops focused on developing shale oil and gas in the South American nation.


Excited to join my fellow energy ministers at the . This is an exciting time for Argentina and the region. Argentina’s leadership in energy is good for our hemisphere and the world. pic.twitter.com/5X37kAEiXb

View image on Twitter

Argentina has the second largest shale gas reserves in the world, but is still a net energy importer. Working together, our countries can partner to deliver abundant, affordable energy to the Americas and the world.


The main target for fracking in Argentina is Vaca Muerta (translated as “Dead Cow”), one of the world’s largest unconventional oil and gas deposits, located in the Neuquén Basin. The oil and gas industry has been eyeing this formation in west-central Argentina since its existence was announced in 2011.

…click on the above link to read the rest of the article…

Good Times…

Good Times…

My son wanted to know why it is that Venezuela (a topic that gets discussed around the dinner table at home) chose such painfully, obviously asinine policies.

After much thought I explained it thus.

Hard times create strong men. Strong men create good times. Good times create weak men. Weak men create hard times.CLICK TO TWEETI’d seen it before somewhere and so I dug it up. Here it is in a different form.

We bipeds don’t change. I’ve come to realise not to fight it, just see it for what it is and make sure you’re positioned accordingly…for your friends family and those you care about. Speaking of which you should consider joining our family.

No special offers, no steak knives, no wild ridiculous promises – simply rational analysis and positioning for a macro world we’ve never encountered before. EVER! That’s both exciting and terrifying at the same time.

We’re Bad

At literally everything. We buy high, sell low, look to what Johnny next door is wearing, what car he drives. We get taken in and scammed by shysters, we believe in the unbelievable.

Which brings me swiftly to EM where fund managers desperate for yield dived into the fire over the last few years. Now the inevitable pain is hitting as default fears mount for “BATS” as the emerging-market rout deepens.

Turkey’s implied default odds climbed to highest since 2008 and over in the land of great steaks default risk in Argentina is …ahem…substantial.

As Bloomberg points out:

  • Argentina’s implied default probability over the next five years climbed this month to 41 percent, the highest since Mauricio Macri’s government ended the nation’s decade-long legal battle with most holdout creditors.
  • Turkey’s implied default odds during that span rose to 31 percent, the highest since the 2008 global financial crisis.
  • Brazil’s implied default odds increased to 18 percent, the highest since the country’s worst-ever recession deepened in late 2016.
  • South Africa’s implied default odds soared to 15 percent, the highest since Donald Trump’s election in November 2016.

…click on the above link to read the rest of the article…

Major Currencies All Over The World Are In “Complete Meltdown” As The $63 Trillion EM Debt Bubble Implodes

Major Currencies All Over The World Are In “Complete Meltdown” As The $63 Trillion EM Debt Bubble Implodes

The wait for the next global financial crisis is over.  Major currencies all over the planet are in a “death spiral”, many global stock markets are crashing, and economic activity is beginning to decline at a stunning rate in quite a few nations.  Over the past 16 years, the emerging market debt bubble has grown from 9 trillion dollars to 63 trillion dollars.  Yes, you read that correctly.  Now that emerging market debt bubble is imploding, and as a result emerging market currencies all over the globe are in “complete meltdown”.  In fact, at least 20 different currencies have fallen by double-digit percentages against the U.S. dollar so far in 2018, and nobody is quite sure what is going to happen next.

You may be tempted to think that this must be a good thing for the United States since the value of the U.S. dollar has been rising, but it is not.

During the “boom years”, trillions of dollars were borrowed by emerging market economies, and a high percentage of those loans were denominated in U.S. dollars.  Now that their currencies are crashing, it is going to take much more local currency to service those U.S.-denominated debts, and a whole lot of them are going to start going bad.

That means that many financial institutions here in the United States and over in Europe are going to end up holding enormous piles of bad debt, and the losses could potentially be astronomical.

The dominoes are starting to fall, and even the mainstream media is admitting that what we are facing is really bad.  For example, the following comes from a CNBC article entitled “The emerging market crisis is back. And this time it’s serious”

…click on the above link to read the rest of the article…

Don’t Cry for Me Argentina – It’s a Global Debt Crisis

QUESTION: Mr. Armstrong; Our government here in Argentina has told us we should expect more poverty and there is no hope for the future. Socrates has been amazing on its forecasts on our currency. There are enough of us down here who would sincerely ask would you consider advising Argentina to straighten out our economy and nation? You have forecast this emerging market crisis long before anyone else and your solution video on YouTube is very thought-provoking. If we can demand the government meets with you, would you do it?

KRD

ANSWER: The sone maybe Don’t Cry for Me Argentina, but it applies to the entire world for what happens in Argentina is merely the beginning of the global debt crisis. We can see from the chart that the dollar has been soaring. However, the Array picked August as the Panic Cycle and that has been spot on. Unfortunately, it does not look like this is going to calm down. We may be headed into a real Emerging Market crisis by October.

The reason why we are able to forecast such events well in advance is rather common sense. As I have said before, every solution to a crisis sets the stage for the next crisis. The Emerging Market debt crisis is unfolding because central banks in the USA and Europe lowered interest rates to “stimulate” the economy and they have no idea about how an economy truly functions. This is all based upon Keynesianism which is in turn based upon an isolated theory of the economy. They never consider that you lower interest rates and there are pensions who simply need higher rates to break-even. Then emerging markets issued debt in dollars with higher yields for the pension funds bought it assuming there was no currency risk.

…click on the above link to read the rest of the article…

Argentine President Admits “More Poverty” To Come, Announces Price Controls, Higher Taxes, Smaller Govt

Having been told by The IMF that he must stop using their bailout funds to prop up his currency (which has been utterly futile), Argentine President Mauricio Macri addressed the troubled nation this morning to announce his plans to satisfy Christine Lagarde’s demands in order to receive the next tranche of bailout cash sooner.

Things have not worked out so well since The IMF “bailed them out”…

In his address, there was good news, bad news, and ugly news.

“Everyone has to make sacrifices,” Macri implored of his nation’s citizens – who have lost 50% of their wealth year-to-date due to the collapse of the peso, which he also attributes to being “exaggerated by Turkey and Brazil weakness.”

Having blamed “mostly external factors” for the collapse of the economy (not bingeing on too much dollar-denominated debt in order to manufacture a smoke-and-mirrors-based boom), Macri notes that investors “have started doubting” Argentina’s ability to function.

The Good News

Macri has promised to dramatically shrink the size of the government, eliminating several ministries entirely, adding that Argentina must “set a goal not to spend more than we have.”

The Bad News

In an effort to close its budget gap, Macri will raise taxes on its one positive economic attribute – its exporters.

The Ugly News

Amid the hyperinflationary regime shift that is occurring, Macri will resort to price controls of some essential foods. When has that ever ended well.

All of which, as Bloomberg notes, is intended to signal a shift in the government’s strategy as it heads into talks on Tuesday with the International Monetary Fund to speed up the disbursement of cash from a $50 billion credit line.

Macri is now caught between the ‘rock’ of pleasing investors by cutting spending, and the ‘hard place’ of ensuring that the belt-tightening of austerity doesn’t cause social upheaval ahead of next year’s election.

These measures, Macri warned “will lead to more poverty.”

For now, the peso is stable (modestly weaker)…

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