7 ms·

It looks like Goldman Sachs is betting that Venezuela will sort it self out by 2022, and getting a good discount. I'm not sure how that is “making a quick buck

It looks like Goldman Sachs is betting that Venezuela will sort it self out by 2022, and getting a good discount. I'm not sure how that is “making a quick buck off the suffering of the Venezuelan people”, or how the people would benefit if nobody buys the bonds.

DarkKomunalec 9y ago
As happened in Greece, such purchases result in pressure applied to the country to pay off its debts, rather than help its people. It's good in the short term, but in the long term, government debt ends up as a massive transfer of capital to the lenders.
- raverbashing 9y ago
  Yeah. But don't bet on the current government doing that. Quite the contrary Or even the next This is pure speculation
  - xbmcuser 9y ago
    Banks control western politicians who will put who ever is in power under pressure to pay of the debt. I used to think people that talk like that are same as the ones that wear tin foil hats. But the last 6-7 years has made me realise that they are not completely bat shit crazy. And the world of power is power is most corrupted and the least in the news.
    - arethuza 9y ago
      "And the Weak Suffer What They Must?" by Yanis Varoufakis (former Greek finance minster) has an interesting view on the mess that Greece (and indeed Europe and the rest of the world) is in. I don't think it's without flaws but it is certainly interesting - particularly his view of EU/ECB bureaucrats: "a clueless, inefficient bureaucracy... working tirelessly for politicians with an infinite capacity to recite unenforceable rules"
      - CaptainZapp 9y ago
        On a sidenote (but likely interesting to HN readers): Varoufakis worked as an economist for Valve[1] [1] http://blogs.valvesoftware.com/economics/it-all-began-with-a-strange-email/ http://blogs.valvesoftware.com/economics/it-all-began-with-a...
    - raverbashing 9y ago
      That works if: - The concerned politician has a slight sense of responsibility (even though paying banks first is less responsible to the people but has long-term goals) - The concerned country has a minimal ability to pay Venezuela has neither at this moment
      - greeneggs 9y ago
        Venezuela does have a minimal ability to pay. Eventually, default is likely, but they have paid all of their bond obligations so far. (The story you hear is that many of the bonds are held by political allies, so the payments transfer money to them.) https://www.nytimes.com/2017/04/12/business/venezuela-oil-debt-payment.html https://www.nytimes.com/2017/04/12/business/venezuela-oil-de...
    - posterboy 9y ago
      For a second I read that as "western politicians who will put in power whoever ..."
- bobcostas55 9y ago
  >As happened in Greece Greece had the largest default in history[0], virtually all private debt holders were forced to take a ~70% haircut. [0]: https://en.wikipedia.org/wiki/Private_sector_involvement https://en.wikipedia.org/wiki/Private_sector_involvement
  - Retric 9y ago
    That 'haircut' is based on interest assumptions not actual costs. The actual haircut was only 53.5% of the face value so if you bought it from someone else at a higher discount you made significant profit. Assuming you sold it or there will be no second default.
    - pyvpx 9y ago
      I humbly suggest reading the book "Debt: The First 5000 Years"
    - jessriedel 9y ago
      Sorry, are you saying that if a bond is supposed to pay a certain interest which isn't actually paid, that this isn't a partial default because the interest is only an "assumption"? And we should only count the face value of the bond?
      - ant6n 9y ago
        I think the point is more that by the time the default happened, the market already considered the bonds to be worth less then what they ended up being worth.
        jessriedel 9y ago
        The fact that the market priced in the haircut does not mean there was no haircut. It just distributes the loss between different creditors. The bonds are just as much in default, representing a net transfer from creditors to borrowers.
    - 9y ago
- eeasss 9y ago
  The purchases happened at the secondary market. This means that this bond are already issued... this means that what you say above is not true.
  - DarkKomunalec 9y ago
    Where the bonds were purchased does not affect Goldman's ability or motivation to pressure Venezuela.
    - jevgeni 9y ago
      Or any creditor's motivation for that matter. Debt must be paid back, regardless of who the creditor is.
      - DarkKomunalec 9y ago
        Most legal systems disagree. See https://en.wikipedia.org/wiki/Default_(finance) https://en.wikipedia.org/wiki/Default_(finance) Society does not exist to serve contracts - it is the other way around.
        jevgeni 9y ago
        I'm sorry, what? Most legal system recognize default as a breach of contract. Also, contracts are between at least two parties. Which of these parties don't you consider being a part of society?
        DarkKomunalec 9y ago
        Most legal systems have procedures in place for when debt cannot be repaid. That is why I take issue with the statement that it 'must' be repaid. "Which of these parties don't you consider being a part of society?" - This is a strawman. Both are part of society, but the contract between them may do more harm than good in total. And blindly holding contracts sacred quickly leads to bad outcomes (non-competes, EULAs, some NDAs, etc.)
tyingq 9y ago
The original letter has more detail as to why Borges believes that. I'm no expert, so I have no idea if it's plausible. On the other hand, if I were a citizen suffering under Maduro's regime, I'd be pissed at any sort of foreign investment that Maduro could spend as he wanted. In short, "provides a financial lifeline to his authoritarian regime" and "desperate desire to gain resources needed to secure weapons and other instruments of oppression..." Page 1: https://pbs.twimg.com/media/DBAqsdZXkAEVKgF.jpg https://pbs.twimg.com/media/DBAqsdZXkAEVKgF.jpg Page 2: https://pbs.twimg.com/media/DBAqtrDXYAABc9H.jpg https://pbs.twimg.com/media/DBAqtrDXYAABc9H.jpg
- tgb 9y ago
  It's not directly useful for Maduro. They bought the bonds in the secondary market for a seventy percent discount. Maduro made no money off the sale. And at that large of a discount I don't think he'll have an easy time selling new bonds to anyone either.
  - tyingq 9y ago
    Makes sense, but I still see the reason oppressed people would make a stink. If only to broadcast that it will be bad optics for any foreigner to support the current regime...or even appear to. Propaganda is likely going on both sides.
    - whatok 9y ago
      The only reason why this is even made public is because Goldman is a big and easy target. There are mutual funds that I wouldn't be surprised a bunch of people here hold that easily dwarf GS in this space.
      - tyingq 9y ago
        Sure, but that seems logical. If you want to make a deterrent, use a big name that will get press coverage, even if they bought on a secondary market. For example, I'd be loath to buy Sudanese investments, even if I could prove it was a secondary market buy. The association just has bad optics.
deleted 9y ago
[deleted]
conanbatt 9y ago
I agree with you in general economic concepts but begin from argentina, I tell you, that all the money coming in for this will be poached by the current government in its corruption, and the next government will have to deal with that debt.
- privateprofile 9y ago
  Exactly what happens in Portugal and Greece with most of the money from the EU and the IMF, sadly...
awkwardtortoise 9y ago
> It looks like Goldman Sachs is betting that Venezuela will sort it self out by 2022 Or GS thinks they will have more favorable government in power in venezuela who will pay their bonds in full. Looks like GS, CIA, Trump, etc are lining up to overthrow the venezuelan regime in the next few years. > I'm not sure how that is “making a quick buck off the suffering of the Venezuelan people” Forcing a nation to pay 100% on bonds that are worth shit is how you make a quick buck off the suffering of the people.

DarkKomunalec 9y ago

As happened in Greece, such purchases result in pressure applied to the country to pay off its debts, rather than help its people. It's good in the short term, but in the long term, government debt ends up as a massive transfer of capital to the lenders.

raverbashing 9y ago
Yeah. But don't bet on the current government doing that. Quite the contrary Or even the next This is pure speculation
- xbmcuser 9y ago
  Banks control western politicians who will put who ever is in power under pressure to pay of the debt. I used to think people that talk like that are same as the ones that wear tin foil hats. But the last 6-7 years has made me realise that they are not completely bat shit crazy. And the world of power is power is most corrupted and the least in the news.
  - arethuza 9y ago
    "And the Weak Suffer What They Must?" by Yanis Varoufakis (former Greek finance minster) has an interesting view on the mess that Greece (and indeed Europe and the rest of the world) is in. I don't think it's without flaws but it is certainly interesting - particularly his view of EU/ECB bureaucrats: "a clueless, inefficient bureaucracy... working tirelessly for politicians with an infinite capacity to recite unenforceable rules"
    - CaptainZapp 9y ago
      On a sidenote (but likely interesting to HN readers): Varoufakis worked as an economist for Valve[1] [1] http://blogs.valvesoftware.com/economics/it-all-began-with-a-strange-email/ http://blogs.valvesoftware.com/economics/it-all-began-with-a...
  - raverbashing 9y ago
    That works if: - The concerned politician has a slight sense of responsibility (even though paying banks first is less responsible to the people but has long-term goals) - The concerned country has a minimal ability to pay Venezuela has neither at this moment
    - greeneggs 9y ago
      Venezuela does have a minimal ability to pay. Eventually, default is likely, but they have paid all of their bond obligations so far. (The story you hear is that many of the bonds are held by political allies, so the payments transfer money to them.) https://www.nytimes.com/2017/04/12/business/venezuela-oil-debt-payment.html https://www.nytimes.com/2017/04/12/business/venezuela-oil-de...
  - posterboy 9y ago
    For a second I read that as "western politicians who will put in power whoever ..."
bobcostas55 9y ago
>As happened in Greece Greece had the largest default in history[0], virtually all private debt holders were forced to take a ~70% haircut. [0]: https://en.wikipedia.org/wiki/Private_sector_involvement https://en.wikipedia.org/wiki/Private_sector_involvement
- Retric 9y ago
  That 'haircut' is based on interest assumptions not actual costs. The actual haircut was only 53.5% of the face value so if you bought it from someone else at a higher discount you made significant profit. Assuming you sold it or there will be no second default.
  - pyvpx 9y ago
    I humbly suggest reading the book "Debt: The First 5000 Years"
  - jessriedel 9y ago
    Sorry, are you saying that if a bond is supposed to pay a certain interest which isn't actually paid, that this isn't a partial default because the interest is only an "assumption"? And we should only count the face value of the bond?
    - ant6n 9y ago
      I think the point is more that by the time the default happened, the market already considered the bonds to be worth less then what they ended up being worth.
      - jessriedel 9y ago
        The fact that the market priced in the haircut does not mean there was no haircut. It just distributes the loss between different creditors. The bonds are just as much in default, representing a net transfer from creditors to borrowers.
  - 9y ago
eeasss 9y ago
The purchases happened at the secondary market. This means that this bond are already issued... this means that what you say above is not true.
- DarkKomunalec 9y ago
  Where the bonds were purchased does not affect Goldman's ability or motivation to pressure Venezuela.
  - jevgeni 9y ago
    Or any creditor's motivation for that matter. Debt must be paid back, regardless of who the creditor is.
    - DarkKomunalec 9y ago
      Most legal systems disagree. See https://en.wikipedia.org/wiki/Default_(finance) https://en.wikipedia.org/wiki/Default_(finance) Society does not exist to serve contracts - it is the other way around.
      - jevgeni 9y ago
        I'm sorry, what? Most legal system recognize default as a breach of contract. Also, contracts are between at least two parties. Which of these parties don't you consider being a part of society?
        DarkKomunalec 9y ago
        Most legal systems have procedures in place for when debt cannot be repaid. That is why I take issue with the statement that it 'must' be repaid. "Which of these parties don't you consider being a part of society?" - This is a strawman. Both are part of society, but the contract between them may do more harm than good in total. And blindly holding contracts sacred quickly leads to bad outcomes (non-competes, EULAs, some NDAs, etc.)

tyingq 9y ago

The original letter has more detail as to why Borges believes that. I'm no expert, so I have no idea if it's plausible. On the other hand, if I were a citizen suffering under Maduro's regime, I'd be pissed at any sort of foreign investment that Maduro could spend as he wanted. In short, "provides a financial lifeline to his authoritarian regime" and "desperate desire to gain resources needed to secure weapons and other instruments of oppression..." Page 1: https://pbs.twimg.com/media/DBAqsdZXkAEVKgF.jpg https://pbs.twimg.com/media/DBAqsdZXkAEVKgF.jpg Page 2: https://pbs.twimg.com/media/DBAqtrDXYAABc9H.jpg https://pbs.twimg.com/media/DBAqtrDXYAABc9H.jpg

tgb 9y ago
It's not directly useful for Maduro. They bought the bonds in the secondary market for a seventy percent discount. Maduro made no money off the sale. And at that large of a discount I don't think he'll have an easy time selling new bonds to anyone either.
- tyingq 9y ago
  Makes sense, but I still see the reason oppressed people would make a stink. If only to broadcast that it will be bad optics for any foreigner to support the current regime...or even appear to. Propaganda is likely going on both sides.
  - whatok 9y ago
    The only reason why this is even made public is because Goldman is a big and easy target. There are mutual funds that I wouldn't be surprised a bunch of people here hold that easily dwarf GS in this space.
    - tyingq 9y ago
      Sure, but that seems logical. If you want to make a deterrent, use a big name that will get press coverage, even if they bought on a secondary market. For example, I'd be loath to buy Sudanese investments, even if I could prove it was a secondary market buy. The association just has bad optics.

deleted 9y ago

[deleted]

conanbatt 9y ago

I agree with you in general economic concepts but begin from argentina, I tell you, that all the money coming in for this will be poached by the current government in its corruption, and the next government will have to deal with that debt.

privateprofile 9y ago
Exactly what happens in Portugal and Greece with most of the money from the EU and the IMF, sadly...

awkwardtortoise 9y ago

> It looks like Goldman Sachs is betting that Venezuela will sort it self out by 2022 Or GS thinks they will have more favorable government in power in venezuela who will pay their bonds in full. Looks like GS, CIA, Trump, etc are lining up to overthrow the venezuelan regime in the next few years. > I'm not sure how that is “making a quick buck off the suffering of the Venezuelan people” Forcing a nation to pay 100% on bonds that are worth shit is how you make a quick buck off the suffering of the people.